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Office 2k for $5? How Microsoft buys its way into education

Hook them with a cheap ELA, get them standardised, reel them in...

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After some spadework, we're starting to get a clearer picture of Microsoft's deal-making with US educational institutions. As we reported earlier this week, the business end of the deal from the student's point of view is that you get a copy of Office 2000 for $10, but there are various different permutations in operation that'll get you software for $5, $2 or even for free, depending on where you study.

It doesn't seem to be exactly for sale. The software is obtained under some form of implementation of a Microsoft Enterprise License Agreement (ELA) entered into with a particular educational institution, or with a group of them. The organisation pays for the licences, and therefore the sum paid by the student seems to be whatever the organisation deems it should claw back for media costs and admin.

But what does the organisation pay for the licences? We're grateful to the University System of Maryland for telling us the cost is "less than $14 per license for each year of the three year agreement, with two optional years available after that." Maryland quotes the normal retail cost at $150, and says the deal, struck last July, is worth $1.5 million, with 22,000 students expected to take it up.

Deals are also in place in Ohio, Indiana, and at the University of Texas. Older deals (e.g. Texas, in 1998) positively forbid product registration with Microsoft, so the newer Ohio deal, which makes it compulsory, shows you which way the wind's blowing. The Texas agreement was four year, worth $6.3 million and covered 146,000 students, so maybe the cost is going up.

Microsoft's reluctance to let OS code escape via this channel seems best explained by the fact that the apps CDs are encrypted, while the OS ones aren't. But the bottom line would appear to be that Microsoft is prepared to charge ultra-low prices upfront in order to induce colleges to effectively standardise on Microsoft applications.

The colleges themselves, of course, all say that they're not standardising, and that their users are free to use other software, but if you can get Office 2000 virtually for free, what are you going to do? Mind you, if you look at that per seat licensing cost to Maryland of $14, then presume the deal will be extended for the full five years, you get a per seat cost of $90. This still isn't bad for deals that generally include upgrades, but the approach has a lot in common with the way Microsoft operates in the business market.

There, tempting low pricing for enterprise agreements is dangled as the hook. After the enterprise is standardised on Microsoft software, it is of course difficult and expensive to flee in the direction of what rival companies still exist. So the enterprise still saves money on renewing the agreement with Microsoft, even if the price has mysteriously gone up. Which we hear it often has. ®

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