Microsoft make enterprise customers pay

Enterprise customers will pay dearly as Microsoft moves toward its long-term goal of software-as-a-service, according to Gartner analyst Alexa Bona.

The size of the bill will start to appear with the current shift to annuity-based Software Assurance (SA) licences and away from single-version upgrade licenses.

Open and Select Office customers who drop their traditional version upgrade in favour of the yearly-rental SA model will pay between 35 and 107 per cent more to upgrade in future, Bona estimates.

Those figures apply to shops which upgrade every three to four years.

Microsoft needs new licensing models to maintain revenue growth in the face of growing customer indifference to version upgrades, Bona told Gartner's 2001 Asia Pacific Symposium.

SA and the interim Upgrade Advantage program (due to end in July) are stepping stones on Microsoft's path to subscription licensing, she claimed.

Unless derailed by strong user objections, Microsoft will probably eliminate version upgrade products entirely by 2006, she predicted.

She also warned that changes to terms and conditions will lift costs to enterprise customers up to 50 per cent annually even though list prices remain "ostensibly flat".

Bona advised organisations with current-version licences and upgrade cycle plans of less than three years to purchase SA in the first half of next year. Those with longer upgrade cycles should ignore SA and re-buy the upgrade licence.

Commenting on Bona's estimates, Microsoft Australia national volume marketing manager Robert Vogler said "Those figures can be spun anywhere you want.

"At the end of the day, we are moving to licensing models that remove the confusion and complexity of past licensing programs for our customers."

There was a logical flow from the Select Transaction program through to the Enterprise Application annuity program, Vogler said.

"It ensures customers can better evaluate which program best suits them."

Vogler said that to the best of his knowledge, Microsoft does not intend to eliminate version upgrade licences entirely.

The rental model has been piloted in Australia over the past year in a limited fashion, and Microsoft has found "only a certain type of customer willing to go down that road".

"My understanding is that the rental model will be offered as just one of the options. It makes no sense in our mind to restrict our customer base to only one flavour of licence."

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