Microsoft's move to rental models is likely to be followed by other software companies and while initial deals may appear enticing, users will be forced to upgrade software regularly while long-term licence fees will be higher than under existing schemes.
"It's a sad day," said Simon Moores, chairman of the Windows NT Forum and Java Forum. "It will extend from business down the food chain to the consumer, and you will be forced to upgrade.
"Microsoft is very much behind software as a service. Some 30% to 40% of their turnover comes from software licensing. It can see declining revenues, so it needs to keep upgrades going."
The software giant will encourage enterprise users to sign Software Assurance contracts. This will provide businesses with specified software and upgrades as and when new releases appear. The new model offers lower-priced yearly contracts. However, Microsoft has itself admitted that while users will see short-term financial gains, it will cost them more in the long term.
Moores believes Oracle will quickly follow Microsoft's example. Jessica Figueras, e-business analyst at Ovum, agrees. "Others will definitely follow suit," she said. "What Microsoft has done is to adopt half of the ASP model, the licensing part. Software vendors are really interested in it. It means they can get their revenue on a recurring basis. They can test out user attitudes, and I think we'll see software licensing becoming a service in the next five years."
Microsoft is been keen to point out that users do not have to adopt the new rental model. It also claims customers will benefit from additional flexibility and the advantage of being able to plan and account for software purchases more easily.
Opinions are divided as to whether the software giant will make this kind of licensing model obligatory. Ovum's Figueras believes there is no cause for immediate concern. "This will definitely not happen in the short term," she said. "There would be an outcry."
Moores thinks the model will become the norm and that it could have an impact on hardware. "Microsoft products have been described as 'bloatware', and as products get bigger, machines will have to be more powerful, and consumers will be forced along a hardware upgrade path as well," he said.
User resistance to Microsoft's new licensing model could boost alternatives, including Linux. However, Figueras said, there were limits to the process.
"Smaller companies that don't upgrade their software very often are going to be most affected by this. By definition, these companies have fewer technology skills and don't see the value of having the latest software.
"These companies aren't going to be interested in Linux. They just don't have the skills required."
Moores predicts Linux would boom as a result of Microsoft's actions. "I think Linux may well find itself there as a protest vote. In the long term this could be a real threat to Microsoft," he said.
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