Finding the Opportunity in Licensing

Deepen your relationship with customers and Microsoft at the same time.

If you're like most Microsoft partners, chances are that you don't fully understand Redmond's various licensing programs. That lack of knowledge is costing you money.

Now that Microsoft has added Licensing Solutions as a competency to its partner program, it's time to learn how licensing can help you build lasting relationships with your clients, positioning your company for real growth. Licensing Solutions is one of four competencies going live in the Microsoft Partner Program this month. The new designation arrives just in time for a series of enhancements to the Software Assurance component of Microsoft volume licensing that take effect in March.

Licensing Solutions actually includes two specialties: license delivery and software asset management. We'll examine the opportunities in software asset management in an upcoming issue. Microsoft's message about partners holding the Licensing Solutions Competency will be that these partners are especially well-prepared to assist customers in license acquisition, management and planning.

To qualify for adding the license-delivery specialty on your marketing materials, you'll need to:

  • Employ two employees or contractors who have passed at least one of two exams on designing and providing Microsoft licensing solutions. (The version for serving small and medium customers is exam 70-121; the exam for large customers is 70-122.)
  • Submit three customer references featuring license delivery scenarios.
  • Meet certain sales goals during a 12-month period, such as selling 100 units of Office or 10 servers.

What Microsoft Wants
Frankly, Microsoft's interests in the program don't have much to do directly with your bottom line. Competencies form the heart of the Microsoft Partner Program, and the four new competencies are filling in some large gaps in Microsoft's offerings, says Richard Flynn, director of the Microsoft Worldwide Partner Program.

A new designation called the OEM Hardware Competency is probably the broadest, covering some 70,000 system builders who didn't previously have a home in the partner program, Flynn says.

While the Licensing Solutions Competency doesn't cover nearly as large a group, it does provide a label for one of Microsoft's most important sets of partners: the Large Account Resellers, who handle a large portion of Microsoft licensing revenues. There are about 20 LARs in the United States who handle the Enterprise Agreement and Select licensing deals for customers with hundreds of seats. But you don't have to be a LAR to sell Open License volume licensing to smaller customers, and the new competency can cover you too.

"Our revenue-producing, high-end licensing partners, as well as the smaller-end Open [types], didn't have an official place in our partner program," Flynn says.

Brent Callinicos, corporate vice president for Microsoft worldwide licensing and pricing, says the program isn't intended to create a giant new group of partners certified to license Microsoft software. "I don't really have a goal around more or fewer partners," Callinicos says. "We might have more in some places, less in others."

The benefit of more partners adding the licensing solutions to their competency quivers is in having better-educated people talking to customers, Callinicos says. "You don't want customers getting different answers from people about licensing. The more educated partners are, the better. We want partners out there that have enough of an understanding of licensing that they can have those truly informed discussions," he says.

In that light, the new competency is consistent with Microsoft's ongoing efforts to simplify licensing. Microsoft also recently streamlined licensing documentation and introduced an online Microsoft Product Licensing Advisor tool to help IT end users answer some licensing questions on their own.

The drive to simplify resonates with what partners hear in the market. In the September 2005 Redmond Channel Partner survey, respondents told us that their third most-frequent customer complaint was that licensing is too complicated.

Scott Braden, a former licensing reseller who wrote the book Microsoft License Secrets, which advises IT customers on how to save money in licensing negotiations, warns that selling licensing is not a road to riches for smaller partners.

"Anybody selling Microsoft licenses is dealing with a true commodity business, which means very heavy price competition. After all, an Office license is the same whether you buy it from the consultant who just built a whiz-bang business engine for you, or from the lowest price on the Internet," says Braden, now an independent consultant based in Dallas.

"If you're a Microsoft partner, you should heed [Microsoft's] advice: Focus on delivering value by building systems that help your customers make money. Don't waste any more effort than necessary in chasing the license-resale business," Braden continues.

Payoffs for Partners

Potential benefits that partners can gain from obtaining the Licensing Solutions Competency include:

Marketing value of an official stamp from Microsoft

Upsell/return sales benefits resulting from better-informed conversations about licensing with customers

Opportunity to forge a tighter, stronger relationship with Microsoft

Competitive advantage of saving small customers money through Open Licensing

Ability for ISVs to underbid competitors if solutions require Microsoft licenses

The LAR Benefit
Some LARs are obviously happy to have the new label. Software ONE Inc. of New Berlin, Wisc., is putting all 16 of its sales people through the examination to be certified for designing and providing Microsoft licensing.

