Microsoft Backs Off on Licensing Plans

By Peter Galli  |  Posted 2001-10-15 Print this article Print

Users say plans too restrictive, seek alternatives.

A growing number of enterprise customers are seriously considering alternatives to Microsoft Corp. products as a result of the companys hard-line approach to its volume licensing programs.

While the Redmond, Wash., company may not see immediate fallout from its new licensing plans, the long-term negative impact could be significant if products such as Linux or Sun Microsystems Inc.s StarOffice desktop productivity suite continue to gain ground.

Last week, Microsoft capitulated to growing customer pressure about the plans and changed some of the conditions and extended the sign-up period. The company pushed the date to July 31, 2002, from Feb. 28 and announced that customers will no longer be required to upgrade to Office XP to qualify for Software Assurance.

It also said it was making Upgrade Advantage available to customers under its Open and Select volume licensing agreements during the full launch period.

Dave Howell, the IS manager at PED Manufacturing Ltd., in Oregon City, Ore., a Microsoft shop since 1988, said it would be difficult for the company to simply move from Microsofts platform to another.

"But I am now looking at and thinking about alternatives, and if Microsoft keeps doing what [its] doing with their licenses, they will push me to the point of no return," Howell said. "Unless they change their ways—and do so soon—that day is rapidly approaching."

Other Microsoft customers are switching. Tim Payne, vice president of wholesale distributor TMP Co., in Seattle, has switched to StarOffice. Payne said he saved $1,000 per employee with the move. According to Payne, Microsofts licensing was "most restrictive and very expensive, and they dont use industry standards in their products."

When Microsoft announced the new licensing agreements in May, it said customers had three months to upgrade to the latest versions of Office XP and Windows 2000 to qualify for Software Assurance.

The Software Assurance program commits companies to buy application upgrades for an annual fee. The alternative for the companies is to shun the new agreements and pay the full price for the software when they do upgrade.

The revised licensing plans came as dissent for the program mounted. A recent report by The Infrastructure Forum, an association of senior corporate IT managers based in Berkhamsted, Hertfordshire, England, said many of its member companies were thinking about scaling back on Microsoft products or switching to open-source alternatives as a result of the licensing changes.

The forum estimated that some 94 percent of its members will see a hike in their license fees. A recent survey by Giga Information Group Inc. and Sunbelt Software Inc. of more than 4,000 technology professionals found that 36 percent of those polled said they would consider alternative products, while 80 percent expected to pay more for their Microsoft software.

Adding to the pressure on Microsoft, Sun officials last week said their company is witnessing a record number of Windows and Office users downloading the beta of StarOffice 6 for review and testing—more than 200,000 downloads from Suns site in the first week of availability. Simon Phipps, a Sun evangelist in Southhampton, England, said Sun will challenge Microsofts Internet Information Services server with its iPlanet server, whose price has been cut by 37 percent.

"We never intended it to go up against Microsoft with StarOffice, and we still dont. But a lot of people downloading the software are evaluating the product. Office users are defecting to us despite the fact that we are not marketing to them. Microsoft has no one but itself to blame for the increasing customer dissatisfaction with them and their products," Phipps said.

PEDs Howell welcomed Microsofts latest licensing changes and time extension as a "good move" that gives him more time to consider the issues further. But he remains skeptical about whether the cost benefits and return on investment of upgrading from Office 2000 and Windows 2000 to the XP versions of the programs justify the new licensing costs.

"As Microsoft continues to charge customers more for its software in an environment where other software is free or prices are falling, its customers will increasingly move to other products," TMPs Payne said.

Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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