Q&A: Microsoft Expands Reach of Volume Licensing Programs and Reduces Complexity

MINNEAPOLIS — July 9, 2005 — Solution providers often describe an ideal sales scenario as being one that allows them to help customers decide what type of technology solution they need, how they’ll finance it, and the licensing they should have – in one fell swoop. After all, being able to address licensing and financing at the beginning of the decision-making process, rather than sometime afterward, helps customers make their purchasing decisions more easily, especially if the financing arrangements enable them to implement more of the total solution earlier than they had planned.

As part of Microsoft’s overall commitment to make it easier for its partners and customers to do business with Microsoft, the company is announcing several enhancements to its volume licensing and financing programs today at the annual Microsoft Worldwide Partner Conference. Microsoft is taking another step in simplifying volume licensing programs by consolidating the various flavors of the current Open Value program into one worldwide program and streamlining the operations of Microsoft Financing.

PressPass spoke with Brent Callinicos, corporate vice president of the Worldwide Licensing and Pricing group, and Brian Madison, general manager of Microsoft Financing, to find out more about today’s announcements.

PressPass: Why is Microsoft consolidating the Open Value program and how will that improve the process of licensing for customers and partners?

Callinicos: We’re continually looking for ways to improve the quality and comprehensiveness of our licensing programs and models. Over the past two years, the Microsoft Open Value program, a software-license payment program for small and mid-market businesses, has morphed into a couple of different programs worldwide, such as Multi Year Open (MYO). Whenever a particular geographic region of the world or a particular industry segment required a slightly different flavor of Open Value, we created a new program – a slightly localized version, or a version that addressed the needs of that industry. These various flavors have done a good job of providing what small and mid-size businesses need in the way of licensing, but when customers merged their businesses, crossed geographic boundaries, or had different entities that required different types of Open Value licenses, customers and partners told us they ended up wrestling with the complexity and lack of consistency across the programs.

As a result of that feedback, we’re streamlining our Open Value licensing program and expanding its reach into Latin America and select Asia Pacific regions. While our customers and partners have clearly communicated to us that they want simplified licensing, they have just as loudly communicated that they also need flexibility. Because our customer base is global, we need to provide flexible programs that meet a wide variety of needs. Open Value is a great example of that commitment – we’ve taken the best of the many flavors of that program, including flexibility and best practices, and consolidated them into a single offering that will be available worldwide in October.

Brent Callinocos, Corporate Vice President, Microsoft Worldwide Licensing & Pricing Group

In addition to making the program more globally consistent, we’ve reduced the contract size by half, as well as increased efficiencies of the process for our partners. This announcement represents the kinds of ongoing developments that customers and partners will see coming from Microsoft moving forward — we are committed to making it easier for customers to understand licensing and not have to deal with as many point solutions as they have in the past. These steps also enable our partners to spend more time adding value for our mutual customers rather than getting mired in the licensing processes.

PressPass: What other steps has Microsoft taken to simplify its licensing programs?

Callinicos: At Microsoft we believe that at the end of the day, licensing should be a conduit for acquiring technology to move their business forward, not a separate hurdle that they and their solution provider must overcome. We are taking steps to make it easier for customers and partners to navigate through the different programs under volume licensing.

Earlier this year we outlined some other steps we are taking to make it easier for customers to do business with us. We consolidated our product licensing models from over 70 unique models into nine categories. In tandem, we also improved the navigation and usability of our Product Use Rights (PUR) document, which details how we license Microsoft products sold under our volume licensing programs, so customers and partners understand what licenses are needed. Over the years we’ve made more products available through our volume licensing programs, and the Product Rights Document swelled to more than 100 pages that detailed information on licensing models for the 70-plus products in Microsoft Volume Licensing, making it challenging to understand and use. We rewrote it from the ground up, stripping it of redundancies, inconsistencies and unnecessary legal jargon, without changing the actual licensing terms. It is now approximately 40 pages – less than half its former size. In addition, to ensure consistency moving forward, we have built-in checkpoints across our product groups to ensure that future Microsoft products map to one of the nine licensing models.

PressPass: How does Microsoft Financing support volume licensing programs?

Brian Madison, General Manager, Microsoft Financing

Callinicos: For every product that Microsoft takes to market, Microsoft Financing (formerly Microsoft Capital) provides a way for organizations worldwide to acquire and finance not only Microsoft products more easily, but also the services, partner solutions and hardware that they need for their total solution.

