Government urged to defend Microsoft users

Anxious IT leaders are calling on the Government to defend their rights in response to Microsoft's new licensing terms as fears...

Anxious IT leaders are calling on the Government to defend their rights in response to Microsoft's new licensing terms as fears grow that the software giant is abusing its dominant position in the market.

Four out of five IT directors of major UK companies believe Microsoft has used its near monopoly of the desktop software market to force an unreasonable increase in their software spending.

A confidential survey of the Computer Weekly 500 Club, an invitation-only club for senior IT directors, reveals that 81% believe the Government should take action against the software giant under general competition policy. The 500 Club is made up of IT directors from the UK's 500 biggest companies including Boots, Lloyds TSB and Abbey National.

One user commented, "We are being exploited and it needs to be stopped."

Another said, "This is just what happens when a company has a virtual monopoly and is seeking to generate more revenue."

PC sales dropped last quarter for the first time since the mid-1980s.

Microsoft's new licensing rules, announced in May, end the trade-in Upgrade Advantage terms and introduce a Software Assurance programme that users and analysts believe could double software costs through shorter upgrade cycles.

Microsoft also introduced subscription licensing, which gives customers access to the latest versions of its software for a continuing annual charge. The new terms will be brought into effect in February next year.

Duncan Reid, Microsoft's licensing manager, was adamant that the software giant is not abusing its position. "We are extremely confident that our new licensing programme is absolutely legal and good for customers," he said.

However, there is now growing pressure on the Government to take action. Peter Scargill, national IT chairman of the Federation of Small Businesses, which represents 165,000 UK companies, believes that Microsoft is abusing its position.

He said, "The Government should do something about this, although a co-operative approach [from companies] could be more effective than the UK Government alone."

Scargill said the federation is seeking talks with Microsoft over the new terms.

Aggrieved businesses can complain under European Union competition law or via the Office of Fair Trading under Section 18 of the Competition Act, experts in business law said. However, they warned that Microsoft would be prepared for such complaints.

The British Chambers of Commerce said extra money going to Microsoft could hinder UK firms' chances of success in e-business. Its e-business policy manager Sally Low said, "Increased costs could have a detrimental effect on business because smaller companies could be put off investing in IT."

The new licensing agreement could have dire financial implications for the UK industry, according to the Computer Weekly poll.

Eighty eight per cent of IT directors believe that the new licensing terms will result in increased costs for their business. For one company, this will mean an increase in Microsoft licensing costs of more than 150%.

The 500 Club survey shows users are not impressed with the introduction of subscription licensing. One user said, "Subscription is an expensive option when you do not wish to upgrade every year."

Whitehall sources said a cross-government meeting has been called with Microsoft to discuss the cost of the licensing changes for government.

The new terms could affect Labour's ambitious e-government agenda. Research from the Society of IT Managers estimates that UK councils will need to find between £50m and £80m over the next two years to satisfy Microsoft's new licensing terms.

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