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Microsoft licensing deadline looms - Partly to blame for IT doldrums?
The Inquirer ^ | July 16, 2002 | Egan Orion

Posted on 07/16/2002 4:14:01 PM PDT by JameRetief

Microsoft licensing deadline looms

Analysis Partly to blame for IT doldrums?

By Egan Orion: Tuesday 16 July 2002, 09:01

IN TWO WEEKS Microsoft will slam the door shut on customers used to its former pay-as-you-go software sales policies. As of August 1st, IT organisations that haven't knuckled under to Microsoft's Licensing 6.0 initiative will be facing significantly higher costs, if and when they do finally upgrade their servers, desktops, and office software.

We've read that all recalcitrant customers' subsequent licensing cost penalties might be up to 45% -- but we'll get back to that shortly.

The dark rabbit-hole leading one down into the Great Vole's veritable Alice-in-Wonderland maze-like warren of various and quite bewildering Volish software licensing terms and conditions may be found here.

Customers who "upgrade" to the Licensing 6.0 scheme also lose ownership of Microsoft software products and are thereby nudged into limited term licensing with periodic extensions (with or without any code updates), as shall be dictated by Microsoft -- in other words, software leases.

Microsoft has also instituted something they have rather quaintly termed Software Assurance, which involves 25% to 29% annual license surcharges -- though we don't know if this is merely for access to report bugs or for some, er... assurance that Microsoft will offer help or actually fix bugs. In any case, it's what big-iron vendors such as IBM and Computer Associates term "maintenance fees." Incidentally, most all enterprise software maintenance fees typically run 15% to 20% of one-time software product licensing costs, depending upon the product.

Microsoft is not only imposing software leasing, but they are also charging much more for maintenance than other software vendors. Gotchas, coming and going.

In a previous life, this correspondent was well indoctrinated that the term "assurance" means only "inspiring confidence" legally, in that the locution is a favorite of consulting firms that don't want to "ensure" or -- heaven forfend -- "insure" anything regarding actual results.

Prospects for Microsoft's new licensing regime were polled last March and reported by the INQUIRER based upon a rather broad survey that had been conducted by Sunbelt Software.

Since three months have passed and Microsoft's deadline is almost upon us, we thought it might be interesting to revisit that study, make some extrapolations, and speculate about Microsoft's licensing sea-change, both for them and for the IT industry as a whole. Although we don't have any more recent polling results available and have misplaced our crystal ball, we doubt that IT organisations will have reformed overall in the meantime, so perhaps we can guess some hints from the record.

The study at hand begins its statistics with a very telling breakdown -- of all respondents, only 12% had budgets to afford Microsoft's licenses, while 41% definitely couldn't afford them, and the remaining 47% didn't know at the time. Now, let's suppose that similar proportions propagate into Microsoft's deadline. That will yield another 5% of the total that can afford the new licensing and -- assuming "don't know" means "no" -- the rest, or another 42% of the total, that can't afford to switch.

If this analysis is moderately accurate, about 66% to 80% of Microsoft's customer base can't afford Microsoft's imposed Licensing 6.0 program.

A little spreadsheet magic reveals that Microsoft doesn't care about its customers with less than 20,000 seats, as they comprise less than 25% of its customer base, approximately, the majority being big firms with more than 50,000 seats. Not coincidentally perhaps, these are the companies that are most risk-averse as well as best able to pony up for licenses.

So... this is really Microsoft's assault on its largest IT customers.

But what does this all mean? Well... for one thing, as the study hints, it suggests that smaller Microsoft business customers, excluding people who buy PCs individually -- most of whom have no choice but Microsoft -- might look elsewhere. Most will simply put off spending any more money right away and hope to muddle through with what they have until later.

Given the near-50% price premium Microsoft will enforce, one might have a guess that almost 25% of Microsoft's customer seats will wait another six months to a year-and-a-half before upgrading, to level the cost.

What's perhaps also interesting is that smaller, more nimble firms will be first movers away from Microsoft's arrogant and oppressive software licensing protocols, and these companies will gain cost advantages that place their larger competitors, who pay the new Microsoft taxes, at the disadvantages that will accrue to their higher internal IT expenses.

What about the IT industry? Hmmm... I don't know about your situation, but if I were a CIO facing 20% to 200% higher software costs (about 85% of study respondents reported Microsoft software cost increases in this wide range), and I thought I had to pay this, well... I'd freeze hiring and research projects and cut back on hardware buys. Sound familiar?

Thus, there is a case to be made that Microsoft is a fiscal drag on all IT industry, both at present and for several quarters yet to come. µ

TOPICS: Business/Economy; Culture/Society; Editorial; News/Current Events; Technical
KEYWORDS: business; fees; lease; microsoft; software

1 posted on 07/16/2002 4:14:01 PM PDT by JameRetief
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To: JameRetief
Sam Walton's Legacy May End Up Eating Bill Gates' Lunch.

WalMart just started selling systems with Mandrake Linux or such if Im not mistaken.

