Microsoft licensing: Day one

On the first official day of its new software licensing program, Microsoft Corp. is staying mum on the number of customers who have signed up, but so far the new strategy seems to have been met with confusion and frustration on the part of customers and industry observers.

Prior to Microsoft’s Licensing 6.0 model, all held licenses were fully paid. The new model 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 its new Software Assurance program, customers who purchase multiple copies of the Office suite would receive upgrades if purchased in advance. That means that companies would receive every single upgrade as they are made available.

Sherry Irwin, president and general manager of Technology Asset Management Inc. in Mississauga, Ont., explained that customers can no longer upgrade their existing licenses under a maintenance plan. “[Customers] must buy a new license. So for whatever Microsoft deems to be the current version – Office XP, for example – in the past you could get an upgrade license for 50 per cent or so of the full license. And now that is no longer available. They have to buy a full, new license 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 licenses 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 licenses of Sun Microsystem’s StarOffice suite.

Bill Depatie, manager of channel sales at Microsoft Canada in Mississauga, Ont., said that the impact a customer would get from the new program depends on a number of 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 license purchases and found that 80 per cent of the purchases would have been either cost-neutral or cost-savings.”

But the general impression on the part of industry observers is that Microsoft’s move is not being well-received all around, 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 to kick on a few occasions also indicates that it was not being well-received, he said.

And rival vendors are not sitting idly by. Taking advantage of Microsoft customers’ reactions, Ottawa-based Corel Corp. yesterday 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.

One Corel representative noted its announcement was intended to be a response to Microsoft’s initiative, and not necessarily a move to positioned Corel against it.

“It was a convenience for us to release the licensing program now both operationally and for our customers as well,” explained Joe Bevk, director, 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 all of 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.

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