October 9, 2001 1:00 PM PDT

Microsoft revises licensing plan

Customer complaints have forced Microsoft to revise the deadline for a controversial software-licensing plan.

Microsoft said Monday that companies have until July 31, 2002, rather than Feb. 28, 2002, to enter Microsoft's controversial Software Assurance licensing program, which will eliminate some discounts and raise software prices for some of Microsoft's business customers. Microsoft also said customers will no longer be required to upgrade to Office XP to qualify for the Software Assurance plan, which is intended to move Microsoft's customers to a long-term licensing model.

"It is in response to customer feedback," said Microsoft spokesman Dan Leach. "When we went to talk to customers about the issue, they made it clear they needed sufficient time to examine their existing licenses, review the improvements in the (new program) and decide how to take advantage of the new software offering."

But IDC analyst Al Gillen noted that this is the second major change to the new program in recent months.

"This is the second time they've backed down to changes in their licensing program," he said. "In fact, they're backpedaling somewhat on what they were trying to push through back in May."

Last week, Microsoft relaxed another controversial licensing restriction, on a practice known as "reimaging." That practice, common among business customers, involves technicians erasing the copy of Windows installed on new PCs and replacing it with an identical version of the OS that also includes the appropriate hardware drivers and software applications specific for their work environment and corporate network.

"Our customers clearly helped us understand that we misunderstood the amount of time needed to launch this new program," Leach said. "The original five-month launch was not enough, and our customers were right. Now customers will have had 14 months from the time we announced the new licensing program until...it is fully implemented."

Already, Microsoft's new licensing plan has drawn the ire of customers. A survey from Giga Information Group and Sunbelt Software showed that 80 percent of the technology managers polled viewed the new program negatively. An equal number said they expected their cost for Microsoft software to increase. Gartner estimates the new program, Software Assurance, would raise Microsoft software-licensing costs between 33 percent and 107 percent.

The survey also found that 55 percent of respondents wanted Microsoft to extend the deadline even further, to Dec. 31, 2002.

"They apparently have already witnessed so much backlash that they're extending the registration period for their Software Assurance plan," said Tom Berwick, president of Bellaire, Texas-based integrator Berwick & Associates.

Gillen agreed.

"They have to accumulate a certain amount of negative feedback before they make a change. And if they don't hear from enough of them, they wouldn't opt to make a change at all," he said. "The fact that this is the second major change they're making to this licensing program tells you that they are hearing from unhappy customers."

In addition to the initial sticker shock, many Microsoft customers found hidden costs. In enacting Software Assurance, a two-year maintenance program, Microsoft has done away with the most popular way companies have purchased upgrades. That has left the majority of Microsoft customers one licensing option: Software Assurance. But to qualify for that plan, companies have to upgrade to the most current version of the software available.

In the case of Office, that has meant moving to Office XP before qualifying for the new plan, which works out to be another kind of price increase for some companies. Microsoft announced the licensing change in early May before the release of Office XP.

The new changes mean Microsoft customers can qualify for Software Assurance if they already have Office 2000 or are in the process of moving to the product. For Windows, version 2000 and XP had already been considered current versions to qualify.

"Probably chief among the changes is the fact (that) Office 2000 is being considered current technology," Gillen said.

Cautiously optimistic
Although many companies see Microsoft's changes as a step in the right direction, others that say they were burned in recent licensing negotiations with the software giant remain skeptical.

"They all but threatened to have BSA (Business Software Alliance) audit us if we didn't move off of Office 97," said one technology manager who asked not to be identified. "My bosses were afraid and said we should just pay the damn bill--despite my conviction we had absolutely no licensing violations."

Stu Sjouwerman, president of Sunbelt Software, said such stories are not surprising.

"Certainly Microsoft is moving toward licensing enforcement," he said. "The way they do it could be more tasteful, as far as I'm concerned, especially as a Microsoft partner."

Companies also worry that Microsoft's forthcoming .Net software-as-a-service strategy would lock them into perpetual fees enforced through Microsoft's product activation technology.

Product activation locks Microsoft software to a specific PC, turning off if too many hardware changes are made. The feature also could be used to enforce subscription sales and fight software piracy.

"I've talked to more than one customer who doesn't want to allow Microsoft to have the power to 'turn off' their software should they decide not to renew a subscription," Berwick said. "This issue alone and the distrust of Microsoft are going to fuel sales of alternative software big time."

Microsoft sells a small number of subscriptions through volume licensing. Leach emphasized that none of them use product activation.

However, Office XP copies sold at retail in Australia and New Zealand--Microsoft's test markets for consumer software subscriptions--do use product activation, which can be used to reactivate expired software.

 

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