C|Net Chronicles Customer Frustration With Microsoft's Licensing Tactics

by , 4:00 PM EDT, September 21st, 2001

C|Net has published an article by Joe Wilcox that focuses on customer frustration with the licensing changes Microsoft is using to extract more money out of its customers. The company regularly changes the way it licenses its products to corporate customers in order to get around the fact that those customers don't upgrade as often as Microsoft would like. The latest change, which was announced in May of this year, was the one of the last steps in making its software a service that must be rented as opposed to a product that one can buy, thus forever divorcing the company from the need of making its products compelling enough for its customers to want to upgrade. From that article:

Rather than paying full price, many larger customers purchase software through one of two popular volume-licensing programs. Under terms ending Sept. 30, most companies could purchase upgrades either through a two-year maintenance contract called "Upgrade Advantage" or by buying one of four common version upgrades--the most popular option. Starting Oct. 1, both plans will be replaced with a new program called "Software Assurance."

But because version upgrades are being eliminated, customers no longer can choose how often they upgrade their software. They either must pay an annual fee as part of a two-year maintenance contract or pay full price for upgrades.

"Software is going to be delivered differently in the future, and we're getting ready for that," Landefeld said. "We are providing a more predictable way for people to get the greatest and latest from Microsoft."

Before participating in Software Assurance, Microsoft customers must be on the current version of the product to even qualify. In the case of Office, that would be XP, released the same month Microsoft announced the changes. Microsoft had wanted companies to make those upgrades by Oct. 1 but later extended the deadline to Feb. 28.

"Your main alternative is to pay the upgrade price more frequently now," LeTocq said. "Alternatively, you decide you're going to pay full whack somewhere down the road."

For customers who upgrade every two years, software costs would actually go down 19 percent, analysts concluded. But the majority of customers--particularly those buying Office--typically upgrade every four years.

"Microsoft claims that over 50 percent (of customers) will see no change in costs, which is not true," LeTocq said.

Gartner estimates that medium-sized businesses upgrading software every three years would pay anywhere from 33 percent to 77 percent more under the new plan than they did with the old. Four-year upgraders would pay 68 percent to 107 percent more.

There is a lot more information in the full article, and it is a very good read.

The Mac Observer Spin:

Microsoft has lost site of the fact its job is to provide compelling solutions for its customers to buy. Instead, the company seems to see its customers' habits and buying patterns as an inconvenience that must be reigned in. That the company can do just that is made possible only by its monopoly power, and that is why the company must be broken up. Unfortunately, the DoJ has announced it would not pursue such a breakup, so it is unclear how this will play out. Will these corporate customers that are cited in this C|Net article actually look at the alternatives on the market like Mac OS X or Linux, or will they continue to line up to the feed trough like the good sheep they have always been?

C|Net Article