Eric Lai
Microsoft introduced late last week a new pilot program to encourage refurbishers to install legitimate copies of Windows XP on used PCs.
The new Microsoft Authorized Refurbisher (MAR) program offers a discount off the retail price of Windows XP, along with deployment tools to help refurbishers reinstall Windows and all of the relevant drivers on renewed PCs in as little as 15 minutes, said Hani Shakeel, senior product manager of the genuine Windows product marketing team.
When MAR is fully expanded, it will also help stem what Microsoft acknowledges as widespread flouting of Microsoft's XP licensing rules by price-pressured refurbishers.
"There's a range of behavior. Definitely, what you're describing is happening," Shakeel said.
Observers say MAR also attempts to ameliorate another risk: that refurbishers, frustrated by the high cost and difficulty of following Microsoft's arcane Windows licenses to the letter, will simply install a free Linux operating system on renewed PCs instead.
Some resellers "are saying, 'We're just going to ship this stuff out with Ubuntu Linux,'" said Adam Braunstein, an analyst with the Robert Frances Group.
Braunstein estimates that for now, no more than one in ten refurbished PCs goes back out for sale sporting Linux rather than Windows. But Microsoft is worried.
"There are pieces of the armor that are pretty rapidly deteriorating," he said.
And the first two contestants are...
Two large refurbishers have been initially selected to participate in MAR: Redemtech and TechTurn.
Microsoft has long encouraged the donation and reuse of older PCs, albeit in a limited way. Its Community MAR program lets PC recyclers obtain cheap copies of Windows that they could use to install on used computers.
But the catch was that those licenses were only available for PCs destined for use by charities, schools and other non-profit groups. As a result, only 200,000 refurbished PCs worldwide last year benefited from the Community MAR program, according to Microsoft.
Meanwhile, up to 28 million refurbished PCs will be sold this year, making up 10% of the global PC market, according to Microsoft's Shakeel. Nearly all are destined to consumers and smaller companies.
Many of those PCs shipped will be violating some aspect of Microsoft's complicated End User License Agreement (EULA) for Windows. For instance, most refurbishers will assume that they can reinstall Windows onto a recycled PC using the license number on the original Certificate of Authenticity (COA) that shipped with it. In fact, Microsoft requires that refurbishers also have the original Windows installation CD.
That's a "near-impossible" requirement, says Braunstein. "You're probably lucky if half of the PCs [at a large company] still have the COA after three years," he said. As for the installation CD, "one of the first things a company does when they get a new PC is throw away the installation disc."
Confirmed Jake Player, president of TechTurn: "The majority of machines we get don't come with the original Windows CD."
A mixed message
Moreover, refurbishers struggle with even lower margins then conventional PC makers. At TurnTech's site, many several-year-old Pentium 4 desktops with Windows XP Professional command less than US$200.
"It's very difficult to make any money in this market," Braunstein said. "Microsoft has only been standing in the way of folks."
Unofficially, Microsoft has not strictly enforced its EULA with smaller refurbishers, choosing to tolerate this de facto piracy because the alternative -- refurbishers installing Linux instead -- is far worse in Redmond's eyes.
Microsoft's attitude "is 'Please don't pirate software. But if you do it, make it's ours,'" Braunstein said.
But large refurbishers such as TechTurn, which expects to sell 800,000 refurbished PCs this year, have been forced to comply with Microsoft's rules and ship out most of its PCs without any OS on them, says Player, which is why he has been "begging" Microsoft for relief.
Besides giving TurnTech an undisclosed discount on certified copies of Windows XP, Microsoft will supply the company with deployment software that will help detect and load needed drivers onto a large number of PCs in a matter of minutes.
"It helps customers know what they are buying," he said. "We are anticipating a sales uptick of 20%."
Relief and respite on the way
MAR comes just in time, too, from Player's point-of-view. He predicts a huge wave of older PCs will start hitting the market within a year or two, as companies upgrade to Vista and dump their existing, underpowered PCs.
Braunstein applauds MAR: "Microsoft is getting a little smarter," he said. But he thinks that until Microsoft expands the program, especially with smaller refurbishers, the company's likely to "continue to do things as is."
Shakeel said MAR will be "expanded as quickly as we can," first to North American refurbishers selling more than 5,000 systems a month, and then to other parts of the world.
A different program is in the works to encourage smaller refurbishers to get legal, he said. In the meantime, Shakeel confirmed that those firms won't have to worry about sudden anti-piracy enforcement coming from Redmond.
"There's nothing in the immediate horizon that should be a worry to the market," he said.
