Users hail first victory

User pressure, backed by Computer Weekly in a hard-hitting editorial campaign, has forced Microsoft into a limited climb-down....

User pressure, backed by Computer Weekly in a hard-hitting editorial campaign, has forced Microsoft into a limited climb-down. What should users' next steps be?

Microsoft's decision to extend the deadline for its new licensing regime to July 2002 has given users some breathing space if nothing else. Businesses now have more time to assess their options - and they still have some fundamental concerns about the issue.

Microsoft had already agreed to extend the upgrade deadline to 28 February but has now extended the discount upgrade a further five months to 31 July 2002.

Campaigns from a broad selection of user organisations forced Microsoft to back down for the second time last week on the deadline for its Software Assurance licensing programme.

It had changed the way it licensed its software from 1 October, scrapping various upgrade programmes which enabled users to upgrade software at a discount.

Users had been told that if they failed to upgrade to Windows 2000 or Office XP by that date they would have to pay the full cost of the software instead of the discounted upgrade price.

Since it announced the licensing changes in May Microsoft had insisted that only 20% of its customers would see their software costs increase as a result. However, at one large meeting on the issue every user attending expressed the view that, in licensing terms, they would end up paying more for no additional benefit.

Users were infuriated and, backed by Computer Weekly, they gradually began to fight back against what some described as "extortionate" pricing.

FTSE 500 user group The Infrastructure Forum (Tif) said its members, which include companies such as Shell, Royal Bank of Scotland and the BBC, would have to find an extra £880m per year.

Earlier this month, the group called on the Government to investigate whether Microsoft was abusing its dominant market position.

Public sector IT user group the Society of IT Managers (Socitm) said in August that local authorities in the UK would need to find between £50m and £80m over the next two years to satisfy Microsoft's new terms.

In September, Socitm, Elite and the Institute for the Management of Information Systems wrote a joint letter to Neil Holloway, Microsoft's UK managing director, complaining about the increased costs, the lack of time for decision-making and the way the changes were announced.

Microsoft has conceded some ground, and IT user groups such as Tif and Elite, the British Computer Society's IT directors' forum, are planning discussions with the company before considering their next moves.

Users gave a cautious welcome to the decision to move the deadline again, but warned that there were still many concerns that the software giant had yet to address.

"We hope that Microsoft, now it has publicly admitted there is a problem, will re-evaluate its licence policy," said David Roberts, chief executive of Tif.

"However, it looks like Microsoft is giving customers more time, not more options," he said.

Elite chairman David Rippon said, "We are glad it has delayed the changes but it has not addressed the other issues, namely the increased costs and how the changes were announced."

Rippon said companies needed more information, such as product road-maps, as well as more time, to assess the implications of the changes.

Duncan Reid, UK licensing manager for Microsoft, said the company could help with technology planning on its products.

"We are not going to say when we are going to release the next version of Office," said Reid. "But we recognise that we have to be clear about our general road-maps, so we can work with customers to understand what future purchase decisions may be."

Concerns have also been voiced about companies that felt they had been forced into making a decision before 1 October.

Reid said if a customer had already "unwillingly" bought Upgrade Advantage before the climb-down was announced they would be allowed an extra 10 months on the licence.

Microsoft is keen to change the focus of the debate from the cost of the new programme to its value.

"We will work with customers to demonstrate the value of our products and the new licences," said Reid. "We believe that, by 2004, the vast majority will have understood the value of Software Assurance as a way of simplifying licensing."

By 2004, however, Microsoft may well face serious competition as users consider alternative software.

A confidential survey of Computer Weekly's 500 Club, an invitation-only club of senior IT directors, revealed that many respondents were looking at moving to an open source desktop, using the Linux operating system and Star Office, Sun's office productivity suite - both of which are free - as an alternative to Microsoft's software.

"I think Linux may well find itself there as a protest vote," said Simon Moores, chairman of the Research Group, a body representing software users. "In the long term this could be a real threat to Microsoft."

In a recent letter to Computer Weekly, Les Hatton, professor of software reliability at Oakwood Computing Associates, said, "The resources necessary to migrate to Linux are a tiny fraction of how much Microsoft is going to extract for XP. Do not let people tell you it is not feasible."

It is now up to Microsoft to convince users that the value of its products justifies their cost.

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Keep up pressure
Microsoft has let a chink of light through the door with the deadline extension. User groups continue to put pressure on the company and the Department of Trade & Industry is considering whether to refer the case to the Office of Fair Trading. But what else should users do?

Analyst group Gartner has recommended that users put pressure on Microsoft to make the following changes:

  • Retain version upgrades, enabling users to upgrade when they are ready and still get a discount - effectively a trade-in value on their old version

  • Let users who do not buy software assurance pay for "missed maintenance" for the period between upgrades rather than having to buy a brand new licence when they want to upgrade

  • Allow users to continue to buy premier support without having to buy Software Assurance (at present this requirement comes into force in October 2003)

  • Reduce the cost of Software Assurance from the current annual fee of 25% of the licence cost for server products and 29% of the licence cost for desktop products.


    Buy Upgrade Advantage before 31 July 2002
    Signing up to Upgrade Advantage for products before the cut-off date next July will enable you to upgrade to the latest version of those products and any subsequent version launched either before or during the period covered by the deal, all for about 5% more than the cost of a version upgrade. Upgrade Advantage runs for two years or until your current Select or Open volume licensing agreement runs out. You do not have to actually upgrade during the term of the deal.

    Sign up to Enterprise Agreement
    Under Enterprise Agreement 6.0, licences automatically come with Software Assurance upgrade protection. If you have at least 250 desktops and are planning to upgrade every two or three years but want to retain the ability to step off the upgrade treadmill at some point and retain perpetual rights to use your software, this is probably the cheapest option in the long term. But if your company is happy to upgrade every three, four or even five years, this option will probably double your costs.

    Move to subscription licensing
    If you are confident that you will continue to upgrade to new Microsoft products virtually as they come out, then taking the subscription licensing option saves you 15% on a conventional Enterprise Agreement. But you never own perpetual rights to the software use under this deal so you cannot step off the upgrade treadmill, unless you are willing to stop using the software, or stump up a lump sum of one and a half times the annual cost of your enterprise agreement to buy out of the deal and gain perpetual rights.

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