Microsoft's new policy to create market confusion: ISODA

After Microsoft India introduced two price lists policy, starting April 2013, InfoTech Software Dealers Association (ISODA), who is also a significant partner of Microsoft has issued a circular to its members against Microsoft's new pricing policy. The association feels due to change in policy, it would cause imperfect market conditions.

Commenting on this development, Devesh Aggarwal, VP, ISODA said, "We feel greatly aggrieved at the release of these price lists and believe that few important factors have not been taken into account while taking this decision. All policies from principal companies such as Microsoft are supposed to be designed for extreme fairness to all its partners and customers. Any unfair advantage to one partner over the other based purely on pricing policy from the principal violates this principal of fairness and is anti-competitive in nature."

The most important point is creating imperfect market conditions and giving artificial and unfair advantage to large players having multi-city operations. Since one price list is lower than the second price list by over 5.8%, and since a customer can buy Microsoft license at any of its office in India and use them anywhere in the country, this opens up situations where a multi-city partner would out-price a single city partner by billing the customer at office address located in his state, even if customer case has been worked upon by the partner who operates in a single state.

He further added, "We have received two different price lists today with some rules attached such as 'applicable only when the resellers and end users are available in the same state'. The two price list have significant price difference for same items. In scenario where reseller and end user are in different states, we have to specifically seek another quote from distributor. This policy also puts a relatively smaller customer with single state operation at a disadvantage over larger buyers who have presence in multiple states. Asking smaller customers to pay higher prices, again purely on policy decisions, is extremely unfair to such customers."

ISODA fears, the dual price list policy also ignores the principal of simplicity in designing market policies. Partners will need to train field force on factors which were hitherto not applicable. In dealing with multiple price lists, there could be commercial errors, which would also increase issues for Microsoft distributors and Microsoft itself. There could also be cases of fraudulent practices, a general result of imperfect market conditions.

"We strongly believe that Microsoft should work on a single price list for the entire country, and average out or absorb impact of factors that are leading you to put out dual price lists in the first place. The points above are only first reactions and if this policy continues, we all are bound to face many more issues that an imperfect market brings out. We expect Microsoft to hold this policy and immediately work on and release a single price list policy," Aggarwal highlighted.

Another big issue ISODA pointed out is rebate / coop fund service tax liability with partner. "We understand that Microsoft will now be paying out rebate and coop funds from India and that all service tax applicable on these amounts is to be absorbed by Pprtner," Aggarwal said.

"For channel partners rebates are extremely important for partner's business viability and profitability and is a huge incentive for partners to aggressively work on generating Microsoft business. An effective reduction of 12.36% from this benefit is a de-motivator. As a principal, Microsoft can take a more liberal view of this matter and take care of service tax liability at its end. Quite likely, the entire amount could be a set off for Microsoft since they are now billing locally, so there may not be even a financial burden on Microsoft. Even if there is a financial burden, Microsoft is much better geared to absorb this burden compared to its partners. We request Microsoft to take a larger view of this point and absorb service tax liability on rebates / coop funds at Microsoft's end. Meanwhile, we have communicated both these issues to Microsoft India top management last week and asking for resolution on the same," Aggarwal concluded.