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Licensing Plans Under Review

Vendors may have to justify licensing and maintenance programs by bundling in more support in light of industry consolidation
OUTLOOK 2005Microsoft would love for 2005 to be the year that its Software Assurance initiative finds widespread acceptance, but early signs are that the company may have to keep working to build momentum behind the maintenance and upgrade program it introduced in 2002. With massive changes under way in the consolidating software industry, IT managers seem to be paying a lot of attention to licenses for their critical enterprise applications. In particular, many of them are concerned with figuring out what Oracle's acquisition of PeopleSoft Inc. means to them.

Oracle says it will enhance current versions of PeopleSoft and J.D. Edwards applications and finish developing new releases of each application (see "New Software Landscape"). But Dan Sheehan, CIO of marketing-services firm Advo Inc., wants more proof that he'll see new functionality added to his PeopleSoft human-resources and payroll applications, thus justifying the more than $400,000 a year he spends on PeopleSoft maintenance fees. "I'm going to have to do some evaluating if they're not going to make any changes," Sheehan says.

Microsoft Software Assurance ChartAssuming Oracle does as it promises, Sheehan still hopes he can slash his licensing costs by combining his Oracle and PeopleSoft licenses into one package. Advo uses Oracle applications to run everything from order management to accounts receivable, and it pays $1.2 million a year in maintenance fees.

In InformationWeek Research's Outlook for 2005 survey, part of our quarterly Priorities series, only 16% of 300 respondents say that Microsoft Software Assurance renewals supersede other application-licensing priorities. Microsoft says that Enterprise Agreement renewals (which include Software Assurance) are in line with company expectations of 65% to 75%, but the vendor takes responsibility for what it says is a lack of customer education. "We can do a better job of making sure the marketplace knows what comes with it," says director of marketing and readiness Cori Hartje, who manages Microsoft's worldwide licensing programs. For instance, Hartje says few customers seem to be aware that the company in June added a disaster-recovery piece to Software Assurance for its server products.

Still, Software Assurance is causing other software providers to consider adding additional services to their maintenance and support programs, IDC analyst Amy Konary says. A year ago, Konary found that 48% of customers expected vendors to bundle more services with maintenance, and she anticipates her next survey to show that number has grown. "The customers are really wearing the pants when it comes to negotiation," she says.

Despite the added services of Software Assurance, H&R Block CIO Marc West still plans to assess the program's long-term value. The company has Software Assurance for its Microsoft SQL server and desktop products, as well as its .Net software development environment. West is taking a hard look at all of his vendors, including Oracle and PeopleSoft. Like Sheehan, West says he wants proof that Oracle will preserve PeopleSoft's product road map before committing to additional licensing investments.