Licensing: Countdown to July 31

Microsoft has made some drastic changes to its volume licensing programs during the last year. Alvin Park, a Gartner senior research analyst, said now is the time to make your move - don't wait until the last minute. He talked with SearchWin2000 about what your choices are if you procrastinate, how the new model pricing may differ from the old one and why you may be paying too much to license your software. This is the first of this two-part interview.

Microsoft has delayed the licensing deadline twice to July 31, 2002. Has customer feedback been the driving force behind the delays? My understanding is the reason they changed those deadlines is due to customer feedback. It does pay to complain. That's why MS delayed the deadline twice. We predict that 65% of people still haven't done anything. MS, to their credit, will have given customers 13 or 14 months to make their decisions -...

which MS thinks is adequate.

My understanding in talking with MS is that they don't intend to change the deadline again. They want this to be over. They know they've taken some heat and bad press. I think they're gun-shy - I think any announcement they make, even if it were a good announcement, would generate negative press. If they're going to make any major announcement about licensing, they'll make it after July 31. Can someone have their mind made up on July 30 and still go this route?
There are three big things you can still do: You can buy a Select Agreement Version 5 prior to that date, but that takes longer than a day to complete. You don't want to wait until the last minute for that. The other two things you can do that day: buy Upgrade Advantage (UA) on something or Software Assurance (SA) on something. UA has to be on non-current licenses. SA is on current licenses. I don't think it would do any good to wait until the last day to get a Select 5. When I did it, it took like a month. Now is the time to start working on it. Don't wait until the last minute. We don't think MS is going to change the date again. We're just afraid that people still haven't done anything. We think about 35% have done something already. The other 65% haven't. Maybe they decided they didn't need to. I get a lot of people calling me asking, "What's the answer? Do we do it or not do it?" Some people need to do it. Some people need to NOT do it. And for some people it's optional. It's really on a case-by-case basis, depending on the situation. There is no black or white-type answer. Do you think MS will stick with this deadline?
Yes, I don't think they'll change it again. But let's suppose not enough people sign up for these new programs that MS has developed. Then they'll have to change them again because they didn't meet their objectives, whatever they are. I think it's driving revenue for them, and I think there's going to be significant revenue made by MS in the next couple of quarters. Who does the negotiating in these deals?
The customer negotiates with MS for an EA. The problem is, if you're a MS salesperson, you may do 10 or 15 of these deals per year. I'm poor Joe-Blo customer -- I may do one every three years. So who's going to be better at the negotiating process? It's difficult for the average corporation to understand all the nuances and the new licensing programs. If you're not as good as MS at doing this particular work, you're not going to get the best deal. A lot of companies don't have the resources to train somebody to do that. People in the IT shop do most of the negotiating for the company. They may have someone from procurement on the team, a lawyer and maybe one or two technical people. If IT turns it over to procurement, that's a disaster. Software isn't his or her specialty. Simpler for MS or the customer?
Simpler for both, but it'll be expensive for the customer. MS is flexible at negotiating. They want people to sign Enterprise Agreements (EAs). Last year 15-18 % of people had EAs. The figure is getting into the low 20s now, and we predict more customers will sign and renew them. Are these changes just a way to simplify the licensing model?
MS said they thought they were simplifying licensing. I think after July 31 that may be true because your two options are buy it with SA or buy a new license later. That's pretty simple. In this transition period, which has been extended twice, it makes it real difficult for people to do the proper analysis and pick the right solution because there are so many different variables. From MS' standpoint, after this stuff is fully implemented, they think it'll be simpler because the options are gone. A lot of the nuances you spoke of are going away after July 31 aren't they?
Yes, but I'm afraid they're going to be replaced by new nuances.

FOR MORE ON THIS TOPIC:

Learn more about volume licensing from Laura DiDio of Information Technology Intelligence Corp. (ITIC) during an upcoming SearchWin2000 Webcast. Didio will offer tactical advice for negotiating a favorable licensing deal with Microsoft. Click here to pre-register for the April 16 12:00 PM EDT (16:00 GMT) event.

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