Users face 50% price hike on Microsoft products - report

Enterprise customers face a 50 per cent hike in their Microsoft budgets each year until 2002, a Gartner Group study has warned.

The study stated: "Although Microsoft pricing will remain ostensibly flat, enterprises using Microsoft software should expect to pay 50 per cent more a year as a result of changes to terms and conditions."

Gartner claimed that "by 2002, Microsoft will offer nonperpetual licences as a standard option within its corporate licensing agreements [and] by 2004, nonperpetual licences will cost 20 per cent more than equivalent perpetual licences." (A perpetual licence is a one-off fee the customer pays at the time of purchase enabling them to use that version of the product continuously until the end of the agreement term. A nonperpetual licence is where the customer pays ongoing fees.) The study added: "We believe Microsoft will increasingly use changes related to usage as a means of increasing revenue."

Thomas Bittman, an analyst at Gartner, noted Microsoft contracts include terms that allow it to change usage entitlements at will.

Gary Cox, director of the enterprise group at Microsoft Australia, admitted to Computerworld the contracts are "structured so that we have the ability to modify certain elements".

He added: "We have no plans to remove perpetual licensing from our current offering [but] we may offer nonperpetual licensing as an option in the future.

"We are not making any dramatic changes to our licensing structures."

However, John Connors, Microsoft's worldwide vice president of the enterprise group, conceded the vendor was in the process of simplifying licensing and pricing structures for most of its software.

According to the Gartner report, Microsoft's removal of usage entitlements from its agreements, including home use entitlements and concurrent use entitlements, will be a key contributor to the rising cost of its software.

The report estimated that in a 5000-desktop site licensing only Microsoft Office, the cost of software licensing would increase 224 per cent over five years if home use, concurrent use and the proration of maintenance entitlements were all affected by changes.

Cox responded that changes to home and concurrent use have been in place for more than a year.

"Customers have been exposed to those changes and we have not experienced any fallout," he claimed.

Meanwhile, Bittman also claimed Windows 2000 would become fragmented between the different markets Microsoft was pursuing, including 64-bit NT, 32-bit high-end, low-end and Datacenter NT, consumer NT (codenamed Neptune) and embedded NT.

"By 2002 I believe there will be 15 different versions of Windows, eight with different code bases," he said.

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