Microsoft Nixes Discounts to Non-Educational Charities

Noneducational charities are out of luck when it comes to getting discounted software from Microsoft Corp.'s Authorized Educational Resellers, according to a story posted on the Computer Reseller News Web site (http://www.crn.com/) this morning.

Microsoft has reviewed the program, and prompted by fears of gray marketing, will pull the plug on the discounts, which had been extended to February 28, said Sam Jadallah, vice president of Microsoft's Organization Customer Unit.

Shortly before Christmas, CRN reported that Microsoft planned to axe the trial program at the end of this year. Prompted by an outcry, and embarrassment at the timing of the disclosure around the holidays, Microsoft agreed to extend the trial pending its own evaluation.

The review showed "pervasive gray marketing" of the discounted software into non-charity accounts, according to the company. Discounts for educational charities including universities, museums, schools, and public libraries, will continue, Jadallah said.

Microsoft, perhaps more than any other software vendor, must deal with all tiers of the reseller chain, and mediate disputes between them.

VARs were among those who prompted the review when they found they could not compete with gray market copies of Microsoft Office re-sold into their own non-charity accounts, Jadallah said.

Paul Jarvie, vice president of ASAP Software, a Buffalo Grove, Ill. reseller said although he was unaware of increased gray marketing, "generically, we appreciate any efforts to reduce the gray market."

While on the one hand Microsoft has been slammed by build-your-own and other VARs for the Microsoft Office deals it cut with direct PC marketers like Dell Computer Corp., much of the gray market software actually originated from this pilot program, Jadallah maintained.

A few AERs including Consistent Computer Bargains, loudly bewailed Microsoft's decision last December, and offered to monitor sales into non profits. CCB was willing to obtain and document a charity's 501C3 designation, said Chris Booth, president of the Racine, Wisc. distributor.

The 501C3 designation is bestowed by the Internal Revenue Service on non- profit charities donations to which are tax-deductible.

The problem is that the designation alone does not guarantee that the software ends up with the charity, Jadallah said. "You can't just say if they have a 501C3 number, they're legitimate." he noted.

"We're seeing a very pervasive gray market and piracy of this product, [it's] even being advertised in magazines and I'll bet if you find Office advertised at a price that will make heads turn among legitimate VARs, if we track it down [the seller] could probably give you a 501C3 number."

Microsoft continues to donate money and product to charities, and sponsors a gifts-in-kind program detailed on its web site.

CCB's Booth is "greatly disappointed that there wasn't' a meeting at Microsoft with the top 25 resellers to further investigate how to control the gray market, channel conflict and administration."

Booth said he believes a solution was and still is available and "we can't answer why they have not pursued heavy controls."

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SOURCE: CMP Media Inc.

CONTACT: Leslie Dunbar of CMP Media, 516-562-7040 or ldunbar@cmp.com