Windows U R The Weakest Link Gu'Bye
2 posted on 07/16/2002 4:26:36 PM PDT by NormsRevenge
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To: *Microsoft
3 posted on 07/16/2002 4:40:06 PM PDT by Djarum
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To: NormsRevenge
I'll Be Darned , here Is the WalMart Thread That I Just Saw on FreeRepublic "The Best Darn Conservative Forum in the Universe"

Wal-Mart's Web Site Sells Computers Without Windows Software
4 posted on 07/16/2002 4:40:36 PM PDT by NormsRevenge
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To: JameRetief
MS is toast. The writing was on the wall way before clintoon filed anti-trust against them. That just hurried up the inevitible.

They've got no new ideas. No additions to Windows (so why buy a new copy?). No place to go.

And the clicker is, once you own your copy of Windows (Word - whatever), you never pay them another dime. They close the doors.

So much for a monopoly. A monopoly that goes out of business just as soon as they can't come up with anything new.

Strange, the brain siezure at MS happened just about the time Bill himself took over the job as "chief archetect". I kind of wonder if he's not doing it on purpose. He's sworn to leave this earth with only a 10 million dollar inheritance for his kids - giving the rest away. I wonder if he'll accomplish that by deliberatly making his MS stock worthless? In his current job, he can do that by just ignoring good ideas sent up to him from below. Drag his feet a little.

5 posted on 07/16/2002 4:40:41 PM PDT by narby
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To: NormsRevenge
Is Mandrake Linux a viable altrnative?
6 posted on 07/16/2002 4:41:13 PM PDT by MonroeDNA
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To: JameRetief
Goodness, what a way to inspire customer loyalty! ... NOT!
7 posted on 07/16/2002 4:44:15 PM PDT by Utopia
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To: MonroeDNA
Im not sure, I don't think application wise that there are a robust set of offerings available. But it depends what you want to do with it as well. For small business and home scenarios, it may be just what Dr. Watson ordered.
8 posted on 07/16/2002 4:46:15 PM PDT by NormsRevenge
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To: NormsRevenge; Admin Moderator
hmmm, strange. I have posted several articles about Walmart carrying nonMicrosoft PCs in the last couple of weeks or so. I just did a search for them and they are not to be found. Very, very strange.
9 posted on 07/16/2002 4:50:01 PM PDT by JameRetief
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To: JameRetief
Not to fret ,, The data is out there (I hope!).

The FreeRepublic mechanics have been working on some of the nuts and bolts of this place behind the scenes for the longest time. Im not sure what they're up to tho ..

Linux has legs as they say. For the price of the systems, I wish 'em well.
10 posted on 07/16/2002 5:02:15 PM PDT by NormsRevenge
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To: MonroeDNA
Is Mandrake Linux a viable altrnative?

I think so, yes. Get OpenOffice from and you can interoperate with MS Word and Excel - I have written OpenOffice docs and saved them in MS Word format, sent them to Word users and they have not noticed a difference.

In fact, OpenOffice is better at opening Word97 docs than Word XP is.

11 posted on 07/16/2002 5:39:19 PM PDT by ikka
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To: JameRetief
12 posted on 07/16/2002 9:46:07 PM PDT by eclectic
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To: JameRetief
My theory on Microsoft's new licensing...

I think that their WindowsXP/2000 product is "mature". It is user-friendly, stable, runs every application that I need. What else is left for them to do with this product? Maybe some tweaks here and there... but I don't see the major breakthroughs coming. Remember the jump from DOS to Windows 3.1? Or Windows 3.1 to Windows 95? These were big jumps. These were the kind of upgrades that people were willing to pay bucks to get. What does a company do when people won't pay money to get their next version, because their current version works just fine?... And because they are running out of new ideas?

They switch from "selling" to "renting".

I read a recent article in a financial magazine about all of the cash that MS is hoarding. Approximately 40 billion. The article was one big string of guesses as to what the money was secretly earmarked for... My theory (not in the article): They don't know. They're searching.

I realize that MS has other reasons for wanting to switch to this new licensing arrangement (e.g. To stop communist china from running their entire country's computers from a single bootlegged Win98 CD.) But MS will soon find that these people (and others like them) will not pay for WindowsXP+. They just don't have the money. Overall, their new licensing scheme tells me that MS has no confidence in their ability to create future versions of Windows which are compelling enough draw users into upgrading to their latest versions.

13 posted on 07/17/2002 12:32:04 AM PDT by TheEngineer
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To: eclectic

If you are going to jump into every thread and be negative, at least have something interesting to say. Boring and mindless postings like this give you no credibility.

14 posted on 07/17/2002 12:41:53 AM PDT by JameRetief
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To: TheEngineer
Agreed, they have no confidence. Even many current users of MSO 97 and 2000 have shown little desire to upgrade - so this is probably driven by their experience.

I read an article on CNET a few months ago about MS Office being Microsoft's true Achilles heel, not the OS. It made a very good point that businesses are virtually addicted to using it low level office functions. This is actually quite a gamble on MS's part - that many smaller offices still running older MSO suites will suddenly leap to avoid greater costs downline.

I tend to think they will also try to force the issue from the server side, and play games between the new and older VBA code.

The period to upgrade at old rates is almost ended, and I'd be very interested to know how many businesses actually took the bait. Anybody know if anyone has leaked some real stats on this?

15 posted on 07/17/2002 5:52:18 AM PDT by Thisiswhoweare
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