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Microsoft to WaMu: Pay Up

It has seemed for a while as though the global financial storm was going to deal a mostly glancing blow to the technology industry. Everybody hurts when markets go into free fall (and, as we're writing this on Wednesday afternoon, the Dow Jones has just closed down another 189 points -- although, as always, it could be up 500 points again by the time you read this). But if Wall Street and the banking sector are having a tornado rip through their gilded trailer parks, tech has, thus far, mostly just experienced some rain and a few gusts of wind in its relatively quiet suburb.

The question, though, is whether that rain will turn into a flood, and this week we saw some pretty big puddles forming. For instance, one way in which the global financial crisis could hit the technology industry is if big customers can't pay their bills to vendors and partners. Microsoft found itself in just that situation this week. Redmond is taking a close interest in the fate of bankrupt Washington Mutual, which, apparently, owes the software titan some dough that Microsoft would love to collect.

There aren't a lot of details on this story yet, and as far as we can tell WaMu seems to owe Microsoft the money -- and we don't know how much yet -- directly. We're sure that partners must be involved somehow, though, given that Microsoft makes the overwhelming majority of its revenue -- more than 95 percent -- through the channel. But even if there's no direct partner involvement here (and, as the dispute seems to involve software license fees, there might not be), we're wondering whether channel players are having to slink around customer sites in track suits carrying baseball bats and asking bewildered executives and business owners to pay up -- metaphorically speaking, of course.

Most of RCP's readers are probably not dealing with the WaMus of the world, but those that are might want to start thinking about how they're going to collect from customers that are going belly-up -- or maybe start adjusting their budgets accordingly. And those that aren't should still be wary. This isn't the kind of trickle-down activity any economist wants to see, but it seems possible that big failures at the top of the corporate food chain could eventually hurt companies that generally work closer to the bottom -- especially given how interconnected the financial industry is with pretty much every facet of the American economy.

Microsoft, with its lawyers, resources and influence, might be able to get its money from WaMu -- or it might not. But what are you, the average partner, going to do if your revenue starts drying up because the drip-drip-drip of your customers' losses becomes a flood? We know that you're worried about a credit crunch, but while you're fretting about that, you might want to consider whether your revenue sources are going to have the money to pay what they owe you, and what you're going to do about it if they can't. (We don't actually recommend a baseball bat, by the way.)

Those economic tornadoes that are tearing through the financial industry might not be headed directly your way, but the wind and rain they carry could still make your front yard -- or your bottom line -- a heck of a mess.

Are you worried about customers not being able to pay for your services? Are you making contingency plans in this economic crisis? If so, what kind? Let us know at [email protected].

Posted by Lee Pender on October 09, 2008


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