Microsoft calls in the A-TEAM

Stepping off the plane with a box of sharpened pencils, calculators aplenty and tasked with scrutinising the books of authorised distributors, a crack audit team (the A-TEAM as I like to call them) landed in Dubai recently to help pinpoint the source of grey and parallel export Microsoft product leaving the region. If you have a grey problem, if no one else can help, and if you can find them, maybe you can hire the A-TEAM.

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By  Stuart Wilson Published  February 16, 2005

Stepping off the plane with a box of sharpened pencils, calculators aplenty and tasked with scrutinising the books of authorised distributors, a crack audit team (the A-TEAM as I like to call them) landed in Dubai recently to help pinpoint the source of grey and parallel export Microsoft product leaving the region. If you have a grey problem, if no one else can help, and if you can find them, maybe you can hire the A-TEAM.

And these guys mean business. One authorised distributor has already opened up its books to the A-TEAM and allowed them to pore over Microsoft transactions going back over two years. Other authorised distributors are expected to receive visits from the A-TEAM as Microsoft investigates shady product flows that allowed resellers outside the region to purchase software from ‘rogue authorised’ distributors in the Middle East.

As contradictory statements go, it doesn’t get much better than the term ‘rogue authorised’ distributors. This was the term used by Microsoft UK to describe the distributors that UK reseller ITAC had been purchasing from. And it begs the question; precisely what action will Microsoft take against the bad boys of the regional distribution scene once the A-TEAM starts digging up details of the dodgy deals?

There is a precedent here and it is one that Microsoft would do well to heed. In late 2003, a major global vendor uncovered similar issues in its Middle East channel. The distributors at the heart of the problem were unceremoniously dropped and those employees at a vendor level that had been complicit in the creation of this channel abuse were shown the door. The vendor launched a comprehensive clean up of its regional channel, overhauled its distribution model and is now starting to reap the rewards.

There is a great deal to be said for the benefits of coming clean in a situation like this. So far Microsoft Middle East has maintained a stony silence on specific questions relating to the case against ITAC, and the implications of the channel audit for its authorised distributors in the region. It has also failed to disclose the precise reasons behind recent changes in its South Gulf channel management team.

The A-TEAM certainly has its work cut out in the Middle East. They would do well to focus their attentions on the potential for special pricing abuse stemming from large government ministry tenders in the region. If the A-TEAM do find discrepancies in the books of the channel players they pay a visit to, will Microsoft actually drop these partners?

The termination of distribution contracts may not be a foregone conclusion even if evidence is uncovered. When all is said and done, distributors will only engage in this type of activity if they believe the vendor will let them get away with it.

Any case brought by Microsoft against ITAC, or any other reseller outside the region buying from ‘rogue authorised’ distributors in the Middle East, appears to be fundamentally flawed. In this age of corporate governance, Microsoft needs to look at how its internal procedures failed to detect this product flow for so long.

Time and time again, distributors say that vendors can only ask the channel to clean up its act once they start policing the behaviour of their own employees. These problems need to be tackled at source, and unfortunately for many vendors in this region, that means dealing with the actions of their own staff responsible for the distribution channel.

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