News

EXCLUSIVE: Microsoft CRM Payments a Challenge for Channel

• By Barbara Darrow
• June 29, 2007

Under the "Certified Software Assurance program," partners who sell CRM licenses must wait up to 90 days to get their margin payment on those sales. A glitch in the accounting system meant many of them have been underpaid for their work.

The partners, who spoke on condition of anonymity, say Microsoft discovered the glitch and has worked to fix it.

"To their credit, they screwed up but they found the problem and tried to fix it fast -- and quietly," said one New York metro-area partner who was affected.

On the other hand, he said, if the mistake had gone the other way, with VARs underpaying the vendor, "there would have been hell to pay from Microsoft."

Another partner described the whole affair as a "goat rodeo."

A Microsoft spokesman characterized the issue as a short-term glitch that was quickly resolved.

"When we launched Microsoft CRM 3.0 SKUs -- Professional and Small Business edition and pricing for MS Dynamics CRM v3.0 [in December 2005] an error was made in the compensation calculations, resulting in a slight underpayment to our partners," the spokesman said via e-mail. "We detected this problem during a routine audit, and immediately put a 'make-right' plan in place to issue checks to all affected partners. All underpayments have been rectified for all partners worldwide."

Some partners said the notion of "slight underpayment" is relative, noting that in their cases it amounted to several tens of thousands of dollars. They also said the problem rippled into recent months with them receiving checks "in the five-figure range" last month [May].

One long time CRM and ERP partner said that sales of Microsoft CRM have been problematic from the get go. When Microsoft entered the CRM fray with its 1.0 release in January 2003, it promised that CRM sales would go only through authorized Microsoft Business Solutions (MBS) partners, a small subset of the overall Microsoft reseller population.

Then, a year later, it changed course, throwing distribution of CRM out to the wide Microsoft reseller population. This caused a firestorm among MBS partners who sell ERP and are used to slower, more service-oriented software sales cycles and the fatter margins those sales carry. Many of these partners still worry that Microsoft ERP sales will follow in CRM's footsteps and see thinner margins.

After Microsoft bought Great Plains and then Navision starting in 2001, existing Great Plains and Navision VARs worried that their bread-and-butter accounting software sales would suffer from the margin pressure associated with Microsoft's volume sales approach. At the time, one long-time Great Plains partner said Microsoft only understands "volume, volume, volume" and that that mindset does not suit the more complex and hands-on nature of accounting and financial software sales.