Microsoft Eyes Pay-as-You-Go Licensing

By Peter Galli  |  Posted 2004-04-19 Print this article Print

Microsoft mulls changing its enterprise licensing model from long-term contracts to pay as you go.

Microsoft Corp. officials are mulling potential changes to the companys enterprise volume licensing program that could let large systems integrators and service providers license software on behalf of their largest customers.

Enterprises now must negotiate their own volume agreements with Microsoft, even when the software is hosted and managed by a third party. New solutions, sources said, could allow pay-as-you-go licenses rather than requiring users to pay for and get tied up by a long-term agreement.

Sources said some licensing changes could be in the cards as early as next year, in time for "Yukon," the next version of SQL Server, or by 2006, for "Longhorn," the next version of Windows. A spokesman for the Microsoft Volume Licensing Team, however, said Microsoft has no plans to institute SPLA (Service Provider License Agreement) options into its enterprise agreements "in the imminent future."

But Microsoft CEO Steve Ballmer said he believes such ideas have merit if a win-win arrangement can be forged among Microsoft, outsourcers and users.

Ballmer told eWEEK editors in an interview at the companys Redmond, Wash., campus earlier this month that "weve been under ... a constant issue with outsourcers [about service license agreements]. Right now, the way we work is we own the license and then we sell the license to the customer and it gets managed by the outsourcer."

For the full Ballmer interview, click here. Ballmer said he believes that the current model is the right one for Microsoft but that there are outsourcers that want to be able to put the license costs into their fees instead of letting Microsoft have a direct relationship with their clients.

"That issue has existed for a long time," Ballmer said. "Its a very hard licensing problem because we dont want these guys to become just sort of volume aggregators like master distributors of our software. That does not make any sense to us. Its not where real value-add is."

Ballmer did not rebut the possibility that such licensing changes could be under consideration.

"It wouldnt surprise me," Ballmer said, "if there was somebody around the place working on seeing if we couldnt find a win-win for us, the outsourcers and the customers."

Next page: Some customers would welcome SPLAs.

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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