AfterDark hits out at licensing policies

AfterDark hits out at licensing policies

A Brisbane-based reseller is calling for amendments to the Trade Practices Act to stop vendors using information gathered from existing licensing agreements to direct customers to preferred suppliers.

AfterDark Technology managing director, Peter Davies, said his business has suffered from vendors including Microsoft making direct contact with his customers.

AfterDark, a small IT business with seven staff, provides end-to-end infrastructure solutions including software, hardware and services.

At the heart of Davies’ concerns is Microsoft’s use of end-user information collected by his company when selling software licences.

Davies claims Microsoft has been using these details to tell them of discounted Select Licensing, only available through a small number of preferred partners.

He said he had proof his customers had been contacted directly by Microsoft and advised that they qualified for cheaper licensing. However, in order to receive the discounts they would need to direct their business to one of Microsoft’s select agreement partners.

Davies said in one case, one of AfterDark’s clients had grown from 80 to 300 users in a three-year period. The customer was then approached directly by a Microsoft sales representative and advised of the Select Licensing discounts, he said. The customer had previously been on a general open licence agreement.

“Another client has had three inducements [from Microsoft] in the last 12 months,” he said.

Responding to the claims, Microsoft licensing manager, Thomas Kablau, said the software giant investigated possible solutions with customers and resellers. He insisted the vendor had the customer’s best interests at heart.

“We tell them about that [software package] which is best suited to their environment,” he said.

“For example, if a customer is looking at a technology rollout we might suggest Windows 2003. They will then ask where to go to source the product.

“This interaction is not restricted to licensing arrangements. We provide leads back to our partners for services, for example.”

In the case of licensing agreements, customers could choose to opt out of receiving any information from Microsoft when they sign up, he said.

Nevertheless, Microsoft would advise the customer at the end of a licensing term of the operational benefits of the contract.

Select Licensing is generally available to customers with more than 250 PCs, Kablau said. The special agreement offers discounts across Microsoft’s range of products. For example, Office Professional 2003 on an open licence would be $810 per seat, whereas those purchasing on a select licence would pay $752 per seat — a saving of $58 per user.

Kablau said Select Licensing was only offered in Australia through its 13 Large Account Resellers (LARs). While some of these partners only offer licensing, others provide a full suite of services.

Wherever possible, Kablau said Microsoft would use the LAR partner for the licensing component of the transaction, while leaving the services and support side to the original reseller.

However, Davies said there was a fundamental flaw to this procedure because some of the preferred suppliers were offering to sell the customer additional commodities, such as networking gear or other software products.

“We’re talking about large partners here that offer the whole gamut of services,” he said.

To illustrate this point, Davies said one Microsoft preferred partner awarded a licensing contract with one of AfterDark’s customers had gone on to sell Cisco routers and associated equipment — effectively cutting out another revenue stream for AfterDark.

“There’s a glass ceiling I can’t get past,” he said. “I can’t qualify as a LAR because the business gets whipped away from me.”

Davies said he sent a letter on client management to his company’s software suppliers last year, requesting that all dealings and communications with the customer be filtered through them.

Both Microsoft and lifecycle management vendor, Altiris, had refused to comply, citing international company policy, he said.

“I have taken up this issue with Microsoft but they are hiding behind their US company policy,” Davies said. “These policies are designed to deal with large volume issues but are being applied to SMBs in Australia. They haven’t taken into account the size and volume of transactions being undertaken here.

“Microsoft needs to recognise that Australian businesses are different to the US. These practices are disadvantaging everyone and creating conflict. They should make policies which are relevant to the Australian marketplace.”

Davies said US-based Altiris had also been contacting AfterDark’s customers directly — this time in relation to software maintenance programs.

“We are at a stalemate with Altiris,” he said. “The problem here is that AfterDark gets a 12-month maintenance contract with customer for their software. Altiris then contacts the customer directly eight months after and doesn’t allow us to sell them an extended maintenance program.”

Davies said one of the main problems with proving such predatory acts lies in the conditions of the Trade Practices Act.

Under the Act’s means test, AfterDark needed to prove the vendor’s intent was to take business away from AfterDark.

“I would like to see this clause changed to an effects test,” he said.

“This would mean I’d need to prove the vendor’s activities are having a detrimental effect on my business. This would make it easier to take them to court.”

However, Davies said the company simply couldn’t afford to take the matter through the judiciary process.

“The only thing for me to do is raise public awareness,” he said.

“The responsibility falls back to the political ministers to do something about it.”

Davies said he had approached the Australian Competition and Consumer Commission (ACCC) about the issue, as well as his local MP.

He was currently waiting on a response to his letter to Shadow Minister for Communications, Stephen Conroy.

Davies said he was hoping to achieve one of two outcomes: either have the Trade Practices Act amended, or have Microsoft’s policy changed to reflect the Australian market.

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