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Big Changes Afoot During Microsoft's Summer of Discontent

Licensing and lawsuits mean changes for Microsoft customers

This week has brought several important changes to the way that Microsoft does business, and one or both of these changes will likely directly affect you and virtually every other Microsoft customer. First, Microsoft's dreaded Licensing 6.0 scheme has gone into effect, dramatically altering the way medium and large businesses purchase software from the company. Second, Microsoft said this week that it will begin implementing several components of its proposed antitrust settlement with the US government, despite the fact that the federal judge overseeing the case hasn't approved the settlement yet. Let's look at these two developments.

Licensing 6.0
After two delays because of customer complaints, Microsoft has finally unleashed Licensing 6.0, its new "simplified" licensing program. Unfortunately, in this case, simplified means more expensive for many of the software giant's customers. To paraphrase Microsoft's description of Licensing 6.0, the company's volume licensing is now essentially a 2- or 3-year software subscription term, during which time you receive "free" product upgrades. Simple, right?

Despite Microsoft's claims to the contrary, I think the company designed Licensing 6.0 with two key goals in mind, neither of which is about making anything easier on its customers. First, Microsoft wants customers to upgrade to new Windows and Office versions when the versions are released, not when corporations want to upgrade. And second, Microsoft wants to move to a steadier, more regular revenue stream, which this subscription software model will provide.

Moving customers to new products in a timely fashion helps make Microsoft's new products more enticing because the company can issue press releases describing how well its products are selling, as it did recently when Windows XP hit the 46-million licenses mark. (One has to wonder how many of those licenses were bought because companies were trying to get in under the Licensing 6.0 deadline.) In the future, each Windows and Office release will have positive sales stories, thanks to Licensing 6.0.

Subscription software has long been a Microsoft dream. And thanks to a recent agreement with the Securities and Exchange Commission (SEC), Microsoft can no longer artificially smooth its books, making growth look more linear than it is. If Licensing 6.0 is successful, this linear growth will now be real, rather than manufactured.

Customers have responded to Licensing 6.0 in various ways, with some expressing resignation over what was likely an inevitable change in Microsoft's business strategy. But for the first time, Microsoft's licensing is causing some customers to look at solutions—particularly open-source solutions such as Linux and—outside of Redmond. Even companies such as Novell, with its aging NetWare line, and Corel, with its nose-diving WordPerfect products, could make something of a comeback, thanks to Licensing 6.0.

If you're wrestling with Licensing 6.0, I'd love to hear from you. Is this the final straw or just another in a long line of changes that won't ultimately affect your business? Please let me know.

Microsoft Implements Antitrust Concessions
On Monday morning, Microsoft announced that it will implement four of the key provisions from its proposed settlement with the US Department of Justice (DOJ) this month, despite the fact that the judge overseeing the case has yet to accept or reject the settlement terms. Microsoft General Counsel Brad Smith explained that the four provisions include milestones that come due this month, so the company felt it should proceed and then make changes later, if necessitated by Judge Colleen Kollar-Kotelly's eventual ruling.

The four provisions include:

  1. The upcoming release of Windows XP Service Pack 1 (SP1), which includes a Set Program Access and Defaults component for hiding Microsoft middleware (e.g., Microsoft Internet Explorer—IE, Outlook Express, Windows Media Player—WMP). A similar component is also present in Windows 2000 SP3, which Microsoft released last week.
  2. The required disclosure of internal middleware interfaces (APIs) in Windows.
  3. The launch of a communications protocol-licensing program for third parties, which will be royalty-based.
  4. New contracts with PC manufacturers and other OEMs.

Smith said that all four concessions are based on a set of core principles that Microsoft is implementing inhouse. First, the company seeks to reinforce its antitrust compliance as a corporate commitment and the personal responsibility of all engineers and employees involved with the affected products. This commitment means that the company will adhere not only to the letter of its agreement, but also to the spirit. Second, Microsoft will provide all the necessary resources to customers, developers, and other third parties as a result of these concessions and do so in a timely manner. Smith also said that Microsoft would err on the side of reasonableness, seek feedback from others, and work to build constructive relationships with the government and the computer industry.

What these provisions mean to you is that third-party products will interoperate much better with Windows clients and servers. On the client side, IT administrators who roll out XP SP1 will be able to easily replace Microsoft middleware with preferred third-party products, for example. On the server side, makers of server tools and services will be able to replace Microsoft server products in a way that will be seamless to desktop clients.

The most interesting aspect of both announcements, however, is that they're tied directly to what might well be the company's biggest problem: Trust. Licensing 6.0 leaves a bad taste in my mouth, but it's encouraging to see Microsoft reach out to honor its legal agreements. And although seeing how serious this effort is will take a while, serious and honest compliance could go a long way toward fixing Microsoft's reputation. Now if only we could get better licensing terms.

Microsoft Implements Antitrust Concessions

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