Impact of Microsoft Licensing: It’s not one size fits all

By : |December 11, 2001 0

Laura DiDio

There is simply no hotter issue in the Microsoft environment today than the
potential impact of the Microsoft Licensing Program 6.0. Corporations did get 10
months of "breathing room" to consider the issue when Microsoft
acquiesced to customer requests to push the launch date back from October 1. The
program now goes into effect Aug. 1, 2002.


Corporations should use this time wisely. There is no hard and fast rule to
apply to all firms. Though 80 per cent of the 5,000 companies polled in the most
recent joint Giga/Sunbelt Software Inc. survey indicated they expected
licensing costs to rise under the Microsoft Licensing Program 6.0, only 40 per
cent of the respondents said they had done actual cost calculations!

Ultimately, whether or not companies will see cost increases, decreases or
hold the line on pricing will depend on the type, the term and the volume of
their current agreements and how sharp their negotiating skills are. There are
other factors that come into play as well. These include (but are not limited
to): the state of the corporation’s individual level of software compliance or
noncompliance, whether or not your licensing volumes are increasing or
contracting and the effect of mergers and acquisitions.

Microsoft is essentially changing to a subscription-based model, ostensibly
to make the licensing scheme easier and more flexible for users. Not
surprisingly, there’s also a lot at stake for Microsoft: trying to protect its
profit margins in a corporate world that is overwhelmingly lengthening its
software and hardware product life cycles to three, four and even five years
between major upgrades. This flies in the face of what the major software
vendors would like to see: customers doing major software upgrades every 18 to
24 months. It doesn’t take an economics genius to figure out that software
vendors profits will plunge if customers continue to push their upgrade cycles
to 36, 48 or 60 months.

So it comes down to this: Corporate volume buyers have a choice: Get
"current" by next July 31 or pay full price the next time you need new
software (with no upgrade discount). Microsoft defines "current" as a
computer running either Windows 2000 or with an agreement to purchase Windows XP
as well as Office 2000 and Office XP.

Organizations that sign agreements to upgrade before the July 31, 2002
deadline will most likely be in better shape than those that elect to let their
current contracts expire. Wait until after July 31 without a contract or at
least a commitment in place, and you will most likely pay more, lots more. Giga’s
best advice is for corporations to perform due diligence. Review the terms of
your current contracts; know what’s on your network and what you’re paying
for. Be prepared to come to the bargaining table armed with facts. Get your
house in order and make sure your IT staff performs a thorough software
licensing review to ensure compliance. Do not allow your organization to
compromise its position and get a nasty surprise at the last minute by finding
out your firm has a significant noncompliance issue.

Furthermore, corporate customers that are currently still using Office 95,
Office 97 and Windows 9x in all likelihood should bite the bullet and migrate.
Office XP and Windows 2000 Professional/Server and the forthcoming new versions
are much better products and deliver much better performance, stability and
reliability. The desktop world really will be a better, more reliable
environment when Windows 2000 and XP replace all the Windows 9x out there.

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