Microsoft to overhaul Licensing 6.0

After nearly one year of rampant unpopularity, Licensing 6.0 faces sweeping changes. Microsoft is reportedly planning to sweeten the Software Assurance pot in an effort to repair nine months' worth of ill will

Microsoft is planning to make sweeping changes to its controversial licensing program in an effort to improve the business and technical value of its Software Assurance maintenance program.

Steve Ballmer, Microsoft's chief executive, is expected to reveal the reforms next week. Among the changes: Microsoft will enhance Software Assurance by including free access to a jazzed-up version of the subscription side of TechNet, a support service that can cost up to $999 per server, sources said. Microsoft will also include access to technical and end-user e-training. When needed, vouchers will be sent to individuals for offsite training, sources said.

The support additions are supposedly just the tip of the iceberg. But some customers said that these changes might make the difference between staying on Windows and moving to another platform. "I'd feel a lot better about sticking with a Microsoft product if they do offer the support," said Paul East, an IT manager at Conforma Clad Inc., in New Albany, Ind. "I do love [Windows], but I don't like the way [Microsoft] gouges you."

Later this summer, Microsoft is expected to give some price breaks to customers in government and education, which are among the struggling vertical markets making the loudest threats about switching to Linux, sources said.

Analysts have cited fundamental problems with Software Assurance from the start. Though the changes will add value to Software Assurance, they will do so unevenly, said Paul DeGroot, chief analyst at Directions on Microsoft, a Kirkland, Wash., consulting firm. "Now customers will need to say, 'Are these things valuable to me?'" DeGroot said.

A small business -- one without its own IT staff and which employs a partner to install software licenses -- may not benefit, he said.

Microsoft declined to comment on future announcements, though executives repeatedly have said that the company will look for ways to improve Licensing 6.0. Microsoft's own executives have indicated that additional changes were afoot.

"We are certainly evaluating our licensing programs and rules," said Brad Sills, product manager of worldwide licensing at Microsoft. "We feel licensing changes we made recently were a step in our commitment to making things easy and affordable."

Microsoft has been tuning Licensing 6.0 since its introduction last year. The company first offered small business customers its Open Value plan, which lets them spread payments over three years. In December, Microsoft said it would offer user-based client-access licenses (CALs) in addition to device-based CALs for Windows Server 2003. This spring, Microsoft changed to a per-processor server licensing model, which means customers only pay for the processors they actually use.

Recently, the company has made more small changes, including extending product warranties from 90 days to one year, and audit notifications from 15 to 30 days.

Other vendors bundle support with their maintenance programs, though support may be restricted to specific hours or to a certain number of incidents, according to Forrester Research: "Every vendor is trying to differentiate themselves, as costs for [maintenance] continue to climb," said Julie Giera, vice president and research fellow at the Cambridge, Mass., consulting firm.

Giera said that Microsoft has made many changes during the past six months, but at the top of its list is tweaking the percentage that customers pay for Software Assurance. "They are going to have to do something about it sooner rather than later," Giera said.

Customers' tempers about Licensing 6.0 haven't cooled since the introduction of the program in August 2002. Most complain that the plan continues to be complex and expensive, and many have threatened to switch to Linux. Sources said the changes to be announced later this month will go a long way toward repairing broken customer relationships.

"In a large part, this is a change of priorities," said Ed Tittel, an Austin, Texas-based author and expert on Microsoft training. "[Microsoft] is starting to realize that doing what's best for the customer in the long run is also what's best for them."

FOR MORE INFORMATION:

Windows Server 2003, licensing tough sells for Microsoft

Goodwill hunting -- Microsoft gives away Windows

Gartner: Latest Microsoft pricing moves a positive step

Best Web Links on Windows licensing

Dig deeper on Windows Operating System Management

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