Microsoft revamps its licensing program

by Bob Trott

May 10, 2001 —

Microsoft on Thursday unveiled a revamped licensing program designed to encourage enterprises to buy software through a subscription model.

Beginning Oct. 1, customers of the Redmond, Wash., software giant with 250 or more PCs will be able to license all Microsoft enterprise software as a subscription through the Enterprise Agreement 6.0 Subscription program.

By enlarging its Enterprise Agreement (EA) program -- the previous minimum number of PCs was 500 -- Microsoft hopes to encourage more subscription use; according to the company's own surveys, only about 25 percent of customers want to receive software and updates via that model.

"The way we've designed this program, 80 percent of our customers will see no change to their licensing costs or the costs will decrease," said Simon Hughes, program manager for Worldwide Licensing at Microsoft. "The remaining 20 percent, who upgrade infrequently, will see costs increase if they continue their current behavior. We've designed the program to look at the way our customers upgrade."

While Microsoft is not doing away with "perpetual use" licensing, EA 6.0 Subscription will be 15 percent cheaper than the standard EA 6.0. The price could push customers toward the subscription model.

"I would not want to be forced into that plan unless they sold their software at a greatly reduced rate. I would not want to pay full price for something, use it for three years, and then have to pay full price again for the same level of functionality with a few enhancements," said Frank Petersmark, vice president of Information Systems for Amerisure & Co., in Southfield, Mich.

"Microsoft might as well go back to the old mainframe software model and start charging you maintenance every year. Under that [mainframe] plan you bought a perpetual license but you paid a monthly maintenance on it. Under that plan at least you got the maintenance, bug fixes, and upgrades as part of all that," Petersmark said.

Microsoft also is replacing what Hughes termed its "alphabet soup" of various upgrade plans with a program called Software Assurance, which includes rights to upgrades released during the terms of the agreement. The Software Assurance plan will replace the current five different upgrading options. The program allows customers to upgrade to the latest version of the software in the period covered by the Software Assurance agreement -- the duration of the agreement is up to the customer to choose.

Large customers, with over 1,500 licenses, in some countries will get access to the Windows source code.

"This is absolutely no move towards open source. Customers will be allowed to develop on top of the source code, to innovate. We started this about a year ago with some of our large enterprise customers," said Michel van der Bel, deputy general manager for Microsoft in the Netherlands, adding that no altering of the basic source code or sharing of the code is allowed and that Microsoft remains the owner of the intellectual property.

"This won't change much for the users, as they won't be be allowed to alter the code," said Nathaniel Martinez a software analyst with research firm International Data Corp.

Contributions to this article by Joris Evers, IDG News Service.

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