Microsoft Starts 'Authorized Refurbisher' Program

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How do you cut down on Windows piracy while making a little extra money selling out-of-date software?

If you’re Microsoft, you set up a program to let companies that recycle used computers buy bulk licenses that let them legally install Windows XP on those PCs before they send them back out the door.

Indeed, this week, the software giant announced its Microsoft Authorized Refurbisher (MAR) program, a part of its Genuine Software Initiative. It aims to reduce pirating of Windows, while at the same time attempting to slow adoption of Linux. Oh, and, by the way, it cuts down on pollution, too.

One of the dilemmas facing IT shops is what to do with PCs that are no longer leading edge. Rather than plow them into landfills and deal with the concomitant environmental problems that ensue, an industry has grown up to refurbish those systems and resell them, largely abroad.

“This is partly an element of Microsoft’s ‘green’ initiative,” Dwight Davis, a vice president at researcher Ovum Summit, told InternetNews.com. “It’s a public relations win because they’re doing another thing to deal with the landfill problem.”

But that brings up a thorny set of issues. One of those is how to be able to provide those refurbished PCs with a legally licensed operating system.

Many of the systems that are refurbished and resold are formerly leased machines that are returned to the large PC vendors like Dell and HP, David Daoud, analyst at researcher IDC told InternetNews.com. Those vendors refurbish the PCs and then resell them, often in emerging markets around the world.

“The biggest chunk of the refurbished PC market is essentially a non-U.S. phenomenon,” Daoud said.

Microsoft estimates that, in 2004, 20 million refurbished PCs were sold. Today, the company projects that number is closer to 28 million.

However, these refurbished PCs, at least by the time they reach the end user, will require an OS. And Microsoft would prefer that OS to be Windows. So it just made sense to set up the MAR program.

“What these companies were asking for was essentially a means of installing genuine Windows software on a large volume of the PCs that they were collecting and refurbishing,” Hani Shakeel, senior product manager of the Genuine Windows product marketing team said in a statement.

Microsoft executives have argued for years that PCs that ship without an operating system are machines that will most likely end up running pirated copies of Windows. This may be less true today than in years past thanks to the growing popularity of Linux, but piracy still takes a bite out of sales as company executives are quick to point out.

In fact, it was a Microsoft-imposed contract requirement that PC vendors had to pay for a copy of Windows on every PC they sold whether the software actually shipped with the PC or not that got the company in trouble with federal antitrust enforcers back in the early 1990s. (As a result, the company can no longer make such demands.)

“Microsoft Authorized Refurbishers can ship PCs without an OS … it’s not a requirement of the program,” a Microsoft spokesperson confirmed to InternetNews.com in an e-mail.

This isn’t the company’s first foray into providing after market licensing for refurbished PCs. It piloted the idea with its Community MAR program that provides licenses to firms who sell refurbished machines to not-for-profits, educational institutions, and charities.

The trick with commercial refurbishers, however, will be to provide legitimate licenses that won’t break the bank, because customers for such machines are incredibly price sensitive, Daoud warns.

“A refurbished PC could sell for $250 or $300,” he said. So the company has to be careful what it charges per license.

He points out that, besides Windows XP, refurbishers have two other potential paths — shipping a system with no OS at all, or with a low or no-cost OS, namely Linux.

Microsoft would like to, as much as possible, encourage refurbishers to push machines out the door with Windows installed. Of course, Windows XP is no longer Microsoft’s mainstream OS offering. However, most machines coming back for refurbishment are not capable, or are only marginally capable, of running Microsoft’s new flagship, Windows Vista.

So the MAR program helps Microsoft continue to make a little money off of aging intellectual property – XP – while trying to head off the other two problems.

“I can’t believe it’s [the commercial MAR program] dramatic revenue-wise,” Davis said. At the same time, however, that’s a lot of refurbished PCs that are being sold annually. “This isn’t an insignificant market,” he added.

Microsoft’s MAR program defines a refurbished PC as one that has had any previous data completely erased, been tested to ensure it’s in good working order, and perhaps had minor repairs made to it.

In order to qualify for the program, a firm has to have a “track record of supplying an average of 5,000 refurbished PCs or notebooks per month for the last 12 months,” according to the program’s Website. Additionally, the firm would need to have “adequate systems for data wiping and Microsoft reporting requirements, as well as technical expertise to preinstall Windows … in a large scale environment.”

Under the program, refurbishers can get licenses to install Windows XP Home Edition and Windows XP Professional Edition — available initially in English, French, and Spanish. Additional languages are planned for 2008, according to company statements.

This article was first published on InternetNews.com.