Microsoft’s termination of EOH Mthombo’s contract has become effective, and EOH is no longer a reseller of Microsoft software licences.
The group today issued a SENS announcement that, on 12 March 2019, a number of EOH group companies also received a 30-day notice period of Microsoft Ireland’s intention to terminate the Microsoft Partner Network Agreement.
Microsoft’s local office has initiated its own investigations into contracts involving Microsoft and government, which may take six to 12 months to conclude; and has advised EOH that it would not be able to enter into any discussions regarding re-instatement of the partnership
until those investigations are concluded.
“While the immediate short-term impact can be managed, EOH is assessing and discussing various alternatives to ensure the long-term continuity of service to all customers and to maximise value for shareholders,” the statement continues. “EOH is confident that this can be achieved.”
It states that the Channel Partner Agreement is not material to EOH and reported a total profit before tax of approximately R10-million during the last financial year.
The impact of the latest notices is still being assessed, but EOH early indications are that:
* Microsoft-related bespoke application development will be predominantly unimpacted.
* Any long-term impact on the IP businesses, including the core IP that has been developed for resale utilising Microsoft technologies, can be mitigated through migration to other cloud providers.
* The CRM (Dynamics 365) and Productivity Solutions business will be impacted in terms of access to partner support portals.
* The Microsoft-related managed services business and clients will experience no impact as these services are provided on client infrastructure and platforms.
* The cloud business and platform business and the resale of Azure cloud offerings will be impacted in the short-term and EOH is in discussions to find a solution to ensure continuity of service and revenue streams.
While EOH’s assessed impact of the latest notification on profit before tax is estimated at less than R20-million during the current financial year, this will bring the total impact of Microsoft exposure to R30-million profit before tax. There is also an overall medium to long-term go-to-market and credential impact and risk in not retaining Microsoft Gold Partner status.
EOH adds the various investigations are progressing to determine any wrongdoing on the part of EOH, its customers, its partners or its employees. To date we have migrated the legacy public sector business under a new structure and employees implicated in wrongdoing have either been suspended or have resigned.
A sub-committee of the board comprising independent non-executive directors and the CEO has been formed to evaluate the findings and determine the most appropriate manner in which to act.