Applications /

Survey: Many Microsoft customers lack funds for new licensing

By John Fontana
Network World Fusion, 04/09/02

Four months before Microsoft’s new licensing plan goes into effect, nearly half of all IT managers say they lack the necessary funds to upgrade to the new plan and that confusion over licensing will delay new product rollouts, according to a study just released.

The study of 1,400 IT executives worldwide conducted by Information Technology Intelligence Corp. (ITIC) and Sunbelt Software found that 41% of respondents said they did not have the funds to convert to Microsoft’s new License 6.0 volume licensing plan by the July 31 deadline. Only 12% of respondents said they were financially prepared. The survey also found that many of Microsoft’s customers remain bitter about the licensing changes announced last year and that a full 90% believe their licensing costs will rise. Many, however, say they have not figured out their exact costs.

The survey results are similar to the results of an identical survey done six months ago by Sunbelt Software and Giga Information Group.

“Customers are so turned off by this,” says Laura DiDio, principal of ITIC. “IT managers can’t explain [License 6.0] to their CTOs. This is complex and expensive stuff. The main theme in the survey was Microsoft is a monopoly, and we don’t want to be bullied.”

In the most recent survey, a full 50% of respondents said confusion over the terms of License 6.0 would delay upgrades to new Microsoft products, including Office XP, Windows XP and Windows 2000 server. That could have repercussions for Microsoft on three fronts. First it may stunt the company’s attempt to create a recurring revenue stream through licensing changes, it could hamper the adoption of .Net if corporations don’t upgrade to the latest software, and it opens the door for rival software.

The survey found that most of the licensing confusion is centered on comprehending the pricing and benefits of volume licensing vs. Enterprise Agreements, which provide access to all Microsoft software, and determining actual true costs.

Negative reactions have already forced Microsoft to twice delay the official start of the new licensing program and its companion upgrade program called Software Assurance. The program unofficially kicked off last October.

The new License 6.0 program requires users to have upgrade rights to current software, and the Software Assurance program replaces all of Microsoft’s current upgrade programs. To sign up for Software Assurance, users must be on the most current version of software and pay a fee equal to 29% of the full retail license for applications and 25% for servers. Microsoft is offering both volume licensing deals for which Software Assurance is an option, and Enterprise Agreements, which provides access to all Microsoft software and requires the upgrade plan.

Users also can choose between subscription-based pricing or perpetual licensing. Those are options that are making corporate heads spin.

The survey showed that 45% of respondents somewhat understood the licensing, 24% did not comprehend it, and 22% said they fully understood the licensing terms.

Of those that have already signed on to License 6.0, 12% said negotiating new licenses was a positive experience. Another 32% gave the process a “fair” rating, according to the survey.

But with the official July deadline looming, however, the survey showed that 38% of respondents are actively seeking alternatives to Microsoft products, especially on the back end.

“I think it will be difficult for people to chuck Office and the desktop, but for Web servers, hello Apache. I see Unix becoming more entrenched and for small shops, Linux looks attractive,” DiDio says.

But while customers contemplate alternatives, the survey also showed that 63% have not done a true cost analysis.

“There obviously has not been enough diligence paid to this issue,” says DiDio. “Some are overwhelmed and some are confused. It looks to me like some have given up and are not studying the terms. But the fact is that 6.0 forms the foundation of a company’s relationship with Microsoft, including things like premier support.”

The study showed that 50% of respondents are not prepared to negotiate licensing agreements. Only 16% said they were prepared.

“Competitors and the [Justice Department] couldn’t take Microsoft down, but the users who have run out of money may be the final judge,” says DiDio.