Microsoft Unveils Optional Subscription Licenses - InformationWeek

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Microsoft Unveils Optional Subscription Licenses

Microsoft says it will give large customers the option of buying subscription licenses, open high-volume licenses to more companies, and change the way some customers buy upgrades.

The subscription program--effective Oct. 1 and designed to encourage users to upgrade their software more frequently--could lower per-PC licensing costs for companies that add users frequently. But companies with more stable IT environments could see prices rise. Foremost among the changes, Microsoft has lowered the requirement for its Enterprise-Agreements deals to companies with at least 250 PCs, instead of 500 or more. And the subscription option lets Enterprise-Agreement customers save 15% on the cost of software licenses, but not keep the software when the three-year deals expire.

Microsoft VP of worldwide licensing and pricing Bill Henningsgaard says the new arrangements will make Microsoft's best pricing available to smaller companies, and make it simpler for IT departments to amortize the cost of their software. But buyers should be cautious, says Summit Strategies analyst Dwight Davis. "Even as Microsoft positions this as a simplification, there's enough new that you need to study it to see if you're getting the best deal," he says.

Microsoft sells volume licenses, which carry discounts from the retail prices of its products, to business customers under three broad arrangements. Open License agreements target small and midsize companies. The Select License program aims for companies that make decentralized buying decisions. But Enterprise Agreement deals offer larger companies with centralized IT purchasing authority the best deals. Those three-year agreements also entitle customers to any upgrades Microsoft releases during their term.

Under the new policies, Microsoft will keep selling customers perpetual Enterprise Agreements, in which customers own the software they buy at the end of a three-year agreement. But the vendor will also sell companies subscription agreements, which are priced lower but require customers to buy a new license at the end of three years. It's cheaper for companies in the short term, says Henningsgaard, and protects them from high fees if they add PCs midway through the license's term. Companies that plan to keep software running on the same PCs for five or six years start to lose those benefits, and would likely do better to buy a perpetual agreement. Microsoft also will amend the way customers with Open and Select licenses buy upgrades, charging those customers a percentage of their license fees to upgrade, rather than offering them retail prices.

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