Microsoft to End Volume Licensing

By eweek  |  Posted 2001-01-01 Print this article Print

The disappointing pace of adoption of the Windows 2000 platform has caused Microsoft Corp. to halt its volume licensing program on older versions of Windows in a bid to drive business to the 2000 software suite.

The disappointing pace of adoption of the Windows 2000 platform has caused Microsoft Corp. to halt its volume licensing program on older versions of Windows in a bid to drive business to the 2000 software suite. So far, however, the process is only serving to alienate many of the companys customers.

Late last month, Microsoft began informing customers that it will stop offering volume licensing pricing for Windows Millennium Edition, Windows 95 and Windows 98 by the end of June.

The licensing programs affected include the Redmond, Wash., companys Select program for midsize and large companies, which spans a two-year period; the Open program, for five licenses or more; and the Enterprise program, for companies with 500 or more users. The programs have allowed customers to receive discounts based on the number of products bought. While Microsoft declined to disclose exact discount rates, the savings are significant.

Simon Hughes, program manager for Microsofts volume licensing group, defended the licensing changes, saying they followed the increasing adoption of Windows 2000 Professional by the companys volume licensing customers and the associated significant decline in demand for volume licenses for Windows 95 and Windows 98.

Hughes denied the company was dictating to its customers, saying it was giving them "sufficient notice" to enter into any volume licensing agreements for their future Windows ME, Windows 95 and Windows 98 requirements. He also dismissed speculation that the motive for the change was to drive revenue for the company and boost the adoption of Windows 2000.

According to Dan Kusnetzky, an analyst at International Data Corp., in Framingham, Mass., the discontinuation of the programs is a thinly disguised ploy by Microsoft to boost revenue by driving clients to buy volume licenses for the more expensive Windows 2000 Professional or forcing them to enter into volume agreements for Windows 95 and Windows 98 before the end of June.

One reason for Microsofts strategy could be found in a Meta Group Inc. research paper, which states that as the economy continues to soften, "a very real potential exists that companies currently planning large [Window 2000] migrations may delay or cancel these plans."

Indeed, for some Windows customers, there simply hasnt been a compelling reason to migrate to Windows 2000. Mark Bizub, IT manager for Kim Lighting Inc., in City of Industry, Calif., said migrating to Windows 2000 will take "a lot of work and a lot of resources. We also dont see a great benefit from it yet."

Meta Group, of Stamford, Conn., recently released a report indicating that Windows 2000 client migration will cost $700 to $800 per user in a medium-complexity environment. The Windows 2000 version upgrade with downgrade rights to Windows 98 also costs about 25 percent more than the price of a Windows 98 version upgrade.

So far, customers contacted by eWeek about the volume licensing plan are angry about the turnabout. Chuck Kramer, vice president of IT services at Social & Scientific Systems Inc., in Bethesda, Md., launched a stinging attack on Microsoft and its tactics, saying, "Theyre trying to push people into Windows 2000, and if they do, its going to be kicking and screaming. Even the few customers of mine that could actually use it just dont want it." Kramer added that many of his clients felt they were only now getting a handle on Windows 95.

Analysts and users warned that Microsofts new licensing strategy could backfire. IDCs Kusnetzky said the tactic was "fraught with peril" and could cause many clients to become fed up with the company. He added it could cause some, including IDC itself, to consider alternative platforms. The research company, which has some 2,000 desktops running Windows 95, is examining upgrading future desktop apps. The licensing move "may accelerate a move by us to a platform other than Windows 2000 Professional," Kusnetzky said.


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