IT execs cold on Microsoft's new licensing model

In the first few days of its new software-licensing program, Microsoft remains mum on the number of customers who have signed up, but so far customers and industry observers have met the new strategy with confusion and frustration.

While not offering any concrete figures or estimates locally on adoption of the new program, which began on August 1, Microsoft Australia's national licensing manager Robert Vogler said: "We're pretty pleased with the way enterprise customers are evaluating the program."

Yet industry analysts are not so sure this is the case, with Gartner research director Greta James saying more than half of Australian enterprises have not even looked at preparing for the new model.

Gartner warns that businesses that haven't taken appropriate action by now could, in the worst case scenario, end up paying 107 per cent more next time they upgrade.

"Large enterprises are feeling pressured to sign up for Software Assurance," James said. "It's more difficult for large enterprises to change and Microsoft is aware of that."

Vogler conceded that enterprise customers in "certain circumstances" may pay more. "In some small cases, where the customer does not upgrade frequently, they may find cost increases as far as upgrading goes."

"I don't know where [Gartner] gets its research from," he said. "[Microsoft] has been working hard to work through the best choices there are for the customers."

Resisting the new model, Paul Singh, IT manager of publishing house Harlequin Enterprises Australia called Microsoft's approach "unethical".

"Microsoft is putting its revenue concerns first because the software [industry] is currently in a down market.

"By changing the program, Microsoft has given us a lot of extra work in terms of our budgeting process; reviewing all of our existing licensing agreements with that company and figuring out if we even need to upgrade its products. Upgrades cost time and money and take up extra IT resources."

"Does it think companies are just going to buy, say, a new server everyday to suit some licensing changes?" he asked, adding: "My US peers have said to be frank with Microsoft and not even bother about our current licences with it."

Harlequin, he said, would "never go down the path" of licensing 6.0. Instead, he said the company was reviewing alternative productivity software suites like Sun's Star Office as a potentially cheaper solution to buying more licences for Microsoft software in the future.

One technical specialist from CSC Australia felt the new scheme simplified licensing, but was costly for everyone from the large commercial or government organisation, to the small business.

"Particularly for large corporates this has created the headache of trying to link up IT budgets and different financial years.

"And the smaller the customer, the worse the changes are. A lot of smaller organisations don't know what the costs and benefits of software are or even have a budget for it. So they'll end up re-buying the licences outright."

Before Microsoft's Licensing 6.0 model, all licences were fully paid. The new model attempts to move pricing to an annuity model, requiring clients to pay in advance for upgrades. Under the new Software Assurance program, users who purchase multiple copies of the Office suite will receive upgrades if purchased in advance.

Where to now?

Sherry Irwin, president and general manager of Technology Asset Management, said now that the deadline has passed, Microsoft clients can no longer upgrade their existing licences under a maintenance plan.

"[Customers] must buy a new licence. So for whatever Microsoft deems to be the current version - Office XP, for example - in the past you could get an upgrade licence for around 50 per cent of the full licence. Now that is no longer available. They have to buy a full, new licence to get to the current version of the product. So there are definitely financial implications."

Meanwhile, Microsoft's rival vendors are not sitting idly by. Taking advantage of Microsoft customers' reactions, Corel Corporation last week announced its plans to offer its own licensing program, providing its complete software suite under a new licensing scheme. As a special promotion, it is also offering WordPerfect 10 to Microsoft Enterprise Agreement customers.

One Corel executive noted the move was intended to be a response to Microsoft's initiative, and not necessarily a move to position Corel against it.

-- Siobhan Chapman contributed to this article.

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