Microsoft lets customers decide on software assurance programme

Microsoft's customers will get to pass judgment on its software maintenance plan this year when their existing software assurance...

Microsoft's customers will get to pass judgment on its software maintenance plan this year when their existing software assurance contracts come up for renewal.

The Software Assurance (SA) programme gives customers the right to the latest software at no charge over the three-year course of their agreement. But with the next big wave of Microsoft products not expected before 2006, the software maker could see a customer backlash.

Last year, Microsoft made significant changes to the plan to appease customers who complained it cost too much and offered too little. Now, analysts at Gartner believe Microsoft may ship interim releases of Windows and Office to make SA more attractive.

"The primary reason to buy SA is to get the right to future upgrades. If Microsoft continues to elongate release cycles, it could be that customers won't get an update in their contract period and would be upset that they are not getting a new version for what they pay," said Gartner research director Alvin Park.

Many Microsoft customers are on two-year upgrade advantage contracts, which they purchased just before Microsoft retired that option in July 2002.

At that point, SA was introduced and became the only volume upgrade option, apart from buying a brand-new licence. Those two-year licences will be up for renewal this year, as well as a number of enterprise agreements, which include SA.

Microsoft expects up to three-quarters of customers with enterprise agreements to renew their contracts. It predicts no more than 30% of upgrade advantage customers will buy SA, chief financial officer John Connors said. There are more than 200,000 upgrade advantage contracts.

Gartner estimated that as many as 70% of enterprise agreements customers will renew and that as many as half of open and select licence buyers, which includes upgrade advantage buyers, will sign up for the plan.

"The bottom line is that the benefits are worth the cost of SA, but you have to use and deploy them," said Forrester Research vice-president Julie Giera.

A customer could decide that the software they have is good enough and postpone an upgrade until a new version is actually released, said Paul DeGroot, a lead analyst at Directions on Microsoft.

"If you don't think Microsoft is going to come out with anything compelling enough that you will want it, you will wait. The industry is maturing. People are happy with older products," he said.

Some customers may also defer the three-year SA contract because it gives them the option to switch to non-Microsoft products.

"Without locking yourself in for an upgrade, it becomes easier to switch away from Microsoft. My guess is that the Linux desktop will look a lot better three years from now than it does today," DeGroot said.

Joris Evers writes for IDG News Service

Read more on PC hardware