MS licensing switch to trigger mass upgrade to Win2k, WinXP?

Microsoft yesterday hit enterprise customers with the expected licensing bombshell, but the big news turned out to be the "simplification" of the company's licensing programmes, rather than subscription-based pricing. That is in the deal, and no doubt we'll be hearing more from it, but the major bottom line of the changes seems to be that enterprise customers will be forced to ship more dollars into Microsoft's coffers, more frequently, via less programmes.

The other major bottom line that strikes us is that the fact that the changes will take place on October 1st means that they have the handy - for Microsoft - side-effect of incentivising corporate customers who were planning upgrades to bring them forward to before October 1st. A customer update letter from a distributor that's been passed on to us clarifies this nicely.

After October 1st the Open and Select licence options will be boiled down to License and Software Assurance. "License" is simply the right to run the current version of the product, and Software Assurance is an extra you can buy on top of that in order to keep you current with versions of the product. But unlike its predecessor Upgrade Advantage, SA doesn't get you current. It can only be purchased for the current version of the product, and in the case of licences that came with OEM machines you've got a 90 day period of grace in which you can buy SA.

OK so far? Now, here come the good bits. "There will be a grace period between October 1 -January 31, 2002. During this timeframe, you will have the ability to buy Software Assurance on its own, if you are at the 'current' version of the product. In other words, you must be current before purchasing SA, it does not 'get you current' as Upgrade Advantage did."

So friends, you'll all be taking steps to get current before October 1st, won't you? But what is current?

"'Current' on Oct 1st is considered Office XP, Win 2000 or WinXP Pro, Backoffice 2000 family, etc. Office 2000, Windows 98, Exchange 5.5 would be considered 'not current' and you would be required to purchase a new full 'license' when you wish to upgrade the technology. Beginning Feb 1st, 2002 - the initial Software Assurance purchase must be made with a license."

Clear enough? In the immediate future companies are being given a one-time opportunity to get current as an investment, the alternative being that by sticking with non-current products they'll find themselves being whacked for full licences come February 1st. As NT isn't even on the not current list, it must be seriously not, not current. But what's WinXP doing on the current list on October 1st, seeing it doesn't actually launch until three weeks later?

Either the info going out to the channel wasn't updated fully when (or if) they knocked the launch date back, or we can expect some form of further incentivisation that'll let companies buy volume XP ahead of launch. We'd expect the latter anyway.

But these corporate buyers aren't dumb, are they? (Well actually, yes they are, or they wouldn't have wound up in this ridiculous arm-lock.) If it makes sense to get current, then it doubly makes sense to get current with WinXP, which should give you a bit more leeway before it too gets not current. Note that not current seems to be coming around every two years or so - bracing or what? Our distributor letter suggests that "if you had scheduled an upgrade for the end of 2001/ beginning of 2002, it will be more economical to complete the purchase of those upgrades by October 1st."

This, provided the WinXP virtual sales can be contracted by then, will do wonderful things for Microsoft's balance sheet and wonderful things for XP's sales figures, and the speed of uptake in the corporate market. Farewell Win98, farewell NT 4.0. Then of course they'll trot out the figures and tell us XP is the fastest-selling OS in Microsoft's history because it's great and we all love it.

Aside from this one-time piece of creative carrot and stick, the rejig works for Microsoft in the long term too. Gartner, coming over all sensational with "Microsoft hits enterprises with huge price jumps on software," estimates that enterprises with four year upgrade cycles will typically pay 68 per cent to 107 per cent more to ugrade, while for three year cycles the numbers are 35-77 per cent. Microsoft, bless 'em, says that the result will be a reduction or no change in licensing costs for around 80 per cent of its volume licensing customers.

How could that be? Here's a clue: "Organisations that currently upgrade less frequently than the average could see their costs increase, or they have the option to enrol in Software Assurance which provides the most predictable and cost-effective way to stay current with the latest software releases."

Another stick, people. If it's costing you more, it's because you're not buying Microsoft software fast enough, OK?

For what it's worth, Gartner doesn't think there'll be much interest in subscription pricing, which is available as part of Enterprise Agreements. Microsoft has produced a guy from Nestle who says they're great, and a guy from UGI Utilities of Reading, Pa who just loves the online licence management and tracking tools. But we bet he doesn't love them half as much as Microsoft does. ®

Related links:
Gartner gets all scandalised
MS squeezes business for more dough with rental model
Microsoft rolls out volume SW 'leases'
Why it's all great really, by Microsoft