Users 'benefit' in licensing switch: Microsoft

Users need to stop speculating and start listening to realise they are the main beneficiaries of Microsoft's new volume licensing and upgrade policy, the software giant said this week.

Responding to a litany of concerns users raised (Computerworld June 4, p1), including claims the new model was a profit-making move by the company, Microsoft Australia's national licensing manager Robert Vogler said the reality is it will be "cheaper and more flexible" for business.

Vogler said the new licensing policy will not "boost the books" for the company in any significant way.

But IT managers remain wary with executives like John McKibbet, IT manager of Royal Sun Alliance refusing to accept Microsoft's platitudes of simplicity and value.

"I don't see where the dynamics are; the program is more restrictive for users than anything else. If anything, it will cost users more in terms of the total cost of owning upgrades. This is one aspect Microsoft has not addressed," he said.

Royal Sun Alliance (RSA) will migrate from Windows NT to Windows 2000 in August, leaving the organisation with what McKibbett sees as "no choice" but to roll with the licensing changes.

"Microsoft knows its got lock-out. What are you going to use - Windows or Windows?" he asked.

However, Vogler said the company has taken the mystique out of Microsoft licensing agreements by rationalising them with two elements: a full-licence component and a Software Assurance or fixed maintenance component.

In essence, RSA's upgrade programs have been consolidated under one umbrella called Software Assurance, a scheme in which customers with Open or Select licensing agreements will get rights to all version upgrades.

They will pay 29 per cent of the full-licence price of desktop software and 25 per cent of the price of server software per user per year. For example, a $US368 Office licence will carry a $107 fee for Software Assurance.

According to Vogler, subscription-based (leased) licensing will be 15 per cent cheaper than buying a full software licence under the new policy. Subscription customers will also have access to the latest software with "quasi-maintenance".

But users will need to current software before the licensing comes into force on October 1. And only those using the latest versions of software will be eligible for Software Assurance.

Vogler insists the company will not generate substantial new revenue from the new model, stressing: "What I expect out of this is better customer satisfaction, because of the policy's noncompliance element and it will be cheaper for them."

"It's a misconception that Microsoft is forcing customers to go to subscription. Based on a company's deployment plans for the future, it could have the advantage of taking maintenance over three years through an upgrade.

"We've expanded the way customers can acquire our products. Before October 1, they only had software in the perpetual form and owned the licence, but some companies just want to be able to hire a PC and the software."

Under the subscription model Vogler said users can either use the licence as an asset or expense depending on financial volatility and "they won't be stuck with a bunch of licences they don't need".

Observers have called the subscription model a fallacy, saying it is not in the best interests of businesses, large or small.

"The new licensing will compel users to move to the latest versions of software," said Kurt Schlegel, an analyst with Meta Group in the US. "And enterprises will find that it will make more financial sense to keep everything under software maintenance to stay current."

Diana Brown, technology manager of Melbourne-based superannuation provider Jacques Martin Industry Funds Administration Super Partners, says that while the new model has a slightly different value proposition, she believes start-ups will capitalise on it. "They're the ones who want the latest software, so this is good news for them."

Gartner in the US believes that only those who have the capacity to upgrade frequently will benefit from the policy, forcing small businesses to dig deeper into their pockets to pay for upgrades.

Vogler takes a similar view, saying that the policy will only benefit organisations who can keep up with technology, mostly upgrading their applications every three years and their servers every four.

Meanwhile, for IT managers concerned about licensing contracts lapsing after October 1, Vogler said they can rest assured "there will be no big payments" in the short-term. He emphasised that enterprise licences, for instance, had software maintenance bundled into those contracts for three years. - John Fontana contributed to this article.

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