Microsoft chases third-party fees

By ADAM GIFFORD

Microsoft New Zealand is set for a windfall profit boost this year as it enforces third-party licence fees on servers hosted by internet service providers.

Iconz general manager Sean Weekes said the internet provider had spent several months negotiating terms, and was about to pay its first monthly cheque under the regime, totalling about $6000.

The licences cover the Windows servers Iconz hosts for clients, rather than its own servers.

It has 50 racks of such servers, but the charge for each server will depend on whether it is levied on a per subscriber or processor basis, depending on the product hosted.

Previously the ISP had paid an operating system licence fee when it installed a server.

"If you are hosting a business with a customer website, and the customer had 10,000 hits a day, the customer would pay say $18 per processor per month," Weekes said.

"If a website requires authentication, there is an additional per user fee.

"From a business point of view it is better for us, because the costs increase based on the increase in customers and revenue."

2Day Internet head Peter Mott said he had also moved to the Service Provider Licence, and was a fan.

"I don't have to pay any more for operating system upgrades, because they are included in the subscription, and it is particularly suitable for short-term requirements," Mott said.

"You pay the licence for the number of days you use it. We often get sites put up for events or programmes, and when we decommission or repurpose the box we don't have to keep paying."

Mott said it also created transparency in billing.

"We quote the price at the Microsoft price and don't put any margin on it. We like to make our money on the added value part of the business."

He said fees could be as high as $370 a month for some servers, with products such as SQL Server attracting particularly steep levies.

A bigger issue was the cost of compliance.

"It's understanding what they are saying. The licences are drawn up by lawyers, and the staff charged with administering it don't know all the detail, so we have got to get their lawyers to tell us what everything means."

Microsoft's "steam age" approach to banking also had Mott riled.

"They send us a paper invoice by courier, and then because we have a different bank and they won't take credit cards or direct credit we have to write a cheque and physically deliver it."

Microsoft public sector manager Doug Wilson said the Microsoft Service Provider Licence had been used by larger customers for the past couple of years and the company was now extending it to smaller ISPs and application service providers.

"We have been helping out ISP and ASP customers build up their businesses and introduce new services," Wilson said.

"Many large companies have been using the services and licensing them appropriately. Some have not been licensing correctly and we are moving on them now."

The licences are in keeping with the ASP model, where initial capital costs are exchanged for monthly subscriptions. They may also level the playing field, which has been slanted towards smaller ASPs who have not had to pass on Microsoft fees.

"Most customers say they like this plan; it works well for them," Wilson said.

If customers were upset, there was always Linux waiting in the wings.

However, Mott said, it was not a simple either-or choice.

"Open source is a mixed bag. It has not worked as well for us as we hoped, and we are moving back to more Microsoft."