Microsoft revises software licensing program for ASPs

Microsoft Corp. has quietly tweaked its software licensing program for application service providers (ASP) in an effort to make it cheaper and more predictable for hosting companies to rent its products and run them for corporate users.

The changes, which took effect Nov. 1, include price cuts on key Microsoft products, such as Exchange and SQL Server, as well as modified terms of use on the software. Microsoft also committed to change the ASP license fees only once each year, with the next revision not scheduled to take place until January 2003.

In addition, the company said there will no longer be any difference between the fees charged to ASPs and those charged to users who license software directly from Microsoft and then have it hosted by a service provider. Previously, ASPs paid a higher price than such users did.

Under the new program, Microsoft lowered the monthly fee it charges ASPs for the hosted version of Exchange messaging software from US$4.39 for each connected end user to $3.25. Microsoft also cut monthly license fees for ASPs on the enterprise version of its SQL Server database from $999 per processor to $699.

But it's not clear if Microsoft's price reductions will trickle down to users who rely on ASPs, said Dwight Davis, an analyst at Boston-based Summit Strategies Inc. Software costs are just one component of the overall fees that ASPs charge their customers, Davis said. Some service providers may just use the lower prices as an opportunity to shore up their profit margins, he added.

Microsoft's new Service Provider License Agreement (SPLA) updates licensing terms that were put in place in August of last year. The changes are based on feedback gathered from ASPs and hosting firms, said Reed Overfelt, director of hosting and application services at Microsoft.

Along with the pricing changes, Microsoft tried to simplify software usage rights for ASPs, Overfelt said. Previous wording that required ASPs to pay for new versions of Microsoft's products even if their customers weren't using those releases has been cleaned up, he said.

A new Web-based tool supplied under the SPLA also should make it easier for ASPs to report software usage to Microsoft for billing purposes, according to Overfelt.

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