Financing simplifies transactions for our customers and partners because it provides one-stop shopping — organizations can decide what kind of solution they need and take care of how they’re going to pay for it at the same time, rather than having to first decide what kind of solution they need and then go out and drum up the financing.

The program branded as Microsoft Capital has been available to customers purchasing our MBS products. We’ve gained a lot of international experience and been able to strengthen and validate our finance offering in the software space by incubating it within MBS. Financing is a new idea that has a lot of merit for the software industry. Last year I brought aboard Brian Madison to help expand the offering across our customer base (small, mid-market and enterprise) in nine countries: Belgium, Brazil, Canada, Germany, Mexico, the Netherlands, Spain, the United Kingdom and the United States.

PressPass: What are the new developments within Microsoft Financing?

Madison: First, to help customers and partners make a quicker connection in terms of what we offer, we’re changing the name of Microsoft Capital to Microsoft Financing.

More importantly, we’ve heard from our partners and customers that they want us to make it easier for them to take advantage of the financing programs we offer. So we’ve streamlined our program in several ways. We’ve simplified and reduced the size of the contract that customers sign when they get financing from Microsoft, from an average of seven pages to two pages. We’ve raised the percentage of credit approvals we grant to over 90 percent in North America. And we’ve implemented new credit-scoring models with our U.S. partners that have substantially reduced transaction turnaround times, from an average of one to two days to a matter of a couple of hours in most cases.

We’ve also learned that the benefits of offering financing extend beyond the regions in which we currently provide Microsoft Financing, so we have plans to expand our distribution into the top 20 Microsoft markets worldwide by the end of 2008. In addition, we plan to open new channels in the United Kingdom and Germany this year, and expect to make further announcements later this year regarding operations that will be established in three additional countries in Europe and Asia.

PressPass: How does Microsoft Financing help partners?

Madison: Microsoft Financing can help partners grow their top-line revenues and bottom-line profits by helping them use affordable monthly payments to anticipate and overcome customer-price or budget-related concerns. Now, in addition to taking care of “what to buy,” they can also address “how to pay for it,” thus shortening the sales cycle and enabling valuable sales resources to begin working on the next opportunity faster. Our research has shown that two out of every five IT transactions typically involve financing, so when partners provide financing as part of the total solution sale, it makes it easier for customers to say “yes” sooner. We’re also seeing larger transactions — 30 percent to 40 percent larger, on average — when partners provide financing, because financing enables the customer to get the total solution they want today, rather than phasing it in over time.

Another way Microsoft Financing helps partners is by providing them with a means to easily finance the total solution, including software, services and hardware. Because of our deep expertise in this market, we are happy to finance transactions comprising 100-percent software or services, with no hardware required. In addition, because we’ve heard from partners that they wanted fewer parameters on financing, we reduced our requirements for how much Microsoft products need to be part of the total solution to qualify for our financing. Now there’s no minimum threshold — as long as there’s some Microsoft content, we can provide financing.

To encourage our partners to offer Microsoft Financing as part of the total solution they provide to our mutual customers, we’re offering a 101-percent financing promotion for attendees at the Microsoft Worldwide Partner Conference. Partners submitting a customer transaction to Microsoft Financing after July 7 that commences by September 30 this year will receive 101-percent of the amount financed. So the customer gets 100 percent of the solution he or she needs financed, and the partner receives an additional 1 percent as an incentive to arrange financing through us. For example, a partner arranging financing on a US$100,000 solution, will receive an additional $1,000. This offer is limited to those countries within our financing footprint: Belgium, Canada, Germany, the Netherlands, Spain, the United Kingdom and the United States.

PressPass: What feedback have you been receiving from partners and customers about volume licensing programs?

Callinicos: One of the programs in which we’ve received a lot of feedback is the Software Assurance maintenance program. Software Assurance is designed to add value for customers throughout the product lifecycle by minimizing costs and optimizing resources associated with planning, migration, deployment, optimizing and maintenance. We’ve added more than 14 new benefits to the program over the last year and a half, based on feedback we’ve received from customers and partners. Our biggest challenge now is in making customers aware that the Software Assurance program is about so much more than software upgrades – it provides such a variety of benefits that customers of all types can find something useful for them.

Our focus continues to be on listening to and learning from our customers and partners. That boils down to continuing to consolidate when we discover redundancies in our programs and providing customers greater choice and enhanced flexibility so that they find it easier to do business with us. We have developed numerous mechanisms and polls to hear directly from customers about what they want from Microsoft, which have played a big role in driving many of these changes.

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