"For us, that's a very strong positioning statement in the marketplace. Customers feel comfortable that they're dealing with a partner who has gone through the processes," notes Keith Ackerman, CIO and director of marketing.

Jamin Miles, an inside partner account manager for Software ONE, already passed the sales-focused exam.

"It's not an easy exam," Miles says. "Having gone through the online courses that they offer, the writing of the questions was similar to the practice tests that they wrote up. The exam itself was pretty thorough. They used a lot of real-life scenarios. It did require some critical thinking. [For instance,] 'How would a solution be developed to a certain problem that was presented to you?'"

Goodies for VARs
Software ONE, through its VARassist subsidiary, is in the business of partnering with partners on selling licenses, leveraging the process to upsell consulting for its VAR partners. The company sees opportunities for some VARs to pursue the licensing competency.

"I think partners who choose to understand and go after licensing as one of their three or four competencies will see benefits from ensuring that their customers are properly licensed. That makes it easier to go back and propose other solutions," says Peter Ells, Software ONE's Microsoft business development manager and director of its VARassist business.

PCMS IT Advisor Group, a Microsoft Gold Certified Partner in Cincinnati, will add the licensing competency to its existing Microsoft stamps of approval in Networking Infrastructure Solutions and Advanced Infrastructure Solutions.

Matt Scherocman, director of PCMS IT Advisor Group, has actually been selling Microsoft licenses in advance of the competency for some time: "It's a visible recognition of expertise we already have."

Reselling Microsoft licenses doesn't generate big profits for his firm. "I do very little licensing that's not tied to consulting," Scherocman says.

"It's a hidden benefit that makes all the effort and time required to understand Microsoft licensing worthwhile. [Selling licenses] strengthens your relationship with Microsoft," Scherocman says. "The people Microsoft has in the field are almost completely in sales. They need to move product. They're looking to close deals. They say they don't care who handles the licensing, but they do care. We also help them with revenue forecasting and enter opportunities into Microsoft's customer management system."

Microsoft's inside sales people want VARs who can sell total stack solutions that demonstrate return on investment for clients, Scherocman says. "The partners who can do the infrastructure consulting and the licensing are the ones that Microsoft turns to first when they have needs," Scherocman says. While he's not looking for new local competition, he adds, "If I were outside Cincinnati, would I look at this competency? Absolutely. Probably more importantly, I'd sell the licenses."

It's becoming even more important as Microsoft puts greater emphasis on service and consulting rebates to customers as a way to negotiate without lowering software prices, Scherocman says. "If I sold the licenses, my chance of getting those deployment dollars goes up exponentially."

No business is too small to gain an advantage from a better understanding of licensing, contends Paul DeGroot, an analyst with Directions on Microsoft, an independent research and consulting firm based in Kirkland, Wash. Even small partner shops -- those with just one to three employees -- can gain competitive advantage from taking time to understand licensing.

"I'm surprised at how many [small businesses] don't know anything about volume licensing," DeGroot says. With Open Licensing, DeGroot notes, there are cases where you can save money with just a single computer.

Don't Forget the ISVs
There may even be a way for an Independent Software Vendor to wring value out of the new competency, DeGroot speculates: "If you're an ISV building some kind of application that is going to require extra copies of SQL Server or Exchange Server, your ability to configure the list of SKUs that the customer is going to need to make this happen -- and , in many cases, locate a volume licensing program under which the customer can purchase this -- can save the customer a lot of money or leave some money on the table for the ISV."

For example, DeGroot says, no one should ever pay full retail price (about $20,000) for a per-processor enterprise version of SQL Server. "Any enterprise per-processor server application automatically qualifies you to buy under the Open volume licensing program, which saves you 20 percent," DeGroot says. That simple fact, of course, can save a customer $4,000.

A Subtle Return on Investment
Should you invest the substantial time and effort required to earn Microsoft's Licensing Solutions Competency? Scherocman tells of spending nights and weekends years ago going through a binder of information to grasp Microsoft licensing. He says that after cresting that initial hump, maintaining your knowledge is pretty easy because Microsoft rarely discontinues licensing policies for older products, even when it introduces radical changes for new ones.

For all that, selling Microsoft licenses below the LAR level isn't going to throw massive profits at your balance. But approaching the competency with realistic expectations can bring profitable surprises. It presents new opportunities to get closer to Microsoft representatives in your territory for times when they have business leads to distribute. The certification gives you another way to get your foot in a customer's door. And if you can leverage your newfound knowledge to save customers money or turn their licensing questions into a deeper and more meaningful discussion of technology solutions, you're laying the groundwork for lasting relationships.