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Microsoft introduced late last week a new pilot program to encourage refurbishers to install legitimate copies of Windows XP on used PCs.
The new Microsoft Authorized Refurbisher (MAR) program offers a discount off the retail price of Windows XP, along with deployment tools to help refurbishers reinstall Windows and all of the relevant drivers on renewed PCs in as little as 15 minutes, said Hani Shakeel, senior product manager of the genuine Windows product marketing team.
When MAR is fully expanded, it will also help stem what Microsoft acknowledges as widespread flouting of Microsoft's XP licensing rules by price-pressured refurbishers.
"There's a range of behavior. Definitely, what you're describing is happening," Shakeel said.
Observers say MAR also attempts to ameliorate another risk: that refurbishers, frustrated by the high cost and difficulty of following Microsoft's arcane Windows licenses to the letter, will simply install a free Linux operating system on renewed PCs instead.
Some resellers "are saying, 'We're just going to ship this stuff out with Ubuntu Linux,'" said Adam Braunstein, an analyst with the Robert Frances Group.
Braunstein estimates that for now, no more than one in ten refurbished PCs goes back out for sale sporting Linux rather than Windows. But Microsoft is worried.
"There are pieces of the armor that are pretty rapidly deteriorating," he said.
And the first two contestants are...
Two large refurbishers have been initially selected to participate in MAR: Redemtech and TechTurn.
Microsoft has long encouraged the donation and reuse of older PCs, albeit in a limited way. Its Community MAR program lets PC recyclers obtain cheap copies of Windows that they could use to install on used computers.
But the catch was that those licenses were only available for PCs destined for use by charities, schools and other non-profit groups. As a result, only 200,000 refurbished PCs worldwide last year benefited from the Community MAR program, according to Microsoft.
Meanwhile, up to 28 million refurbished PCs will be sold this year, making up 10% of the global PC market, according to Microsoft's Shakeel. Nearly all are destined to consumers and smaller companies.
Many of those PCs shipped will be violating some aspect of Microsoft's complicated End User License Agreement (EULA) for Windows. For instance, most refurbishers will assume that they can reinstall Windows onto a recycled PC using the license number on the original Certificate of Authenticity (COA) that shipped with it. In fact, Microsoft requires that refurbishers also have the original Windows installation CD.
That's a "near-impossible" requirement, says Braunstein. "You're probably lucky if half of the PCs [at a large company] still have the COA after three years," he said. As for the installation CD, "one of the first things a company does when they get a new PC is throw away the installation disc."
Confirmed Jake Player, president of TechTurn: "The majority of machines we get don't come with the original Windows CD."
A mixed message
Moreover, refurbishers struggle with even lower margins then conventional PC makers. At TurnTech's site, many several-year-old Pentium 4 desktops with Windows XP Professional command less than US$200.
"It's very difficult to make any money in this market," Braunstein said. "Microsoft has only been standing in the way of folks."
Unofficially, Microsoft has not strictly enforced its EULA with smaller refurbishers, choosing to tolerate this de facto piracy because the alternative -- refurbishers installing Linux instead -- is far worse in Redmond's eyes.
Microsoft's attitude "is 'Please don't pirate software. But if you do it, make it's ours,'" Braunstein said.
But large refurbishers such as TechTurn, which expects to sell 800,000 refurbished PCs this year, have been forced to comply with Microsoft's rules and ship out most of its PCs without any OS on them, says Player, which is why he has been "begging" Microsoft for relief.
Besides giving TurnTech an undisclosed discount on certified copies of Windows XP, Microsoft will supply the company with deployment software that will help detect and load needed drivers onto a large number of PCs in a matter of minutes.
"It helps customers know what they are buying," he said. "We are anticipating a sales uptick of 20%."
Relief and respite on the way
MAR comes just in time, too, from Player's point-of-view. He predicts a huge wave of older PCs will start hitting the market within a year or two, as companies upgrade to Vista and dump their existing, underpowered PCs.
Braunstein applauds MAR: "Microsoft is getting a little smarter," he said. But he thinks that until Microsoft expands the program, especially with smaller refurbishers, the company's likely to "continue to do things as is."
Shakeel said MAR will be "expanded as quickly as we can," first to North American refurbishers selling more than 5,000 systems a month, and then to other parts of the world.
A different program is in the works to encourage smaller refurbishers to get legal, he said. In the meantime, Shakeel confirmed that those firms won't have to worry about sudden anti-piracy enforcement coming from Redmond.
"There's nothing in the immediate horizon that should be a worry to the market," he said.
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