Microsoft: Why we need Software Assurance

Microsoft chief executive Steve Ballmer explains why he saw a need for the company's radical change in software licensing and...

Microsoft chief executive Steve Ballmer explains why he saw a need for the company's radical change in software licensing and what the company learned from trying to push through the new programme too quickly.

Microsoft's Software Assurance programme is now running. Users will no longer be able to upgrade from previous versions of their Microsoft software unless they join this controversial scheme.

It has taken Microsoft a year to roll out Software Assurance. Outraged users forced the software giant to extend its deadline for the programme. Steve Ballmer still believes the company made the right choice, but its execution could have been better.

Microsoft has been accused of profiting from the move to Software Assurance. Have you made more money from this change in licensing strategy?

Ballmer: We want it to be roughly revenue-neutral to slightly positive. We didn't want to lose money on the transition, which is where I think we will wind up. The truth of the matter is many customers under the old system probably paid us more than they absolutely needed to if they weren't keeping track of their licences very well.

Under the new system, we keep track of everything. Once you put something under assurance, we know it stays under assurance . . . And if it's not under assurance, you've got to buy the licence again.

Why change Microsoft licensing at all?

Ballmer: The impetus was, primarily, to simplify licensing, because our customers were confused about what to buy. Under the new licensing programme we have eliminated a lot of options.

What did you learned from trying to push through Software Assurance?

Ballmer: I know our licensing system was complicated. We made it complicated. Not on purpose, but by adding options and skin grafts and one thing on top of the other. Very smart users were getting very confused, very frustrated and very angry.

Now we didn't give enough time, and that brought another set of issues with it. We've learned a lot. There may be still issues that arise that we need to address either with individual customers or in general.

But the new programme does remove a lot of upgrade options, and customers do like choices, don't they?

Ballmer: I don't actually believe customers like choice. What customers like is a good, low price. If you look at customer [satisfaction] surveys, licensing complexity under the old model is the number-one source of dissatisfaction of the enterprise customer.

With the introduction of Software Assurance, why did Microsoft drop the version upgrade program (VUP), which allowed them to upgrade from one version of a software product to another in the same product family at discounted rates?

Ballmer: The greatest challenge is around the fact that we eliminated the VUP . . . But either you eliminate the VUP or nothing about the whole assurance scheme makes any sense.

But users have complained about being overcharged under Software Assurance

Ballmer: I've got plenty of customers who tell me, "This is going to cost me more money." And then, when I actually look at their purchase history, I can prove to 'em it's going to cost 'em less.

And I have customers who say that "It's going to cost me more money," and I look at their purchase history, and you know what? It is going to cost them somewhat more. But at least it's a rational and predictable framework.

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