Microsoft Cracks Whip On Illegal Windows Resellers

Last week, the Redmond, Wash.-based software giant expanded its Windows Genuine Advantage (WGA) program to reward legal use of Windows XP with free content, while punishing resellers and users of pirated or illegal copies of Windows by limiting their access to security fixes, downloads and other updates.

WGA is a voluntary online authentication program that went into pilot testing in the United States in September. The service authenticates Windows XP against the Certificate of Authenticity (COA) labels attached to PCs to verify the legitimacy of the copy of Windows running on that machine. As part of last week's announcement, Microsoft said it is expanding the effort to 22 new languages and making WGA approval a requirement for customers in Norway, China and the Czech Republic.

Later this year, Microsoft will make the program mandatory for all Windows users, which will enable them to get most updates, including security fixes. However, to prevent virus outbreaks, security fixes still will be available to anyone who signs up for automatic security downloads, the company noted.

Such measures may appear draconian considering that Microsoft's efforts to thwart piracy have historically been limited. Amid a slowdown in growth, however, the company has worked with international law enforcement to press criminal charges against offenders and filed many lawsuits against resellers to curb practices such as illegal hard-disk loading of Windows, counterfeiting software and illegal trafficking of COA labels.

Yet system builders say the problem--which according to the Business Software Alliance costs the software industry an estimated $30 billion annually--remains rampant in SMB and consumer markets.

"The problem is more pervasive than people take notice of. We compete against technicians that are hard-disk loading, and that's where companies like ours get hurt," said Joe Stopski, a vice president at Fusion Microsystems, an OEM Gold system builder in Centennial, Colo. "We don't sell software as a line item, but as part of an overall solution. If my competitor is hard-disk loading, then my solution quote is $2,000 higher and we lose. We're the ones who spec the solutions, put in the engineering effort and then lose the deal over a line item."

Another system builder said he stands to lose deals worth $5,000 to $50,000 each, as well as long-term customer relationships. He believes Microsoft's new tactics will prompt a market correction in which businesses and consumers will reject illegitimate copies of Windows and hold resellers accountable.

"Microsoft isn't going after the installed base, but the resellers. If you want to improve or reduce illegal drug use, the wrong way to do it is to just take enforcement action," said David June, director of development and business relations at Northwest Computer Supplies, Bellingham, Wash. "You create a culture in which it is stigmatized. This is part of program; they're stigmatizing it."