News

Microsoft amends new license plan -- for some

• By John K. Waters
• December 2, 2002

In an effort to discourage its customers from jumping onto the open-source bandwagon, Microsoft unveiled plans last week for a new licensing option. Scheduled to launch early next year, the Open Value plan will allow small and medium-sized customers (those with between five and 500 PCs) to spread payments over a period of three years for purchases of software products such as the Windows OS and MS Office.

The Open Value pitch is part of the Redmond, Wash.-based software maker's Licensing 6.0 enterprise licensing program, which the company instituted last summer, generating mixed reviews from customers and market-watchers. That plan raised licensing fees for the company's business users from 33 percent to 107 percent, according to analysts at Stamford, Conn. market research firm Gartner Inc. Licensing 6.0 participants are required to pay an up-front fee in addition to annual fees over the life of two- or three-year contracts.

Many of Microsoft's smaller customers resisted Licensing 6.0, with its ''Software Assurance'' program. That program requires buyers to commit to multi-year maintenance contracts, which, in effect, lock them into the Microsoft camp. Under Microsoft's older Licensing 5.0 program, customers could buy upgrades at any time. These so-called ''version upgrades'' are not available under Licensing 6.0, and some customers have balked. According to analyst reports, nearly two-thirds of them either rejected the plan or bought partial upgrades under the older Licensing 5 program.

The new plan is designed to take some of the financial pressure off the little guys and keep them from opting for ''Lindows'' and other open-source alternatives, which are less expensive than Microsoft's products. Making such a switch would be tougher for large enterprises with tens of thousands of users, but small companies are lighter on their feet, which makes open source a real option.

The Open Value program has been compared to the ''zero-down'' financing currently offered by automobile dealers throughout the country, who are struggling to attract buyers in a down economy. In fact, Microsoft is making a very similar no-money-down offer to some customers right now, through financing programs set up by outside creditors, according to the company.

According to the program manager of Microsoft's worldwide pricing and licensing group, Rebecca LaBrunerie, the new licensing option could save small business customers as much as 29 percent on desktop software costs, and 25 percent on server software costs over a three-year period.

The Open Value plan will be available in North America early next year, according to LaBrunerie. According to a recent Gartner Inc. research note, a similar program was launched in Europe, the Middle East and Africa last month.