Microsoft licensing: reaction

Although Microsoft Corp. is staying mum on the number of customers who have signed up for its new licensing program, it appears the new strategy is leaving customers and industry observers confused.

Aug. 1 marked the first official day of Microsoft’s new software licensing program, called Licensing 6.0. The new scheme attempts to move pricing to an annuity model, enabling customers to pay in advance for upgrades. While the Redmond, Wash.-based company has been touting its new licensing plan as a way for companies to save money, not all of its customers are viewing it that way.

Under the new Software Assurance program, customers who purchase multiple copies of Microsoft Office suite will receive upgrades if they are purchased in advance. That means that companies will receive all upgrades as they are made available.

Sherry Irwin, president and general manager of Technology Asset Management Inc. in Mississauga, Ont., said that means customers can no longer upgrade their existing licences under a maintenance plan. “So for whatever Microsoft deems to be the current version – Office XP, for example – in the past you could get an upgrade licence for 50 per cent or so of the full licence. And now that is no longer available. They have to buy a full, new licence to get to the current version of the product. So there are definitely financial implications.”

The City of Nanaimo, B.C., decided not to go along with the new program because of anticipated costs. Cam Scott, client support analyst for the city, said Microsoft’s decision to move to this plan actually put the city in a bind.

“We would have had to come up with about $200,000 to upgrade our licences and we would have been looking at about $70,000 a year to stay on the maintenance path,” he explained. “That’s a big thing for our taxpayers. And the July 31 deadline sort of smacked of, ‘This is how it is going to be and you should go along with it.’ That kind of raised our ire a little bit.”

While the city will stay with Office 97, it is also purchasing 100 licences of Sun Microsystem’s StarOffice suite.

Bill Depatie, manager of channel sales at Microsoft Canada in Mississauga, Ont., said the potential impact of the new program depends on several factors.

“It really depends on what their licensing type is, as we have a number of options…it depends on their history, and how frequently they have upgraded their products in the past. And when we looked at that, we went back and did a study internally on licence purchases and found that 80 per cent of the purchases would have been either cost-neutral or cost-savings.”

But Microsoft’s decision is not being well-received, according to Alister Sutherland, director of software research at International Data Corp. in Toronto. “Microsoft’s position is, ‘Look: if you get on with the program, we’ll keep you updated and up and running.’ The fact is, businesses up until now have had a choice in how often they upgrade and when they upgrade and what they upgrade to.”

The fact that Microsoft extended the deadline for the plan indicates that the response isn’t favourable, he said.

And rival vendors are not sitting idly by. Taking advantage of Microsoft customers’ reactions, Ottawa-based Corel Corp. earlier this month announced its plans to offer its own licensing program, providing its complete software suite under a new licensing scheme that includes CorelDraw, Ventura, Corel DESIGNER and XMetal. In part, as a special promotion, it is also offering WordPerfect 10 to Microsoft Enterprise Agreement customers.

“It was a convenience for us to release the licensing program now both operationally and for our customers as well,” explained Joe Bevk, director of sales operations at Corel Corp. in Ottawa. “We see this as an opportunity to extend our reach to give Microsoft customers who are not satisfied with the decisions they are having to make and to make sure they know they have an alternative.”

Despite this, Microsoft is confident its new program will be beneficial. While not able to offer any concrete figures or estimates concerning adoption of the new program, Microsoft’s Depatie said customer reaction has been satisfactory.

“Overall, we’re very pleased with customer participation in our programs, which includes EA (Enterprise Agreements), UA (Upgrade Advantage) and Software Assurance as well,” he noted.

SIDEBAR: OS Frustration

A new Yankee Group report, The Desktop OS: Are There Real Alternatives to Microsoft?, has found that interest in alternatives to Microsoft Corp.’s client operating system is at the highest level in over a decade.

Nearly 40 per cent of 1,500 respondents said they are “outraged” by Microsoft’s new licensing scheme, and are actively seeking alternate products, said report author Laura DiDio.

What’s notable about the customer frustration is that it hasn’t cooled over time, DiDio said. A similar study conducted in October 2001 showed people were already fuming, and that frustration clearly hasn’t waned, she said.

Microsoft’s new licensing scheme draws the most ire, but the customer respondents cite several other reasons for considering Windows alternatives, DiDio said. Many point to the company’s numerous delays of business-class products designed to work with Windows XP. Others profess confusion over the company’s .Net strategy of Web services and applications. Still others note their ongoing frustration with Microsoft’s perceived monopolistic practices and ongoing legal issues with the Department of Justice.

Finally, Microsoft’s ongoing security issues are a factor for many users. Despite Microsoft’s assurances that it is working to improve security in its products, few customers feel reassured. “It seems not a day goes by that you don’t hear about some security flaw,” DiDio said.

Despite these issues, the analyst doesn’t expect an immediate, major shift in the OS market. Windows owns about 90 per cent of the desktop market, with the various Linux distributions and Apple splitting the final 10 per cent.

“There is no mass defection, no march on Redmond,” she said.