What Microsoft Software Rental Agreement for Internet Café and Dell “Paket Merdeka” have something in common besides aiming at Internet kiosks? Why the computer manufacturer can do better than the software giant?

Microsoft Software Rental Agreement for Internet Café (MSRAIC) is an extension of the normal End User License Agreement (EULA) that allows Internet kiosks to legally rent out Microsoft software. There is no additional fee to obtain the license, Internet kiosk owners only have to purchase genuine Microsoft software from resellers, fill out the agreement paper and list how many Microsoft software that they use in Internet kiosk.

Meanwhile, Dell “Paket Merdeka” is a bundle of hardware and software, specially packaged to meet Internet kiosks need to run their business. The hardware consists of a complete set of Dell Optiplex 320 PC, UPS, Dell Switch and pre-installed original Windows XP. Internet kiosks owner can opt for “Package A” worth US$5,718 for 10 clients plus one billing system; or “Package B” for 20 clients and one billing system for a cost of US$13,514.

MSRAIC and Paket Merdeka both try to fulfill Internet kiosk needs for affordable legal software. But there’s more. Both initiatives were evidence of Indonesia Internet Kiosk Association (Awari) transformation: from a communal, unorganized, grass-root organization into a professional industry association. And if history was made by people, those here are two women: Megawaty Khie and Judith Monique Samantha Lubis.

Megawaty was former Small and Mid-market Solutions & Partners Group Director at Microsoft Indonesia. She spent nearly four years in the software maker before joining Dell as Country Manager for Indonesia in 2006. Megawaty orchestrated both MSRAIC and Dell Paket Merdeka.

Judith is a prominent figure in Indonesian ICT landscape. Former journalist, she is an activist on many field, from digital divide, affordable Internet cost, legal software, open source and telecommunication. Judith was chairwoman during troubletime at Awari, took part both in MSRAIC and Paket Merdeka.

But while MSRAIC had failed, there is a good chance Paket Merdeka will make huge success this time. And Awari played an important part.

Lesson learned.

MSRAIC was introduced in Indonesia on April 2005 in the midst of nation-wide police raids to Internet kiosks for pirated software. The year 2005 was a time when Indonesia was pressed by international Intellectual Property Rights (IPR) community to strengthen enforcement. IPR Law that was passed in 2002 was declared effective by 2004, and 2005 was the right time to “show-off” how serious the government were in IPR enforcement. Raids were part of that show, and it’s easier to sweep Internet kiosks than street vendors that had mastered the game of “Tom and Jerry” with the authority.

While at that time most Internet kiosks still use pirated software, some are using legal software. Many Internet kiosks owner had anticipated the IPR Law by switching to the cheaper Microsoft Windows 98 and other freewares. But unfortunately the normal EULA didn’t permit them to rent the software. Police had closed down many Internet kiosks and owners were charged with license infringement, not only for infringing Microsoft software but also freewares such as Winamp MP3 Player.

Indonesian Internet Kiosks Association (Awari) had plied to the authority to stop the raids as it would kill the business. Uncertain of the situation, many Internet kiosks owners decided to close down their business temporarily, some switched to Playstation rental. Months of uncertainty turned into chaos. Rumors began to spread amongst Internet kiosks owners that Microsoft Indonesia was behind police raids.

Microsoft local office in Indonesia had denied any linkage, cited that the software giant had no right to do raids. But it was becoming harder to convince public as Microsoft legal staff from regional headquarters (Microsoft Operations) in Singapore was known to play an active part in Business Software Alliance (BSA). Microsoft is a major stakeholder in BSA, a global non-profit organization for anti-piracy. BSA has been training Indonesian authorities in IPR enforcement, including the police.

Awari - Microsoft “negotiation”

Since IPR enforcement received nation-wide attention, Awari leaders had been approaching Microsoft looking for a price reduction. Awari was referring to Microsoft’s special price given for Indonesian Computer Manufacturer Association (Apkomindo) as reseller and OEM partner. But back then Awari’s organization was in jeopardy following disagreement amongst leaders in 2001 national assembly that inherited problems in finance, member administration and many more.

Since 2001, Awari had been in status quo as non-profit organization, led by a presidium, with Judith MS Lubis as chairwoman of the board. Dragged down with so many internal problems, it was hard to treat Awari as a legal entity. Awari had no membership data, but Judith claimed to have more than 2,000 members.

Against Microsoft, Awari bargaining position was very weak as they could not provide number of software needed to obtain a Microsoft volume license. But the series of events forced Awari and Microsoft to team up looking for a solution that satisfies both parties. Talks began early April 2005. Microsoft regional office took part in the “negotiation.” The software giant offered MSRAIC which appeared as the solution Internet kiosk owners had been searching for. Microsoft and Awari held a joint press conference announcing MSRAIC mid April.

