More on the Folly of Licensing 6.0

Licensing scheme could make customers search for alternative software

Last week's commentary about Microsoft Licensing 6.0 divided Windows & .NET UPDATE readers, with some resignedly throwing up their hands at Microsoft's new policies and others beginning the arduous—and frequently fruitless—task of finding alternatives to Windows and Microsoft Office. Surprisingly, a large number of respondents expressed confusion about Licensing 6.0, noting that they're not sure how the program works, how much it will cost, and why Microsoft made the changes. Many respondents were upset with Microsoft for raising licensing costs, a concern the software giant needs to take to heart. Certainly, my look at Licensing 6.0 is highly unscientific, but it's probably representative of the feedback Microsoft has received to date about the program. And Microsoft isn't yet talking publicly about customer reaction to Licensing 6.0 or the adoption rate.

First, I need to clear up an oversimplification I made last week, when I described Licensing 6.0, essentially, as a software subscription service. Actually, Microsoft's new volume-licensing scheme, which the company calls Software Assurance (SA), consists of four programs. The difference between SA and previous volume-licensing schemes is that the SA programs offer free product upgrades during the term of the agreement. For example, if you purchase an Office XP volume license now, you'll receive a free upgrade to Office 11 next year. This approach is why I used the term "subscription." Although to be fair, Licensing 6.0 offers four SA programs, and only one of these is a true subscription model. The SA programs are arranged according to customer size and needs, as follows:

  • Open License 6.0. Customers with five or more PCs, including corporations, educational institutions, charities, governments, and other institutions can use Open License to purchase a one-time volume license. This form of volume licensing includes discounted product prices and a one license-reorder minimum over a 2-year period.
  • Select License 6.0. Corporations, educational institutions, governments, and other institutions that can accurately forecast purchasing needs and have 250 or more PCs might choose the Select License program. This program includes discounted product prices, the ability to pay for licensing and SA costs over the length of the 3-year agreement, and access to multiple license-purchasing locations for geographically dispersed institutions.
  • Enterprise Agreement 6.0. The Enterprise Agreement program is a 3-year agreement designed for medium, large, and multinational corporations with more than 250 PCs. This program offers deep price discounts with a fixed, annual price based on the number client licenses you purchase; the ability to pay for licensing and SA costs over the length of the agreement; and 1- and 3-year license-renewal opportunities.
  • Enterprise Subscription Agreement 6.0. Almost identical to the Enterprise Agreement program, this program is for institutions with 250 or more PCs that want to acquire nonperpetual licenses for one or more Microsoft enterprise products on a subscription basis. In this case, the enterprise doesn't purchase software licenses, but subscribes to them for a 3-year period.

Aside from the free product upgrades during the SA term, how do these programs compare with earlier volume-licensing schemes? For starters, SA is simpler than previous plans. The passage of time has led to very heterogeneous environments, even for companies that have standardized or largely standardized on Windows and other Microsoft software. With a wide mix of Windows .NET (Win.NET), Windows XP, Windows 2000, Windows NT, and Windows 9x products out there, not to mention Microsoft's other server products and various versions of Office, and the multitude of licensing methods, many organizations have had a difficult time understanding upgrade paths and discounts.

Today, you have several different choices. You can purchase Microsoft software through a reseller, although this route would be prohibitively expensive in volume. Alternatively, you can purchase an SA-based program and be assured of free upgrades over the course of the agreement. And large corporations can opt into the true subscription plan, which can vary widely in cost, according to your upgrade needs. As several readers noted, this scheme could be much more expensive or slightly less expensive than previous volume-licensing schemes.

You have other options as well. A surprising number of respondents simply decided to opt out of Licensing 6.0 altogether. Some are leasing desktop PC equipment with whatever Windows and Office versions are currently available and recycling the software along with the hardware when the leases expire. This approach addresses one of the hidden costs of Licensing 6.0—new product versions often require a hardware upgrade to work efficiently. And in situations in which the company is always a revision or two behind Microsoft's most current software, SA doesn't make a lot of sense. Some readers argued that getting a free upgrade to Longhorn in 3 years isn't so attractive when you're using today's XP license for a Win2K Professional installation anyway. So if your company upgrades infrequently, you might save money by purchasing or leasing PC hardware and foregoing Microsoft's volume-licensing altogether.

Some users are actively researching open-source alternatives, such as Linux and OpenOffice.org, on the desktop and various Linux-based server solutions. In fact, from a purely statistical perspective, the feedback from this article represents a high point for technologies that don't often appear in UPDATE, such as BSD UNIX, Macintosh OS X, Apache, SAP, Java, and OpenOffice.org. This trend should give Microsoft pause, as these technologies are maturing at an alarming rate.

But what about customers who did opt into Licensing 6.0? Surely some customers are happy, right? Not according to my email. Respondents used terms such as "forced," "coerced," and "strong-armed" to describe their decision to adopt one of the Licensing 6.0 programs. Some are adopting the program half-heartedly by eliminating licensing for certain products, such as Office, that will later be reevaluated and perhaps replaced with something different. Many discussed plans to actively decrease their use of Microsoft server and desktop products over time, solely because of Licensing 6.0.

If my Inbox is any indication, Licensing 6.0 is leaving a sour taste in the mouths of many decision makers, and that's not the way you treat your best customers. Thanks to everyone who provided feedback about this crucial topic.

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