Microsoft won’t alter its software maintenance program to provide customers with expired or expiring contracts free upgrades to the oft-delayed Vista and Office 2007, according to company officials. Observers, however, say those customers will have some negotiating power if they choose to renew their contracts.
Microsoft says volume licensing customers with Software Assurance (SA) contracts that have recently expired or will expire shortly before Office and Vista are slated to ship in November won’t get exemptions that would reestablish access rights to the software they would have gotten under SA. If the delays had not happened, many of those users would have had access to free upgrades as part of their contracts.
Microsoft has never offered exemptions based on changes in product ship dates.
The company says only a small number of customers are affected. The plan now is to build special promotions and incentives designed to foster adoption of Office 2007 and Vista and SA renewals, according to Sunny Jensen Charlebois, product manager for worldwide licensing and pricing at Microsoft. She says the promotions are typical of those built around all new product launches.
She refuted media reports last week that hinted Microsoft was designing special programs for users whose SA contracts expire before the Office and Vista release dates.
“Like anyone in the industry, we do not guarantee upgrades,” she says.
SA is a software maintenance program that has been a hot-button issue since its 2001 introduction. Users typically buy three-year contracts that entitle them to software upgrades and other benefits such as home-use rights, training vouchers and technical support.
Expanding SA
Microsoft has been positioning SA as a maintenance program, not an upgrade program, even though upgrades are one benefit.
The company has added numerous benefits to SA over the past year, most recently in March, including 24-hour phone support, additional training vouchers and consulting services.
It also is trying to increase SA’s value by making the Vista Enterprise edition available only to SA customers. It has special SA-only limitations on select features and licensing options for Exchange and Office.
This is not the first time Microsoft has faced the issue of product delays affecting SA customers. The same was true two years ago with continued changes in the release of SQL Server 2005.
“Is Microsoft aware of the situation, and do they want to avoid a public relations nightmare and fallout with their customers? Yes,” says Laura DiDio, an analyst with Yankee Group. “If Microsoft makes any changes or adjustments, they will do it privately. When Microsoft wants to hold on to a customer, they will move heaven and earth to do it.”
DiDio says exemptions to maintenance contracts become a slippery slope for any vendor.
Last fall, the company launched a Web site at www.microsoftincentives.com to highlight incentive programs and special offers and financing.
Some experts say Microsoft needs to focus less on those efforts and more on cleaning up the core of SA.
“What might be a more valuable outcome would be for them to recognize that SA is not working for a lot of customers,” says Paul DeGroot, an analyst with Directions on Microsoft.
Gartner estimates half of Microsoft’s customers with more than 1,000 desktops worldwide have SA for Office or the Windows platform. The company says only 65% of those will renew. Microsoft counters that the number is 10 percentage points higher.
DeGroot says he would change the rules about when SA must be purchased so a user could buy it anytime. Now it must be purchased when the software is acquired. “And I would reduce the price,” he adds.
Microsoft’s software maintenance costs are the highest in the industry, at 29% of the price for desktop software and 25% for server software. For example, a $368 Office license would carry nearly a $107 fee for SA. The industry average is 21%, according to Forrester Research.
