Microsoft's New License Program Worries Users

Many customers doubt change will really save them money.

By Paul McDougall, InformationWeek
Jul 29, 2002 (12:00 AM)
URL: http://www.informationweek.com/story/IWK20020726S0035

In a bid to achieve more predictable revenue, Microsoft is altering the
way it licenses software. On July 31, the License 6.0 program becomes
the only way IT buyers can upgrade Microsoft products without paying for
a new license. Some say the change isn't for the better.

Under Microsoft's earlier Version Upgrade plan, customers could upgrade
software at a discount whenever they chose. With License 6.0's Software
Assurance plan, they pay an annual fee of 25% to 29% of the cost of
desktop or server software at the start of each year in order to receive
all upgrades over the term of the license.

"If you're a frequent upgrader, you're going to save money," says
product licensing manager Rebecca LaBrunerie. That may sound like a good
deal, but for companies that don't upgrade frequently, Software
Assurance imposes a fee for software they may never use. Also, Microsoft
is under no obligation to release any upgrades at all during a user's
license term. And License 6.0 requires customers to buy more software
over a longer term to get discounts.

"This is being forced down our throats," says Brent Zempel, CIO at
Lifetime Fitness Inc. The Eden Prairie, Minn., health-club operator
maintains about 1,100 desktops running Microsoft Office. Zempel says he
won't enroll in License 6.0; instead, he'll buy new software as it's
needed.

Other customers complain that License 6.0 is so complex that it's
difficult for them to determine if they'll save money. The program
presents users with at least 24 possible combinations of payment
options, price levels, software-maintenance plans, licensing agreements,
and customer categories. "It's completely confusing," says Brad Kayton,
president and CEO of Pharos Software LLC in West Hartford, Conn., an
authorized Microsoft reseller.

Jim Hatch, CIO at Pactiv Corp., a $2.8 billion packaging provider in
Lake Forest, Ill., says he's had it. "I plan on using Linux to evolve my
Intel-based systems onto a non-Microsoft environment," he says.

Microsoft says charging customers annual maintenance fees simply lets it
do business the way other business software vendors do. It says the
program is a good deal, and that companies that use Windows 2000 Server
with more than 250 desktops would save up to 50% by enrolling in
Software Assurance.


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