Microsoft NZ users see license cost hikes

With four months to go before Microsoft's Software Assurance licensing program fully kicks in, some New Zealand customers believe it will increase their software costs.

Last May, Microsoft announced it was changing the way companies would pay for its software. The new plan, called Software Assurance, will replace several different types of upgrade licenses. Until July 31 a transitional period exists during which users can buy an existing Upgrade Advantage plan or move over to Software Assurance.

However, Upgrade Advantage expires in 2003, after which users are automatically enrolled in Software Assurance. If users do nothing, on July 31 they will lose their upgrade rights and have to buy a new license the next time they want to upgrade.

Auckland law firm Clendon Feeney, which has been a Microsoft customer since 1983, believes the cash-flow implications of Software Assurance are very unfavorable and the scheme ignores the loyalty of long-standing customers. Partner Craig Horrocks says the firm won't be signing up to the new program and instead will buy new licenses when it upgrades its hardware roughly every three years.

Under Software Assurance users pay a license cost plus a maintenance fee of 29 percent for application and desktop software and 25 percent for server software, two years in advance. Horrocks asks: "What do you get for that (maintenance) fee, which appears to be twice the industry standard of 15 percent to 18 percent?" Vicky McCullough of licensing consultants Accordo Group says the fee has actually reduced. Under Upgrade Advantage it was more than 30 percent.

Microsoft New Zealand business licensing manager Jillian Goodman says Software Assurance gives customers the right to run the current version of the product as well as any new versions released during the term of the agreement. This raises the question of what to do if your organization doesn't upgrade every two years or if Microsoft doesn't have a major release in that time.

"We've always purchased applications, as we've required, not because the next version is out," says Cavalier Bremworth IT manager Mark McElroy.

Cavalier Bremworth skipped Office 95 for Office 97 and is now moving to Office 2000.

"We'll stay with that until it is fully depreciated and it will just be like going back to buy a new license. I'm not sold on ongoing payment for a product that doesn't alter much and we have no control over what is altered."

Regarding additional fees, McElroy draws a distinction between desktop tools and ERP-type software, for which maintenance fees are typically 15 percent to 20 percent per annum.

"The fee for Microsoft applications is 29 percent per annum, but these are common tools such as Microsoft Office where you don't need new features or upgrades very often."

While the company won't be signing up for Software Assurance for its 130 desktops, it will for server licenses.

"As a manufacturing entity we write up and depreciate software over five years. For desktop software it would be cost-negative doing it over two years with the new licensing program. However, for servers we would want to have patches and upgrades so we'll probably be forced into (Software Assurance) because it makes us feel safer being up to date."

Companies such as Cadbury and law firm Bell Gully are still evaluating what they will do.

Affco Meats has an Open License but all software licensing upgrade plans are on hold, as the company is restructuring. Technical services manager David Matheson says because of the restructuring it will stick with what it has. He says Affco doesn't envisage going past a certain level of software anyway.

Lexus Nexus New Zealand is owned by Anglo/Dutch consortium Reed Elsevier that has a global Select Agreement and will be signing up to Software Assurance.

Another question irking users is why the fee has to be prepaid, and why can't credit terms apply? Goodman says this would make billing complicated but "we are investigating the options."

Horrocks, who is also a Computerworld columnist, wants to know whether there is any guarantee that the composition of product bundles such as Office won't change.

Goodman says at the end of the licensing agreement customers get the most current version of the products they are licensed for. So if a customer signed a licensing agreement for Office 2000 Professional, which also included Publisher 2000, when the agreement ended the customer would have the license for the latest version of Office XP Professional. Because Office XP Professional doesn't include Publisher, the customer has the rights to use the latest version of Publisher originally licensed under the agreement (in this instance Publisher 2000).

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