Microsoft’s effective marketing communication had made MSRAIC in the center of public attention. MSRAIC made headlines in many media. MSRAIC helped Microsoft to improve its detoriating image as the culprit behind the police raids. Many Internet kiosk owners put much hope on MSRAIC. But the devil is in the detail. MSRAIC lacks the procedure on how to obtain it. Microsoft had not appointed any local reseller responsible of handling MSRAIC. It took nearly two months before Microsoft announced they had worked out the details. It might look like a simple job, but MSRAIC process involves coordinating Internet kiosks throughout Indonesia and Microsoft Operations in Singapore. The job gets tougher as Awari had neither membership data nor resources to get the job done as soon as possible.

In the mean time, police raids went on. Indonesia is a vast country with unreliable postage infrastructure. There were many cases when Internet kiosk mostly in rural areas had to wait significant time to get the MSRAIC certificate. Without it, they business it at risk from police raids. One Internet kiosk in Central Java -who had licensed Microsoft software-, had to wait two months before they can release their PC that had been confiscated by the police.

Nevertheless, Microsoft had done a pretty good job. Until September 2005, after a road show to several cities, more than 800 Internet kiosks had participated in MSRAIC. Lots of them expressed satisfaction working with the software giant.

The turning point

But in the midst of otherwise had been a successful program, Awari expressed dissatisfaction of MSRAIC. It seems Awari wanted more than legality. In several media, chairwoman Judith MS Lubis demanded Microsoft to guarantee that MSRAIC should make Internet kiosks invincible to raids. This was way beyond Microsoft control. Since MSRAIC, police raids had not loosened up. It was later unveiled that police increasing the raid not only to enforce IPR, but to hunt Bali bomb terrorists.

Then strange thing happened. Microsoft Indonesia’s President Director Tony Chen statement that the software giant cannot interfere with police matters backfired. The cause was not in Microsoft side, but in Awari’s. However bad Judith’s demand to Microsoft was, it wouldn’t get worse if no one had exploit it. Unorganized, apparently some “activist” in Awari if you can’t call them members, were against any move that would stop them from using pirated software. For “the left wing” of Awari, there is no such thing as paying for software. They have every reason to oppose MSRAIC. Tony Chen’s statement was used to convince public that MSRAIC was pointless. From then, things went wild for Microsoft.

After the end of 2005, MSRAIC slowly disappeared from public attention. Microsoft Indonesia’s link to MSRAIC Web page showed a non-active message. For Microsoft, if only they had better knowledge of what kind of organization it was dealing with. It was useless to make an agreement with an association that had no strong leadership to unite its members. But at that time, it was hard for to know what Awari really was. Awari leaders had close relationship with the media. But most of journalist didn’t aware of Awari’s domestic dispute back in 2001 national assembly.

Journalist quoted Judith’s statement as if it represents all Internet kiosk owners. And as a former journalist herself, Judith knew how to feed the hungry media with good scoops. Many of her statement made to the headlines, she brought up various issues from police raids, e-government, digital divide, cybercrime, open source, piracy, to bandwidth price. All of these had carved public perception -including Microsoft officials- that Awari do exist as a formal united business association.

The new Awari

The association was formed in 25 May 2007 2000 with Rudy Rusdiah as the first chairman. Rudy is a pure businessman who owns a Dell distributorship. But then fellow Awari members accused Rudy of not being transparent enough and forced him to resign in late 2001. Rudy later formed a new Internet kiosk association APW-Komitel.

Since 2001, Awari was not more than an informal community of Internet kiosk owners rather than a strong business association. They can’t do much against corrupted police officer during the raids; they have weak bargaining position against suppliers like Microsoft and Internet Service Providers (ISP).

The disorganized Awari lasted until February 2007 with the second national assembly. Finally Awari succeeded in forming a new leadership. Irwin Day elected as Chairman of Awari’s organizing board while Judith moved to be Chairwoman of the supervisory board. See how Awari members pooling result on MSRAIC in Irwin’s post.

Awari transformed to business-oriented association without leaving the role of Internet kiosk to close the digital gap. The new Awari began to seriously organize membership system. In his blog, Irwin described being chairman of Awari as ” It’s a very though job but somebody has to do it”.

For the first time, Awari can provide accurate data of their business. Today, Awari have more than 180 owners running more than 300 Internet kiosks with 3,600 screen using 38.4Mbps of Internet bandwidth to serve the average of 25,000 customer per day. In total, Awari member’s revenue reached Rp3.6 billion per month. Now were talking business. The situation is now more favorable for Megawaty to do serious business with Awari while Judith now have a fresh deck of card to negotiate with not only Dell, but other suppliers.

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