Now, as a stock holder, I want Microsoft to focus on making money. And the potential to lose massive amounts of money on bad financing is pretty high. I would have thought they would have made changes six months ago. Or four.
But now, just as we hear grumblings that the new fiscal year for Microsoft (begings July 1) should be a year of recovery for the economy, they've responded to the credit crunch by destroying their own financing program.
The greatest reason to use Microsoft Financing was that is was easy. A couple months ago I heard a MS employee tell stories about all the interesting things purchased along with the "one Microsoft license" that was required.
That one-license minimum is certainly too lenient. There could be a $1,000 minimum, or a $5,000 minimum, or something higher than "one license."
Why did we use and push Microsoft Licensing? It was easy.
Period. Easy.
It wasn't the best or the cheapest financing available. But it was the easiest.
Now things have changed.
Effective immediately, please note the following changes:
1. Effective immediately, Microsoft content (software/services) must represent a minimum of 35% of the customer's total financed amount, including taxes.
2. On multiple submissions, At least one of the invoices booked in transaction must have MS content (software/services) listed as a separate line item in invoice and total MS content (software/services) for all must be at least 35%
Gulp.
One Windows license is too little. But 35% of the total, including taxes, seems way too high.
Let's take a look.
Disclaimer: These numbers may not work for you. If they're too far off, go look at a recent project within your company. These numbers are taken 100% from a recent server installation (completed last week). Your numbers may vary. Your clients are not my clients. Your ways are not my ways. Blah blah blah.
Purchase:
| 1 | Server - Proliant ML 350 etc. | $1,589.99 | 8% |
| 2 | Hard drives x $399.99 | $799.98 | 4% |
| 2 | 4 GB RAM upgrade x $129.99 | $259.98 | 1% |
| 1 | Tape Drive - DAT 160 | $869.99 | 4% |
| 10 | Tapes - DAT 160 x $29.99 | $299.90 | 2% |
| 1 | Backup Exec Software | $639.99 | 3% |
| 1 | Small Business Server 2008 Premium Edition with 5 CALs | $1,839.99 | 9% |
| 1 | 5-pack Client Access Licenses | $899.99 | 5% |
| 1 | Diskeeper 10.0 defragmentation software | $299.99 | 2% |
| 3 | Desktop Computers - DC 5800 x $899.99 | $2,699.97 | 14% |
| 3 | MS Office Standard Edition - License x $399.99 | $1,199.97 | 6% |
| 1 | Printer - HP 2035 - laserjet | $269.99 | 1% |
| 1 | Toner Cartridge for P2035 | $89.99 | 1% |
| 1 | Printer - Color Laserjet CP3525n | $799.99 | 4% |
| 1 | Toner Cartridge set for CP3525 | 939.99 | 5% |
| 1 | Labor | $6,000 | 31% |
| Total: | $19,499.70 | 100% |
I consider this a decent order. A new server. A few workstations while we're at it. One personal printer, one workgroup printer. Perhaps the only thing that's unusual is the workgroup printer. But if it weren't a printer it would be a scanner or something else.
The problem is this:
1) That's a pretty typical order
and
2) Microsoft software is about 20% of the order.
If we eliminated the workgroup printer (which really means moving it to separate financing), we only gain a couple of percentage points.
Even if we eliminate the labor, we're just at 30%.
(Note on taxes: MS allocates taxes for the Microsoft product as part of their percentage, which leaves all other taxes as part of the non-MS percentage. Unless you have different tax rates for hardware and software, this has no effect on the overall percentages.
If your state does not tax electronically-delivered software, then the Microsoft percentage drops!)
Microsoft says this is not a new policy but a "new clarification to a long standing policy of including Microsoft content in all financed originations."
As a frequent (former) user of Microsoft Financing, I can tell you that this has not been the policy. Everyone involved, from top to bottom, has been very clear that you only needed one Microsoft license to engage Microsoft Financing.
Reality Check
If I have to divide financing between two companies . . . I won't. Once you open the discussion of cutting things and separating things, stuff will get cut from the budget.
Until now my experience with MS Financing has been spectacular. This is true in large part because every time I've used it, the client added more equipment to the order.
Now, if I have to finance part with MS and part somewhere else, three things will happen:
1) More paperwork.
2) The poor interest rates will be more obvious
3) Orders will be smaller instead of larger
How will I avoid this? That's easy:
-> Use other leasing/financing options
I know Microsoft and their financing partners need to limit their exposure to bad credit. I honestly understand that.
But 35% of the total is a deal killer. 20% we can do. 25% we can stretch. But anything above that puts us in a position of juggling multiple kinds of financing for one project. The client sees it all as a single deal.
And you can forget using Microsoft Financing for HaaS.
It was a great program while it lasted. But with a 35% threshold for software on every project, we will simply look elsewhere.
Feedback:
Microsoft's missive says:
"Please feel free to contact your local sales representative for questions on financing transactions or contact Scott D Gilgallon, scottgil@microsoft.com, for any WW concerns on the policy."
I think that's a good idea. If you agree with me, point those people to this blog post. But be sure to tell them that YOU have concerns. And if you can't do MS Financing under these conditions, mention that as well.
Comments welcome.
:-)
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