Ballmer says Microsoft listened to feedback

Microsoft was overwhelmed by user anger over its proposed changes to corporate licensing programmes, said the company's chief...

Microsoft was overwhelmed by user anger over its proposed changes to corporate licensing programmes, said the company's chief executive officer Steve Ballmer.

When the changes demanded by customers finally take effect, he said, Microsoft would offer software at "a fair price".

"We got a lot of feedback from customers on the changes that we announced five months ago," said Ballmer at the Gartner symposium in Florida.

"People said: 'Look, either you guys make some changes or we're going to all elect one of two options: we'll go to the competition or we just won't upgrade.' And that's why you saw us respond and make some changes, to try to be responsive to things that people seek."

To head off the complaints, Microsoft announced this week that it would extend the deadline for customers to move to the controversial volume licensing and upgrade changes that were first unveiled in May.

Corporate users now have until 31 July 2002, rather than 28 February, to make a decision about their future upgrade path for Microsoft software.

The announcement on 8 October marked the second time the Microsoft had extended its deadline. Customers were given a temporary reprieve this summer when the company postponed some changes that had been scheduled to take effect on 1 October.

Customers who may have made licence-purchasing decisions under duress before the October deadline was extended will receive some sort of consideration from Microsoft, according to Ballmer. He declined to offer more specific information, saying a detailed announcement would be made later.

When asked if the new deadline would be extended beyond July 2002, Ballmer said no. " I think we're done, because we've heard what people had to say," he said.

"We have a number of customers who are actually better off with the new programme than the old programme. We have some customers who are about the same, and then from the customers who are worse off, we got plenty of feedback. We've responded to it.

"If you look at the dollars, everything about our prices is quite different from classic enterprise software," Ballmer said. "If you can find a classic enterprise piece of software that sells for a few hundred dollars, then its maintenance, too, might have to be a little higher than the percent people think of as typical.

"I don't seriously propose it," he added. "But the way to get the percentage down would have been to raise the price of the original licence, which I don't think anybody would have liked either. I think the Software Assurance price is fair."

Not surprisingly, some users said that they were pleased to get more time, but they continued to express distaste for licensing changes.

"It doesn't signify that they're changing their strategy, just that they're delaying," said Joseph Aivano, IT director for the US utility, Northeast Utilities Service.

"Only when they saw the feedback did they see it was time to take time out and determine a better marketing strategy," Aivano added.

David Weber, manager of technology acquisition and licensing at Farmers Insurance Group in Los Angeles, said the deadline extension was a "good trend" and might help his company, since it is in the process of evaluating whether to purchase the Upgrade Advantage option, which would entitle his company to receive all upgrades released during the contract period and make it eligible for the new Software Assurance program.

But Weber added: "I still think they're squeezing their customers, and they do have a monopoly on their products."

One licensing change that didn't get an extension is the popular Version Upgrade Program (VUP). Analysts firms have countered that Microsoft was eliminating one of its least expensive upgrade options, favoured by many of their clients.

Under the Software Assurance programme, users pay 25% of the licence fee for any server package and 29% of a desktop product's price each year for the right to upgrade to the latest version of the software. They must already be using the current version of the software to qualify for the programme.

Microsoft said yesterday, though, that during the launch period, in addition to customers using the current Office XP, those using the older Office 2000 software could enrol directly in Software Assurance.

Microsoft officials have acknowledged that the change could result in higher prices for some customers, but they estimate that only about 20% of purchases would end up costing more than they do now, because those customers upgrade less frequently than average.

Two analyst firms, however, predicted that the elimination of the popular version-upgrade programmes could result in substantial cost increases. Gartner estimated that companies that perform upgrades once every four years could see costs soar by between 68% and 107% under the Software Assurance programme.

Chris Le Tocq, an analyst at Guernsey Research, said companies that perform Office upgrades every three years will face price increases ranging from 22% to 48%. If they upgrade every four years, the cost increases could be as much as 40% to 70%, he said.

Read more on Business applications