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Gartner: Latest Microsoft pricing moves a positive step

Microsoft's recent changes to its pricing model are a good first step toward earning back the customer goodwill that was lost after the controversial Licensing 6.0 was released in August.

Experts at a leading consulting firm said this week said they believe some recent changes to Microsoft's licensing are a step in the right direction. But Microsoft still needs to do more to make things right with customers.

Alvin Park, research director at Gartner Inc., Stamford, Conn., said Microsoft must continue to work to rebuild the trust it lost when it moved to its Licensing 6.0 subscription model in August. The consulting firm has recommended to Microsoft that the Software Assurance licensing plan still does not have enough value to make customers want to renew.

The current licensing plan requires users to pay 29% more for a new license on the desktop, and 25% more for a new license on a server, and the only benefit they get is the right to upgrade to a future version of Windows, he said.

"Other vendors don't charge so much and they also include other value, such as support," Park said.

Park said Microsoft has indicated that it will see what other value it can add to Software Assurance to make it more appealing to customers. "We expect that, within six months or by the end of the year, [Microsoft] will make some big changes to its value proposition."

But Park recommends that customers move forward with plans to evaluate competing technologies if they have them. They should anticipate that Microsoft will do more, but they should also be wary until they see more changes, he said.

Some customers say they are encouraged by Microsoft's actions, but they also know that Microsoft has had to react to the potential backlash of angry enterprise business customers.

"[Microsoft] may be greedy, but they are not dumb," said Christopher Nicholson, a senior IT analyst at Husky Energy, an oil and gas company based in Calgary, Alberta. "They do generally listen to what the public is saying."

Nicholson added that he would like to see Microsoft work harder to present a clear message to customers about its intentions for licensing going forward. He said that none of his Microsoft reps had a solid understand of the licensing changes.

Microsoft said earlier this month that it has changed to a per-processor server licensing model, which means that customers only pay for the processors actually in use. The changes will impact customers who use partitioning to segregate different applications running on the same multi-processor server. In the past, customers complained that they have to license all processors on a multi-processor server, even when all processors are not being used.

Starting April 1, customers who partition their servers will only pay for the processors they use to support the software. The changes apply to a handful of Microsoft applications, including SQL Server 2000, BizTalk Server 2002, Internet Security and Acceleration Server 2000, Commerce Server 2002, Content Management Server 2002, Host Integration Server 2000, Microsoft Operation Manager 2000, and Application Center 2000.

Other industry experts said the changes were "expected," particularly with Microsoft's recent purchase of Connectix Corp., San Mateo, Calif. Connectix makes virtualization software for PCs and servers that lets customers consolidate software on one machine.

"After [Microsoft] purchased Connectix, it became clear that, once you are running a variety of virtual servers, you need to clarify what the licensing will be for each instance of the software," said Paul DeGroot, an analyst at Directions on Microsoft, Kirkland, Wash.

The change was just the latest in a string of tweaks to Microsoft's licensing policies since the August introduction of Licensing 6.0.

The company also introduced some licensing options for small and medium-sized business customers. In December, it announced that it will offer user-based client access licenses (CALs) in addition to device-based CALs for Windows Server 2003. Now, companies that have a single end user attached to multiple Windows devices won't have to buy a Windows license for each device.

Since then, Microsoft has indicated that this concept will also apply to several other CALs, including its core CAL, Park said.

"We think over time they will port [this concept] to all of the platforms, with the possible exception of SMS, which is supposed to be managing software on a per-user device basis," he said.

The company has also taken steps to more clearly articulate its product life cycles. For example, last fall the company published support life cycles for all of its products. Microsoft said it would support products fully for five years and then offer two years of paid extended support. "That was a good piece of information for customers who need to do some planning," Park said.

Microsoft has also announced changes to its contracts. Notably, it said it is increasing its product warranties from 90 days to a year.


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