An Upgrade You Can't Refuse?

By SmallBusinessComputing Staff | Posted October 04, 2001
By W.C.G.

Microsoft is in upgrade mode again, and businesses must evaluate whether they need the software behemoth's latest offerings. In May, Microsoft introduced Office XP, and at the end of October, the company will unveil its latest operating system, Windows XP. Microsoft is making a big push to encourage businesses to upgrade to these new versions.

Microsoft has established a program called Software Assurance, a subscription service in which companies receive the latest software upgrades as Microsoft releases them. Businesses with 'open' licenses, covering five or more seat licenses for the software, are eligible for the program. Initially, Microsoft set a deadline of September 30, 2001, by which businesses could join the Software Assurance program and receive the Office XP upgrade. After that date, businesses would have had to pay full price for the upgrade, as if they had never licensed Office at all.

After widespread complaints, Microsoft pushed the deadline back to February 28, 2002 to allow customers 'more time to plan and budget for the transition.' Businesses now have more time to think it over, but they still must make a tough decision - whether to pay now and get the latest upgrades or wait and pay Microsoft more money for new licenses a few years down the road.Either way, Microsoft is forcing small- business customers to pay up like never before, according to Chris LeTocq, an analyst with Guernesy Research. Under the Software Assurance plan, LeTocq says, small businesses will pay much steeper prices than they have in the past. 'If you're a high-volume business with thousands of PCs, this is a price decrease,' LeTocq explains. 'If you're a small business, on the other hand, and you upgrade every three years, this is a 48-percent price increase, and if you usually upgrade every four years, this is a 70-percent price increase.'

Microsoft disagrees; it says if customers follow 'historical upgrade patterns,' 80 percent of licensing costs will remain the same or decrease under the Software Assurance program. Rick Scherle, CEO and co-founder of Bravo Marketing, a 20-employee firm based in San Francisco, says that his company has no need to change its software, and that his employees only use 10 to 15 percent of the features offered in Office 2000. 'You can look at what the benefits [of Office XP] are and they're just so weak,' Scherle says. 'As far as I can tell the consensus is that Microsoft is trying to hammer people over the head with the licensing because they need a way to sell the product.'

LeTocq agrees that most small businesses don't need to upgrade unless they are using complicated features, or are still using Office 95. 'Businesses can continue using Office 2000 for three or four more years,' LeTocq says. 'If you're on Office 95, the right thing to do is upgrade now. If you're using Office 97, there are features on Office XP which are helpful, but not essential.'

According to Microsoft, Office XP will help small businesses make everyday tasks easier, offering integrated communication services, document-management review, and Web-based sharing capabilities.

LeTocq says businesses should remember the costs associated with upgrading, not just the costs of licenses. An upgrade forces businesses to take the time to install the upgrade, test it, train employees, and address issues such as document conversion. 'When you look at a small business upgrading a desktop, the license cost is a pretty small part of the total cost,' LeTocq says. 'Upgrading is expensive, even if the license happened to be free.'

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