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How Microsoft's new licensing policy will affect you

What is a Windows licensing strategy? How will V6 Enterprise Agreements affect pricing? Alvin Park, a Gartner senior research analyst, addresses just such issues in this second part of an interview with SearchWin2000.

For V6 Enterprise Agreements, customers will be dealing directly with Microsoft - no middleman. How will this affect pricing?
Some resellers were giving up to 20% discounts -- losing money. MS isn't going to do that. We think the effect in the long term will be, prices will go up. You will not be able to get as good a price from MS in the direct model as you would if you had competitively bid this with three different large-account resellers and let each of them fight for the business. We think it'll cost you a couple of percentage points now. MS says they can prove the prices they're giving out are real competitive with what they WOULD have been had they gone through a reseller right now. I really fear MS will try to get a little bit more -- gradually, so you don't really notice it. Has Microsoft started auditing companies' software more?
I've seen a lot more auditing activity in the past year. I don't have any statistics that say how many or what percentage of companies have been audited, but a lot of call activity is coming to me. MS has a right to protect intellectual property rights. If I'm a software vendor, and I wrote the audit clause, I'm going to make sure it's in my favor. But sometimes they're auditing people who really aren't out of compliance, and those customers see it as being hassled. We see more of it when MS is trying to sell an EA. They're using this threat of an audit as a sales tactic from time to time. The problem is some people are signing up for an EA as a way to fix that problem when that might not be the most cost effective way. Maybe they just need to go out and buy 300 or 400 licenses to get legal, but a lot of companies don't have good software asset management practices in place. You need to have a good software asset management system, so when you get a request from MS, Oracle, or any other vendor, you have all the information they need. How do you help a company put together a licensing strategy?
I break it into three pieces. I talk to them for five or 10 minutes about their desktop operating systems -- how they use them, how they upgrade them, when they upgrade them, how they buy them and so forth. Then I move to the second piece, which is Office. I talk to them about Office for another five or 10 minutes, and I find out what versions they're using, what their plans are for going to new versions, and how they use the product. Based on how they use the product, I help them build a strategy for how they're going to maintain that particular product. Then we move on the Client Access License (CAL). There are three or four that are real important: Windows, Exchange, SMS, sometimes SQL, sometimes SharePoint. I ask the same kinds of questions as before. Knowing all of that, I'll build a licensing strategy for them. In some cases, an EA appears to be more attractive. In other cases, it's using a Select version 6 Agreement to maintain those licenses -- sometimes with Software Assurance (SA), sometimes without. Some people are doing EAs, some people are doing Select Agreements, some people are doing a hybrid. Why do few companies have solid software management systems in place?
Because they don't see it as a real return on investment. Companies don't want to be out of license compliance; it's just that they don't want to spend the money to put all of that stuff in place when they don't really get anything in return for it, except peace of mind. Why hasn't the Subscription EA, or rental model taken off?
I think it's too expensive - that's why it's not popular in the US. Our prediction is that MS will lower the subscription price. They haven't yet - they announced it last October and they haven't lowered the price yet. They're selling a lot more in Europe.


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.

See part one of this interview, "Licensing: Countdown to July 31"

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