2 min read

Going grey

Computer brokers are becoming more than an irritant for the channel

My two daughters have a magical way of turning my jet-black hair grey, but I can take solace in knowing I will not be the only one who is going grey.

Sue Harper of Microsoft Canada is trying to stop her top partners from going grey from IT brokers selling software at unbelievable discounts.

This puts the pressure squarely on Microsoft, its distributors, partners and, to a lesser degree, customers.

Because of our close proximity to the U.S., Canada is subject to a lot of grey market activity. Harper said it has not increased from last year. However, it hasn’t decreased either.

Microsoft is trying to do something about it. There will be a new billing system in place for OEM distributors, with invoicing of software royalties done on a just-in-time system. This will seriously cut down on deadstock that made its way on to the market. Finally, payment for certificate of authenticity (COA) labels will now be taken care of by authorized replicators.

Harper believes these moves will lessen the pricing pressure on the channel.

But she also sees the rise of brokers who are setting up shop just to sell product with no added value becoming a real problem.

These brokers sell hard disks and other components along with operating system software obtained from sources in the U.S.

This all leads to loss of sales for Canadians. Some of these offerings are co-bundled with counterfeit product. Some have a legal COA labels on a bootleg disc or vice versa. Some of the software is tampered with, she said.

Squeezing the customer

It is here where the customer can get squeezed. This looks awful for a reseller who sells quality products along with counterfeit. It hurts the reputation of the reseller along with potentially putting the customer at risk. Here is where I believe the customer should be careful. The customer should be vigilant and demand the software be legit and procured from reliable sources. They should also understand that it may cost more, but in the end they will have the real deal.

Let’s face it – the real stuff comes with challenges for both the VAR and the customer.

Focusing on saving pennies, while potentially putting your IT environment at risk is just foolhardy for the customer.

Harper has been scratching her head trying to figure out how these brokers are doing it. One legal way is for them to acquire rebates from other hardware products and pass the savings on to the software. Another possibility could be some kind of GST fraud.

But more often than not it is illegally obtained. One way is to have an insider slide in software disks underneath hard drive cases and shipped them out on a skid.

Since Microsoft has more than 280 distributors worldwide handling its products it cannot control inside jobs.

Either illegal or legal, it is putting lots of pressure on the channel to compete.