MS again extends deadline for new licensing program

Microsoft Corp., feeling the heat of customer complaints over its licensing policies, today extended for the second time the deadline for enterprises to enroll in a new program for licensing and upgrading software.

IT executives now have until July 31, 2002 to decide if they want to enroll in Microsoft's new License 6.0 volume licensing program and its companion upgrade plan called Software Assurance, which replaces the previous menu of upgrade options available to enterprise customers. Licensing Version 6.0 officially kicked off last week.

The plan has met with resistance because to enroll enterprises have to pay a hefty fee. The plan also has been blasted as the beginning of Microsoft's move to subscription pricing on its software.

"Microsoft is really trying to be responsive," says Rob Enderle, an analyst with the Giga Information Group. "A lot of customers are upset and Microsoft is trying to ensure that users aren't forced to change vendors. Now enterprises can hopefully do analysis and comparison and Microsoft hopes they stay with its products."

Software Assurance, announced in May, drew so much wrath from IT executives that Microsoft later moved the deadline to enroll from Oct. 1, 2001 to Feb. 28, 2002. Some enterprises face as much as US$5 million in costs to get all their software in line with Software Assurance. Users must be on the most current versions of software to enroll in Software Assurance.

For example, enterprises contemplating an upgrade after the original Oct. 1 deadline to the recently released Office XP face the prospect of spending as much as $300 more per user to purchase new licenses for the suite of software. Those costs are about double the fee for the same user to upgrade before the Oct. 1 deadline.

To enroll in Software Assurance, enterprises pay 29 percent of the full-retail price of desktop software and 25 percent of the server software cost. For example, a $368 Office license would carry nearly a $107 fee for Software Assurance.

Enterprise users quickly complained they could not budget for such costs before the October kick-off and Microsoft gave them more time to enroll.

But, obviously, the extension was not enough.

"Now customers will have more time to evaluate a move to Software Assurance," says Rebecca Labrunerie, program manager for worldwide licensing and pricing at Microsoft.

Many users have said they would consider Linux servers or alternatives to Microsoft Office rather than face the deadlines and economic pressures of the new upgrade plan, according to analysts.

Microsoft's says the new licensing plans will result in a reduction in software costs for enterprises that frequently upgrade. But many are disputing that claim.

A study by Guernsey Research shows that enterprises that stay on a two-year upgrade cycle will save 19 percent in licensing costs under Software Assurance. But enterprises on a three-year cycle will see a 40 percent increase in costs. Research firm Gartner says costs could increase by as much as 107 percent.

Microsoft claims upwards of 80 percent of customers will see a decrease or no change in their licensing costs. The company says the remaining 20 percent may be best served by staying on the software they now have deployed.

With the extension announced Monday, customers can purchase Open or Select volume licensing 5.0 contracts and an upgrade plan called Upgrade Advantage until July 31, 2002. The contracts and the upgrade protection will run for two-full years from the date of purchase.

At the end of those contracts, users will be grandfathered into Software Assurance if they choose that program, according to Microsoft.

Users also have other options. Enterprises can buy Open 6.0 contracts and Upgrade Advantage, but if they choose Select 6.0 contracts they must buy Software Assurance.

Enterprise also can choose to opt out of any of the upgrade packages and just buy full-licenses for every piece of software they purchase. That option allows IT executives to upgrade to the version of software they want - say Windows 2000 on the desktop and server - and stay on that platform indefinitely. When they do decide to upgrade, however, they will have to pay full license price again or enroll in a volume licensing program and Software Assurance.

Also on Monday, Microsoft said Office 2000 is now considered the most current version of Office for users that want to enroll in Software Assurance even though Office XP, the upgrade to Office 2000, shipped in May.

The concessions on licensing follow other licensing moves Microsoft made last week to now allow enterprises to replace the Windows XP operating system pre-installed on a PC with a different copy of Windows XP purchased through a volume licensing program. That means that enterprises can load the pre-configured copies of the OS they create - often called "images" - onto new hardware bought through an OEM (original equipment manufacturer) without any additional costs.

The IDG News Service contributed to this report.

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