Microsoft INR billing: A blessing in disguise

Signaling the beginning of new INR
pricing over its renovated billing system, href="http://www.dqweek.com/Microsoft-rejigs-channel-structure">Microsoft
India has
recently introduced Rupee billing for its dealers in India. As per
the new billing system, Microsoft Singapore will invoice all its
Indian distributors and Large Account Resellers (LARs) in Indian
Rupee instead of USD. The new billing practice is poised to have an
impact on all new agreements of Microsoft products and solutions
under Microsoft's Volume Licensing Programs and all purchase orders
with respect to Fully Packaged Product (FPP) in India only. However,
all existing agreements will run in USD until their expiry.
Commenting over the new move, Ramkumar Pichai, GM-customer and
partner experience, Microsoft India said, “This transition has been
initiated as a direct response to feedback from Microsoft's partners
and customers and will help take currency risks off the partner
ecosystem in India, insulating them from fluctuating dollar rates and
building more predictability into their business. As a result,
partners will find it easier to keep up with aggressive pace and
opportunity in the Indian market.”

Although, the company feels the INR
billing is expected to create a more streamlined and agile channel
that is equipped to deliver greater business results and customer
satisfaction for Microsoft's customers in India, the pricing of
software has been hiked by 8-9% which has irked Microsoft dealers.
Most of the dealers feel that the new billing will bring more
benefits to NDs and large resellers.

NATIONAL DISTRIBUTORS' VIEW

Irrespective of the irk in the channel
community and Microsoft resellers, it is expected that the new policy
will bring in a price stability in the market for its product range.
Rajesh Goenka, VP-sales and marketing, Rashi Peripherals said,
“The new system will make prices more stable and consistent across
the country. Therefore, channel partners and end-users will benefit
more.” Adding to the views put forward by Goenka, Irfan Darvesh,
product manager-Microsoft, Ingram Micro India said, “We have
already informed our dealers about the new Microsoft INR pricing
model, however there is an expected increase of 8-9% on the pricing
as compared to the current pricing. Effective from May 2, 2011, we
have issued price list, based on the price list of Microsoft. The
rest of the process remains the same in terms of TAT, weekly
shipments from MS-Singapore, customs clearance and other
formalities.”

ISODA WELCOMES THE MOVE

According to Rajesh Kothari, chairman,
ISODA, the move is in the right direction, but there are several
ambiguities. However this will bring price uniformity and
standardization which has been creating a lot of confusion among the
channel, but it is still to understand the terms and conditions
attached to this new systems. “Instead of increasing the price,
the company should have followed MRP systems,” he said. Devesh
Aggarwal, president, ISODA said, “ISODA had been complaining to
Microsoft for the last 6 quarters, that there were daily
fluctuations in the US dollar rates and we asked the principal
company to fix a rate for 1 year and stick to it, so that daily rate
fixing and rate quotation could be avoided. Already, other software
vendors like IBM, Oracle and Adobe has been following Indian Rupee
pricing.” Aggarwal also stated that the new policy is good for
business because it would lead to uniformity in pricing, and that
applies to all Microsoft products, but at the same time, he is
reluctant to accept the price hike, as per the distributor
communication. “We are talking to Microsoft for the roll back of
price increase; we can accept price increase between 4-5% but not
beyond that. But Microsoft wants to review the strategy, and may
take decision in another 2-3 months,” he added

THE CHANNEL IMPACT

Though the price hike is a worry for
the channel community, Microsoft is viewing this hike as a way
forward to strengthen and stabilize the market on a long-term basis.
Paresh Shah, CEO, PH Teknow, said, “Sales have been very slow for
the last 2 months, since April due to delay from the distributor's
side. Also after the price hike, customers have stopped making fresh
orders. We don't expect any roll back in pricing in the near future.
Moreover, the situation will be clear in the month of June; so far
there is a lull in the market.” Delhi-based Kavita Singhal,
director, Kamtron Systems pointed out, “We (channel partners) had
been waiting for the INR pricing to come in, but the way it has been
incorporated is not acceptable for us. As per the new system, the
company has over assumed the value of dollar fluctuation and fixed
the value of USD at Rs 50, this is almost like 10%, because the
current dollar rate is about Rs 45 plus.” Further, she opined that
in the USD format, there is always a scope to negotiate with the
distributor and offer best price to the customers, but with the new
system, the price will shoot up by 8-9%. Microsoft said that the new
pricing is applicable to the entire ecosystem and they have given
enough time to partners to incorporate the new price. This in fact,
in a move to prepare the ecosystem for this change, Microsoft
Singapore has already made available for preview the Indian Rupee
price list from March 1, 2011 for its tier-1 partners.
Ahmadabad-based Binit Shah, director- license software division, TM
Systems said, “We are completely against this new billing system.
This will badly hit the sub-distributors. If things doesn't get
stable in the coming times, we will have to look for new business.”
However, with the price hike featuring as the sole negative element
in the INR move, market stability features atop the agenda. Although
most of the dealers across the nation have expressed concern over
this issue, PCAIT has taken up a positive stance, seemingly optimist
about the long-term market goals. Expressing his concern, Saket
Kapur, general secretary, PCAIT concluded, “INR pricing will make
the market more stable. One should look at this move for a long term
benefit. The company has set a benchmark for dollar. With this, we
can predict our business in a better way.”