Microsoft to try out 'master VAR' plan for Dynamics channel

Stakeholders hope master VAR pilot kicking off in September will help small Microsoft Dynamics ERP VARs stay in the game.

LOS ANGELES--Microsoft will pilot a new master VAR program to help smaller Microsoft Dynamics VARs stay in the game without merging with or acquiring other companies.

In this scenario, a larger partner—the master VAR—would recruit affiliates to fill in either geographical or product gaps in its own portfolio and provide centralized services to those affiliates in return for a fee.

“The master VAR is the mother ship. It does the billing for both product sales and professional services,” said Jeff Edwards, director of Microsoft Dynamics channel strategy.

“We’ve opened up the margin spread so that smaller partners will make less and bigger partners make more.  In opening up that spread, the master VAR can accrue orders and make a value proposition to affiliates so that they get X% if they place orders alone and X times whatever if the master VAR places the order,” Edwards said in an interview at the Microsoft Worldwide Partner Conference. The master VAR and affiliates would work out their own payment ranges, he noted.

The Microsoft Dynamics channel has been under pressure of late. The larger players are making acquisitions, but some of the smaller Dynamics partners that may have a deep but narrow skill set wonder about their long-term viability. ERP sales typically have a longer sales cycle, require more hand holding and much more customization than typical Microsoft “volume” software sales.

Linda Rose, CEO of Rose Business Systems Inc. in San Diego, said she’s been expecting Microsoft to revisit some sort of franchise or other plan to help smaller players stay in the game. Rose Business Solutions bought Chicago-based  TTD Enterprises LLC in March as part of its plan to gain bigger geographical coverage. 

The master VAR plan brings some of the advantages of a franchise model—sharing central costs and overhead—without the tax intricacies and liabilities or the negative McDonald’s connotations, observers said. Edwards said the pilot will be very small, maybe two or three master VARs in the U.S. and a couple more in Europe.

Some Dynamics partners on their own have formed confederations and alliances. The various Interdyn companies, InterDyn AKA for example, remain separate businesses without central buying power or support organizations, said Edwards.

Many in the Microsoft Dynamics channel worry about the health of their  businesses going forward as Microsoft finally puts its ERP products into the cloud. Its first Azure-based app, Dynamics NAV, is slated to go live in calendar year 2012 and will be followed by Dynamics GP and AX.

“There’s going to be a lot of churn in those partners,” said one former Dynamics partner who got out of the business after more than  a decade.

Microsoft argues that only a large company with huge data centers can wring cost savings out of infrastructure that will enable those Dynamics VARs to continue selling their own vertical expertise and IP atop a Microsoft infrastructure.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com, or follow us on twitter.

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