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August 10, 2001 by Carl Faulkner Carl Faulkner

Software Assurance is Profit Assurance for Microsoft

Microsoft is once again openly flexing its muscles in the wake of a favorable court decision. The victim(s)? Everyone using any new Microsoft product that is subject to the new software licensing process being introduced this year.

The change will affect almost everyone, but it will especially affect the corporate user who operated with an enterprise license for Microsoft products. In short, the corporate user is moving from a perpetual license model to a software leasing model called Software Assurance. What this likely means for the corporation is much larger fees for the use of the Windows operating systems and the Office suite of products.

Think about this for a minute. Under the old licensing structure, as long as you had enough licenses for the products used, all was cool. You could easily retire one PC, replace it with another, and load the operating system and Office suite. If you stayed with Windows 95 and Office 97, no problemo.

Now skip forward to the new Software Assurance rental plan. This process requires you to move all of your users to the current platforms, i.e., Windows XP and Office XP (or similar products). One of our smaller mid-sized banks reported that the ticket to make the required upgrades will exceed $2.5 million! This is only for Microsoft software products and excludes necessary equipment upgrades required to run the bloatware that Windows and Office have become. Each copy of software is usable on only one machine. The simple replacement of a PC now requires an interaction with Microsoft to get its permission to load and use the software.

While Microsoft has recently softened on this, it still appears that upgrading existing equipment or replacing old equipment is going to require an additional bureaucratic burden with Microsoft. If you fail to ask permission, your PC may self-destruct 30 days after installation.

Every year after the initial purchase, you will be required to pay a fee to maintain (rent) the software already purchased. The rental fee is expected to be somewhere around 25% of the initial license fee. For our client noted earlier, the annual fee will be about $625,000. Unfortunately, Microsoft has made the cost of doing business the old way even more expensive!

The gang in Redmond has become so paranoid about missing a license fee they are paying bounties for tips from independent hardware companies selling systems without installed operating systems. If you can believe it, the bounty for turning in a miscreant includes toasters, grills and watches. Geez, this reminds me of the S&L attempts to gain customers a few years ago.

Unless you decide to move away from Microsoft, there is not much you can do. Our advice is to raise the monopolistic/non-competitive noise level with your local congressman and to beat on Microsoft to provide a more realistic licensing structure. Perhaps Bill and Steve will rethink this plan if enough of their good customers, senators and congressmen and -women express serious concerns about their revenue enhancement scheme. -caf

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