Microsoft Shakes Up Corporate Licensing - InformationWeek
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9/15/2005
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Microsoft Shakes Up Corporate Licensing

The company added new benefits to its Software Assurance enterprise licensing plan. Also, enterprises will be requred to sign up for Software Assurance to get Windows Vista Enterprise Edition

Microsoft shook up its Software Assurance licensing program Thursday, adding a raft of new benefits to quiet critics, but also requiring corporations to pony up if they want the top-of-the-line Enterprise Edition of Windows Vista when the next-generation OS ships in 2006.

At least one analyst was unimpressed. "Software Assurance has outlived its usefulness," said Paul DeGroot of Directions on Microsoft, a Redmond, Wash.-based research firm that specializes in tracking Microsoft's moves. "The farther we get into this [new upgrade cycle], the less attractive SA has begun to look."

Software Assurance, which was launched in 2001, lets customers pay an annual fee -- ranging from 25 to 29 percent of the outright license -- for the right to upgrade to any and all updates of that product during a two- or three-year span.

The program which DeGroot hammered has been the butt of both criticism and poor performance. In the past, research firms such as Gartner and JupiterResearch have questioned SA's economics, surveys have counted a fraction of Microsoft customers as having signed up, and Microsoft's own financials show erosion, or at best, flattening, of long-term licensing revenues brought in by programs such as SA.

To sweeten the deal, Microsoft said Thursday, it will make eight major changes to SA, most of them due to roll out in March 2006.

Sure to catch customers' eyes is the SA connection to Windows Vista Enterprise Edition, one of what will likely be numerous versions of the OS in 2006.

"Vista Enterprise will be available exclusively to Software Assurance customers," pledged Mike Sievert a vice president of Microsoft's Windows group. Enterprise Edition will include such unique features as full-disk encryption, Virtual PC Express, and a single disk image that includes all languages and both 32- and 64-bit versions. The single image, said Sievert, will simplify deployment and support for large firms with far-flung systems.

"I generally have a problem with Microsoft limiting software to those people who buy SA," DeGroot said. "And this is strange. Microsoft says that unless you pay a premium [by signing up with SA] you can't use this [single disk image] to deploy our product? That's just a way to irritate customers."

The Enterprise link to SA was just one of many announced modifications. During a Webcast Thursday, several Microsoft executives drummed up support by noting other changes, which included new training and consulting services, lower costs and fewer hassles for those signing up for extended hotfix support on products which have aged out of mainstream support, a relaxing of technical support rules, and most importantly, said Directions' DeGroot, a switch to 24/7 support from what was earlier available only on weekdays during business hours.

"That's the most important new benefit," said DeGroot, "the additional technical support hours and the elimination of some of the caveats and restrictions on support."

But DeGroot questioned whether Microsoft selected the right benefits to add to SA.

"It looks like they're loading SA up with benefits that won't cost Microsoft much," said DeGroot. "Some of these are just not going to be accessed by many customers. That kind of cheap benefit only makes the list looks longer."

One example, said DeGroot, is what Microsoft now calls Windows Fundamentals for Legacy PCs, but was formerly tagged as "Eiger."

This thin, or at least lean, client is based on Windows XP SP2, but runs from a server using Microsoft's own remote desktop protocol (RDP) or Citrix's ICA protocol. The idea, said Sievert, is that enterprises will use Fundamentals to run a Windows XP-like operating system on old hardware that can't yet be replaced. "It's meant to bridge the gap between legacy hardware and new hardware, and provide a smooth migration to new operating systems," said Sievert.

DeGroot sees it as contradicting the target audience for SA. "This is weird," he said. "It's actually cheaper to buy new hardware than to buy SA, but they're touting this as a reason to sign up? The sweet spot for SA is on companies that upgrade aggressively, but those aren't the people who will want to use Eiger."

He sees the changes in SA actually aimed at Enterprise Agreement licensing customers, which are typically the largest firms with high percentages of Microsoft systems. Enterprise Agreement customers automatically are extended Software Assurance.

"Microsoft's sweetening the pot for Enterprise Agreement customers, who will be able to use some of these benefits, to make sure that as EAs come up and customers decide whether they should renew, that SA is a better package."

Microsoft pays attention to EA customers and their renewals, he noted, because once the Redmond, Wash.-based developer loses an EA -- by a company not renewing -- that customer is "out of the upgrade business for at least the next three years. That has big [financial] consequences for Microsoft."

A run-down on the changes to Software Assurance and a FAQ are available for reading on Microsoft's Web site.

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