Microsoft's license price increase 'lose-lose' for enterprises, say analysts

Cashing in on BYOD by boosting 'user' CALs pricing by 15%

By , Computerworld |  Software, BYOD, Microsoft

Microsoft's recent price increases for its client-access licenses (CALs) is a "lose-lose" deal for enterprise customers but likely a major revenue boost for Microsoft, analysts said today.

On Dec. 1, Microsoft overhauled its enterprise licensing price charts, most notably raising the cost of "user" CALs by 15%.

CALs are the licenses corporations must purchase so workers can legally access company application servers. Most of Microsoft's server revenue actually comes not from the software itself -- Exchange, for instance -- but from the ephemeral CALs it sells by the millions to enterprises.

Until last Friday, Microsoft priced both CAL categories -- "device" and "user" -- identically. The former, as the label implies, is a CAL tied to a specific device, typically a desktop or laptop PC. The latter is linked to an individual, who then can use the CAL to access the server from multiple devices, including desktop and notebook PCs, tablet and smartphones.

"Microsoft is looking for new revenue," said Daryl Ullman, co-founder and managing director of the Emerset Consulting Group, which specializes in helping companies negotiate software licensing deals. "[Their earlier prices] were very customer oriented, but now they are under revenue risk. Changing licensing is always a way vendors deal with a revenue problem."

Microsoft raised only the price of its user CALs, and left the device CALs alone. Experts like Ullman saw the change as a bid to cash in on the BYOD (bring your own device) movement to accommodate workers who use three or four devices to do their jobs. It's no coincidence, they said, that the increased revenue will come from the dramatic shift toward mobile.

If Microsoft can't make money on Windows -- which has virtually no presence in mobile, although the company's trying to change that with Windows 8 -- it will make money on the backs of mobile devices running others' operating systems.

"This has been brewing for quite a long time," said Ullman. "For years, they were selling user CALs knowing that companies would use them to their benefit. They knew they were leaving money on the table. But now they've realized that they can charge more for user CALs."

User CALs were a better deal for enterprises whose workers were armed with multiple devices: Rather than pay for three device CALs, one each for a notebook, desktop and mobile device, they could buy just one user CAL. Instantly, they slashed their CAL expenses by two-thirds.

But as more companies turned to user CALs to cut costs and deal with BYOD, Microsoft saw revenue slipping away.

Originally published on Computerworld |  Click here to read the original story.
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