Microsoft's customers now have less than three weeks to decide whether to take advantage of its most popular discount upgrade schemes before they disappear in a fundamental shake-up of Microsoft's entire licensing regime.
As the deadline for taking decisions approaches, more organisations are weighing up the costs and implications of the new licensing regime. Most UK users are finding that the changes will result in significant cost increases - estimates range from 30% to up to 130% or more.
At the heart of the problem is the pressure the new licensing regime puts on organisations to upgrade their Microsoft software faster. Old upgrade discounts that applied to any version of products and could be taken up at any point in their usage are being replaced with a new scheme, Software Assurance, that can only be taken out on the latest versions of products, and then only when users buy a new license (see box below). This puts pressure on users to stay on the upgrade treadmill - step off for a year or so and you will be hit by heavy costs when you next upgrade.
But users often prefer to delay upgrading. As well as the fee paid to Microsoft, there is also the cost of upgrading hardware to run the more resource-hungry code. And organisations often have to upgrade to new versions of third-party software that will work with the newer Microsoft software.
Another advantage of running older software is that it is less buggy - early adopters have discovered most of the common bugs and Microsoft has produced patches.
For many users, the biggest problem with upgrading is the disruption it causes, diverting the resources of the IT team. Then there is the issue of retraining IT staff and end-users on the new software.
So, while many users see some advantages in the move to turn software into a service, they balk at upgrading every two years or so. Unless you see the benefits of upgrading at this rate, the new regime is likely to prove expensive.
End of an era: pros and cons
Michael Gough , chief executive, national computing centre
This is not a licensing problem per se - it is a usage issue. People are still running NT4, Windows 98 and Office 97 because they don't see substantial value in upgrading.
In most parts of the world, we have reached saturation point. Users can't use the functionality in existing Microsoft products. There is oodles of code in Microsoft products that is never used.
Forcing people to upgrade by converting to a service model protects Microsoft's intellectual property. But this is a tactic to reverse the trend of people not upgrading. It is removing people's choice and making them slaves to software, rather than software serving the business.
There is a groundswell of NCC members now committed to making open source work.
David Harrington , director, communications management association
If this had happened in a regulated business all hell would break loose and it would be stopped. Surely the OFT has something to say about this. I couldn't imagine a similar move by BT. This is a step too far. It has to be anti-competitive.
I support the call for a delay, we need more time.
An IT Director at a UK-based multinational
There is nothing wrong with what Microsoft wants to do in switching to a subscription model. It won't be popular initially, but it is a good model. What is wrong is the way it is forcing IT directors' hands by increasing prices of other options, or removing the options altogether.
People don't like being forced into things and Microsoft can only get away with this because of its desktop monopoly. Attractively priced, I suspect many would make the switch of their own volition.
It is good news because:
1. It will establish the subscription business model for software, which will help the industry
2. It will cause a big anti-monopoly backlash, and make us all explore more open strategies.
There is no way the Government should act to stop this. It should let Microsoft destroy its own monopoly.
Changes to volume licensing schemes
On 1 October Microsoft will replace version 5.0 of its volume licensing deals with version 6.0.
Open Licence 5.0
Aimed at smaller organisations, minimum five desktops. Deal lasts two years, with option to renew for two years. Discount of at least 22% off retail prices, rising to 28% discount depending on the volume of licences bought
Open Licence 6.0
Select Licence 5.0
Aimed at medium-sized and large organisations, minimum 250 desktops. Deal lasts two years, with option to renew for two years. Volume pricing discount for applications, systems and server software, size of discount depends on forecast volume of licences bought in each category
Select Licence 6.0
Deal lasts three years, with option to renew for one or three years
Enterprise Agreement 5.0
Aimed at large organisations, minimum 500 desktops. Deal lasts three years, with option to renew for three years. Volume discounts depend on number of qualified desktops in the enterprise
Enterprise Agreement 6.0
Minimum number of desktops reduced to 250. Deal lasts three years, with option to renew for one or three years. New subscription option allows customers to rent software for an annual fee 15% lower than the annual cost of a standard Enterprise Agreement.
Software upgrade options
Over the coming months Microsoft plans to abolish the software upgrade and maintenance options currently available under its volume licensing agreements, and replace them with a single scheme called Software Assurance.
Expiring on 1 October 2001:
Version upgrade: enables users to upgrade from an older to a newer version of the same product for about half the cost of a full licence
Competitive upgrade: enables users to upgrade from a competing product to an equivalent Microsoft product at a discount
Product upgrade: enables users to upgrade to a new version of a product from a different Microsoft product at a discount
Language upgrade: enables users to change to multi-language versions of products
Expiring on 28 February 2002 (30 April for public sector organisations):
Upgrade Advantage: maintenance programme that enables users to upgrade to a new version of a product and then to any newer versions launched before or during the period covered by the deal. Businesses that buy software under a Select or Open agreement can take out Upgrade Advantage on a product at any time during the lifetime of the product. Product is covered for two years or until the Select or Open agreement expires
Commencing 1 October 2001:
Software Assurance: Available to holders of Open 6.0 or Select 6.0 agreements. Lasts until the end of the term of the Open or Select Agreement. Like Upgrade Advantage, allows user to upgrade the products covered to any version launched during the assured period. But from 28 February it can only be taken out on a product at the time a customer buys a new licence, not retrospectively
The annual cost of Software Assurance is 25% of the price of a full licence for server products and 29% of the price of a full licence for desktop products.
From 1 October to 28 February customers can enroll existing licences into Software Assurance, but only if they are running the "current" version - in the case of Office that means Office XP. Customers can renew Software Assurance on a product when it expires, but not afterwards.
This was first published in September 2001