Dell Software Promo Rankles Microsoft Partners

In an email viewed by CMP Channel, Dell approaches customers directly and extends the offer to products such as SQL, Exchange, Office 2007, Windows Vista, Windows Server Standard, Small Business Server, Client Access Licenses, Project, and SharePoint.

However, Microsoft isn't aware of any Dell promotions that offer Open License software at cost, according to a company spokesperson.

Dell did not return emails and phone calls seeking comment.

Customers typically buy licenses for Microsoft software through a volume license agreement, which can be an Open License, Select Agreement, or Enterprise Agreement. While partners can buy Open License agreements from distributors and sell them to customers, customers can only buy Select and Enterprise Agreements only directly from Microsoft's large account resellers (LARs), one of which is Dell.

What's puzzling about the promotion is that it's not listed on Dell's website and doesn't appear in Google search results, said a solution provider who partners with both vendors.

"It seems to me as though Dell is quietly soliciting their customer base and trying to capture the business, without attracting much attention in the process," said the source.

The VAR says he was able to obtain Dell's pricing from one of the customers the vendor contacted directly. "The part numbers Dell and I quoted were the same, but Dell's prices were at about 2% margin based on my average cost from [distribution]," said the source.

Dell has been taking steps toward becoming more channel friendly lately, but the promotion is another example of Dell speaking out of both sides of its mouth, says Jim Liska, sales manager at Orlantech, and Orlando-based solution provider.

"What I can't understand is Dell preaching how it wants to work with the channel and then its actions go against that preaching. With the pricing Dell gets directly from Microsoft, can't they sell at a profit and still get market share?" said Liska.

Another Microsoft channel partner that partners with both vendors said this type of activity hurts the entire channel, including VARs, distributors, and even Microsoft LARs.

The source, who recently obtained an Open License quote that came in about 1% over distribution, said the hassle of dealing with Dell far outweighed the financial benefits.

"In this situation, there's no advantage whatsoever to me trying to buy licenses through Dell. It takes at least a few hours to get a price, I have to haggle with them on it, and I don't make any more money for my headache. Plus, it counts toward Dell's partner sales through Microsoft, and not mine," said the source.

Just as disturbing is the fact that Microsoft does nothing to discourage this kind of predatory pricing, the source added.

"It makes some sense Dell would do this in an effort to post better revenues. However, it is alarming that Microsoft would either openly allow it or look the other way. What's the point of MAP (minimum advertised price) or list prices if you can sell that low?" said the source.

"I would have thought that Dell as a company would finally have a handle on its representatives, but sadly, it doesn't appear to be the case," said Carl Mazzanti, CEO of eMazzanti Technologies, a Hoboken, N.J.-based solution provider.

"For other Microsoft partners, this should signal an opportunity that Dell is no longer servicing accounts and is burning relationships for a one-time transaction."