Microsoft To Tweak Licensing Plan For SMBs

By Thor Olavsrud | Posted March 03, 2003
Microsoft is widely expected to tweak its Licensing 6.0 volume licensing program Saturday in an effort to make the program more appealing to small- and medium-sized businesses (SMBs) which rejected the plan when it went into effect in August 2002.

Gartner Group analyst Alvin Park said Microsoft began training its channel partners in the new licensing option, dubbed Open Value, on Nov. 21, 2002. He said Microsoft will make the option available in the U.S. and Canada on March 1, 2003. A similar program launched in Europe, the Middle East and Africa in September 2002.

Under Licensing 6.0 and its Software Assurance program, Microsoft attempted to rein in its array of licensing schemes with a single program under which customers buy two- or three-year maintenance contracts under an annuity model. This has the effect of locking the customers into Microsoft's products because they essentially pay for upgrades in advance. Also, because forthcoming upgrades, like Microsoft's Office 11, won't support earlier versions of Microsoft's Windows operating system (Office 11 will only work with Windows XP and Windows 2000), customers who go with the program may have to upgrade their operating systems as well.

Deutsche Bank Securities estimates 400 million desktops still run Windows NT or 9x.

Also the up-front payments of the program made it difficult for SMBs to access. Gartner estimated that it raised the majority of customer fees between 33 percent and 107 percent, and up to two-thirds of customers either rejected the plan outright or chose to go with partial upgrades under the Licensing 5 program.

With some analysts estimating that SMBs make up about half the install base, that presents a problem for Microsoft, especially since smaller firms have more flexibility in switching to Open Source alternatives.

The Open Value option is intended to change that. "In launching Open Value in the United States and Canada, Microsoft provides options for spreading the cost of its License and Software Assurance (L&SA) packages over several years while building its future annuity revenue streams," Park said. "Open Value includes a three-year term with a three-year renewal option and is available for five or more L&SA packages. The new option targets SMBs with five to 500 desktops, but Microsoft put no cap on who qualifies for this new payment plan."

According to Park, SMBs will now have a number of options when it comes to licensing Microsoft products. First, he said, companies which basically only refresh their software when they refresh their hardware would probably be better off with an original equipment manufacturer (OEM) license. SMBs which buy more than five licenses but plan on upgrading their software less frequently than every 3.5 years would be best served by Open License Business or Volume without Software Assurance. However, businesses which plan on upgrading software more frequently than every 3.5 years, or who want to level out their software payments and standardize on Microsoft software, would be best served by going with Open Value and Software Assurance.

Adapted from internetnews.com.

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