Microsoft gooses Windows XP's custom support prices as deadline nears

'Seems punitive,' says Gartner, which cites costs of up to $5M for first year of enterprise after-retirement support

Microsoft is wielding the big stick of dramatically higher custom support costs as it pushes enterprises to abandon the 11-year-old Windows XP.

Microsoft is wielding the big stick of dramatically higher custom support costs as it pushes enterprises to abandon the 11-year-old Windows XP, an analyst said today.

Custom support plans, which Microsoft negotiates on a company-by-company basis, provide critical security updates for an operating system that's officially been declared dead. Windows XP, which still powers about 43% of the world's Windows PCs, is slated for support retirement on April 8, 2014. That leaves 410 days from today for XP users to move on.

[ALSO: Windows XP's countdown to retirement]

According to Michael Silver and Stephen Kleynhans, a pair of Gartner analysts who published a report on XP custom support last month, some companies won't meet the deadline. "Many will not have Windows XP totally eliminated before support ends," Silver and Kleynhans wrote, echoing earlier estimates by Silver that between 10% and 15% of enterprise PCs will still be running XP when Microsoft pulls the plug.

However, Microsoft offers a failsafe of sorts -- "Custom Support" -- that lets companies pay for security patches beyond the normal support lifespan.

But Silver and Kleynhans said that Microsoft has quoted significantly higher prices for Custom Support than in the past.

For some time, Microsoft capped custom support at $200,000 for the first year, payable quarterly so that if a firm finished its migration in less than a year, it would pay only for support through the end of that quarter. In 2006, Microsoft switched to per-device pricing, with a floor of $200,000 and a ceiling of $500,000. Four years later, in 2010, Microsoft modified pricing yet again by capping it at $200,000 for the first year if the corporation had signed up for Software Assurance, the annuity-like program that guarantees companies access to the newest version of a product.

Those prices got tossed out the window, said Silver in an interview today. Microsoft has returned to a per-device model -- $200 has been typical -- and reinstituted floor and ceiling amounts. But those amounts for the first year are closer to what Microsoft was previously charging for the third year of support.

"It's certainly not pretty," said Silver of the custom support quotes for XP, which have ranged from $600,000 to $5 million for the first year.

The higher prices put to rest speculation by some experts last year that Microsoft, faced with enormous numbers of XP PCs still in use next year, would have no choice but to extend free support.

An IT manager, who wished to remain anonymous because he was not authorized to speak on the matter, told Computerworld that Microsoft had quoted his company $1 million for the first year of custom support to cover 5,000 Windows XP machines, $2 million for the second year, and $5 million for the third.

Silver pointed out that the $1 million fit with what he'd heard from other organizations of Microsoft charging $200 per PC for the first year of post-retirement support.

"It is hard to fault Microsoft for wanting to end support for its older products and migrate users onto newer versions that provide a better experience, and potentially revenue for Microsoft," said Silver and Kleynhans in their report.

And it's not like Microsoft sprung the retirement date of XP on customers: It's been hammering the April 2014 deadline for years.

As far back as June 2011, a Microsoft manager claimed it was "time to move on" from XP, while even earlier that year an executive on the Internet Explorer team belittled XP as the "lowest common denominator" when he explained why the OS wouldn't run the then-new IE9.

But the large price increases will bust budgets of enterprises that had expected the older pricing model -- especially those with Software Assurance, who anticipated a cap on custom support costs. "Not having any cap, I think that caught a lot of people by surprise," said Silver.

In their report, Silver and Kleynhans said that the increase "seems punitive."

Silver was somewhat mystified by the jump in costs. One explanation: Microsoft wants to turn custom support into a money maker, rather than simply recover its costs, which has been its philosophy in the past.

"End of the day, it could be a revenue generator," said Silver. "But there's nothing that they've said that proves this is no longer cost recovery. Still, if they create the security fix [for Windows XP] for just one person, they can give it to millions, and make money on it."

And companies running XP are not in a strong negotiating position. "Microsoft has the pricing power," said Silver. "In terms of companies that provide fixes to an OS, the vendor has the monopoly."

Rather than pay Microsoft for custom support in 2014 and beyond, Silver advised enterprises to spend money this year to migrate as many XP systems as possible to a supported operating system. Failing that, IT administrators should consider bringing all XP clients inside the network perimeter to lower the risk of Web-based attacks, or move the applications those XP PCs are running onto a supported server platform.

"But none of these are easy or inexpensive," Silver admitted.

And for all the talk that XP has been a special case -- supported for more than 12 years, two years longer than other editions of Windows because of the launch delay of its expected successor, Vista -- Silver said history could easily repeat itself in early 2020, when Windows 7 exits free support.

Windows 7, which debuted in October 2009, looks to be the next XP, an OS that is so successful that businesses hang on to it until the very end.

"Microsoft may be trying to train [enterprises] with these high custom support prices, but I don't think [enterprises] will really change," said Silver, who expected to reprise his advice, the next time about Windows 7, before the decade's out.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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This story, "Microsoft gooses Windows XP's custom support prices as deadline nears" was originally published by Computerworld.

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