Microsoft will discontinue a program under which businesses can upgrade XP-based PCs purchased after October to Windows 7 for free once the first Windows 7 service pack becomes available.

Windows 7 screen shot
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The plan has not been widely publicized by Microsoft, but was noted in a research report released Friday by an analyst at IT advisory firm Gartner.

"After Windows 7 ships, organizations needing to buy a PC deployed with Windows XP will be allowed a free upgrade to Windows 7 only until SP1 becomes available (or 18 months, whichever is earlier)," wrote Gartner analyst Michael Silver, in the report.

Microsoft plans to release Windows 7 on Oct. 22nd. The company has not stated when the first service pack might become available but it would likely not arrive until late 2010 at the earliest.

Silver took Microsoft to task for the policy and for another rule under which businesses that buy Vista-based PCs prior to Windows 7's ship date are eligible to upgrade only 25 machines to Windows 7 for free.

Silver said Microsoft is simply trying to steer business customers toward pricey subscription programs.

"Gartner believes Microsoft designs these program limitations to persuade organizations to enter Enterprise Agreements, enroll licenses in Software Assurance or purchase upgrade rights to run Windows 7," Silver wrote.

Software Assurance, which offers unlimited free upgrades for three years, is priced at $100 to $150 per PC. Silver said enterprises should consider purchasing Software Assurance licenses only "if the value of the benefits—aside from new version rights—exceeds the cost."

He's also advising businesses to appeal directly to their PCs manufacturers for free Windows 7 upgrades. "If that does not work, buy no more than 25 PCs between now and 22 October 2009, if you need Windows 7 for them," wrote Silver.

Gartner has warned businesses to evaluate their applications before moving from Windows XP or Vista to Windows 7 in order to avoid compatibility problems.

InformationWeek has published an indepth report on Windows 7. Download the report here (registration required).