New MS licensing to drive up costs

Companies lack the funds to upgrade to Microsoft's new licensing model in July leading to a delay of new product rollouts, a global survey of 1400 IT executives shows.

The new model will increase costs, force upgrades and the purchasing of unwanted services, claim Australian IT managers opposed to the volume licensing plan.

Microsoft is leading an industry move along with software powerhouses like Oracle and IBM, to treat software as a service model.

In doing so, Microsoft has been overhauling its volume licensing plan -- Licence 6.0 -- which includes subscription options and targets customers that are slow to upgrade to new products -- moves which affect mostly mid-market organisations, industry analyst IDC said.

Licence 6.0 requires users to have upgrade rights to current software. The Software Assurance (SA) program replaces all Microsoft's current upgrade programs and is the vendor's only remaining upgrade offering.

The SA program will benefit organisations that upgrade their software every two years or so when the costs are compared with version upgrade pricing, according to IDC. However, businesses that upgrade every three or four years will not benefit in any real way from SA, IDC says.

According to a Computerworld QuickPoll of 78 local IT professionals last week, 71 per cent of respondents believe revised licensing models by vendors like Microsoft will bump up costs and force upgrades and purchases of unwanted services.

Only 6 per cent of respondents said new licensing plans would reduce software maintenance costs and benefit their business.

Around 20 per cent of executives polled were more cautious, saying they would need to perform an audit to determine the impact of the new licensing model; while for 3 per cent of users it made no difference.

For Microsoft customers like Hobart-based Aurora Energy, the company is not prepared for the new licensing plan, because it lacks the funds to upgrade to the latest software versions across its back-end systems, according to CIO Reefe Brighton.

And while the utility has an enterprise licensing agreement for the client side, it has neither the funds, nor a complete understanding, of alternative options to pursue for the back-end, Brighton said. As a result, he said: "I'm not actively seeking alternative products, but Aurora is limiting its rate of changeover to newer versions of operating systems and back-office tools like SQL2000 and Exchange 2000."

Contrary to recent IT manager comments that Microsoft could force clients -- particularly large businesses with Microsoft-dependent infrastructure -- to adopt the subscription model, Microsoft Developer Network regional director for Australia, Adam Cogan, disagreed. The revised plan gave customers an incentive to keep their software versions current, he said.

Cogan pointed out customers were also free to buy Microsoft products on a non-subscription basis, but warned this was not the cheapest option.

Also, he argued Microsoft was creating a predictable income stream that allowed the vendor to provide a quality product. "We would all like everything for free, but we expect the high quality of products we've received from Microsoft to continue.

"It is in the interest of Microsoft and of the industry to be on a subscription model," he said.

Requesting anonymity, one technical specialist from a global IT consultancy supported Cogan's stance, saying licensing costs under the new model were not much more expensive than before. "The cost is fairly expensive as a yearly cost, but not when compared to 'doing nothing'. The new plan should smooth out a customer's budgeting cycle," he said.

Microsoft touts its revised licensing model as a way for the customer to simplify software licence asset maintenance. That is, clients choose either a straight licence or a licence with maintenance.

However, clients get hostile when trying to interpret the licensing changes and what they mean for their organisation, according to the tech specialist. He told Computerworld that customers' first response to the revised plan was often: "F#!%^&* Microsoft".

He continued: "Once they calm down and become rational about the changes, they ask: 'What is it going to cost me, what are my options, when do I have to do something'?"

(Lauren Thomsen-Moore contributed to this article)

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