CeePrompt! Computer Connection

Originally published August 19, 2002

Microsoft putting muscle on large-business clients

Apparently it's not enough for Microsoft to muscle its competitors in the corporate world; now they are strong-arming their business customers into buying volume licensing agreements or face higher costs for later upgrades. Of course, Microsoft maintains its Software Assurance Program clearly benefits its clients by simplifying licensing, easing software administration and giving customers more choice and flexibility. In fact, it's a way for Microsoft to reorganize its accounting in a way that ensures a steadier cash stream for the software giant.

July 31 was yet again another deadline set by Microsoft for its business customers to sign up for the subscription service or face the consequences. They've been trying in earnest to implement this program since it was unveiled in May of last year. However, customer confusion and outrage have led to a series of delays.

Microsoft wants to move away from selling one-time licensing agreements to a system of leasing software using an insurance-style program. Through the Software Assurance Program, companies pay an annual premium, which entitles them to receive future upgrades during the term of the policy. A policy typically runs two to three years and represents approximately a 70 percent savings on new software licenses.

Any previous volume licensing deals that allowed users to upgrade on a trade-in basis are no longer valid since Aug. 1. For those who chose not to sign up for Software Assurance by the deadline, they will need to purchase new product licenses for the full value.

On the customer side, this amounts to tens or even hundreds of thousands of upfront dollars for business clients, depending on their size. For many entities this creates a hardship and strain on their own cash flow. Does this seem like taking unfair advantage by a company that already enjoys a monopoly on 90 percent of the software market?

"It smacks of arrogance and greed," according to one business client, but many companies with deeper pockets have already signed up to avoid cost increases and maintain predictable budgeting. To my way of thinking, it's a way to force corporate customers into buying upgrade products for perfectly good applications that are working well within their present business environment. I know of many large organizations that are happily using Windows 98, Office 97 and Office 2000 and would otherwise have no impetus to upgrade to Windows or Office XP, for example.

Everyday clerical tasks such as formatting and formulas are the same whether you're using Office 95 or Office XP. Granted, XP is flashier, but the tasks can be accomplished in the same manner in all versions.

Because companies have chosen not to upgrade at the same pace as Microsoft has developed said upgrades leaves it no alternative but to devise ways to squeeze users into accepting these newer versions, for a fee, of course. Realize that software upgrades often demand hardware upgrades, tacking on additional costs to consumers.

It is still unclear what specifically happens to companies that choose not to renew their software "insurance program" after a period of time. Because key codes are built into the leased software, will the application cease to be operational if the most-current codes aren't provided?

Developers of the operating system Linux are hoping these licensing changes create enough ire to move consumers into seriously considering more-affordable alternatives to the Windows environment. Similarly, Sun hopes its latest release of Star Office at $75 can finally make headway against the $700-priced Microsoft Office suite.

For the time being, the Software Assurance Program applies to larger businesses that normally would qualify for volume licensing. Individual users and small businesses can still rely on retail upgrades and OEM licenses from their hardware purchases. It does appear, however, that Microsoft can change the rules whenever the cash flow seems a little light.