Software upgrade change hits firms

By PETER GRIFFIN

Small businesses slow to upgrade to new software are expected to be hardest hit by Microsoft licensing changes.

The company sent shockwaves through the software market last month when it said it was phasing out licensing options that allow business users to upgrade software as and when they choose.

Instead, customers are being given until October 1 to upgrade to present software versions, allowing them to enter a three-year scheme called Software Assurance, which commits users to annual subscription contracts.

The move affects mainly business users of Microsoft's product range.

The new software maintenance option entitles users to any future releases within the licence period.

After October 1, those not on Software Assurance will have to pay for a full software licence rather than a cheaper upgrade price.

Overseas, analysts were quick to criticise the move, claiming corporate users faced upgrade cost increases of up to 107 per cent.

Locally, the changes have created more confusion than criticism. Many large corporations approached by the Herald were unaware of what the licensing changes would mean to their organisations.



Martin Cassidy, information systems manager at New Zealand Lotteries, said the prospect of compulsory upgrades was not appealing.

"I wouldn't mind moving to later brands of Microsoft software if we could trust it to work.

"Given the general quality of Microsoft's software, that is something we're not particularly happy with."

Mr Cassidy said his company used versions of Windows 98 and Office 97 because their stability had been proven over time.

"XP looks good but the general rule I have with Microsoft is [to] let somebody else find all the errors ...

"I'm never in early in the piece replacing my Microsoft software."

John Haynes, engineering manager at broadcasting group Radio Works, said the move to new platforms depended on what non-Microsoft applications his network of stations used.

"We can't just move when Microsoft does. We've got third-party suppliers that have to have compatible products.

"We have enough trouble with Windows 2000 with audio cards not compatible.

"We've got 24 by seven audio servers and if they decide they don't like the version then the radio stations are off-air."

One IT manager who did not want to be named said Microsoft's dominance in the market meant most companies could not afford to walk away from the company's products.

"But what do you do - move everyone onto Linux and Corel Draw?

"The problem is nobody knows how to use them."

Large IT users such as Carter Holt Harvey, BNZ and Telecom said they had individual enterprise agreements with Microsoft and would not be hurt.

Analyst group Gartner said the changes allowed Microsoft to insure its revenue streams while separating them from the volatile PC hardware market by gathering annual payments by subscription.

"Microsoft believes it has simplified its licensing. Gartner believes Microsoft confuses simplification with the elimination of options," said a Gartner report.

"Either way, most enterprises will pay much more.

"A typical enterprise with 5000 desktops that upgrades Microsoft Office every four years will have its fees increase from $US900,000 [$2.1 million] to $US1.7 million."

Under Software Assurance, users will pay 25 per cent of the licence fee annually for server software and 29 per cent for applications and systems software, figures that also drew flack from analysts as too high.

Gartner estimates the break-even point for Software Assurance at 3 1/2 years and is advising companies that upgrade every three years to take the new scheme on.

Those that upgrade every four years or longer are advised to rebuy the software.

But Microsoft marketing manger Ross Peat said the introduction of Software Assurance would either save money or would not raise costs for 80 per cent of corporate customers worldwide.

"The modelling we have done worldwide suggests that out of the number of seats out there, 80 per cent would be neutral or better.

"Some customers have taken the ad hoc upgrade path. If they are looking to do that upgrade process on a more frequent basis than 3 1/2 to four years, then potentially it is a more expensive choice for them."

While some budget re-working might need to be done at boardroom level, he said, the advantages of upgrading regularly were clear.

"We are sensing more and more that customers are wanting to stay current with the technology.

"There are support benefits in that and many are being driven harder by their executive to leverage technology to some kind of competitive advantage."

Kay Clarke, of Microsoft distributor Datacom, said most customers supported the change.

What it means for MS users


* Business users must upgrade to current software - eg: Windows 2000 and Office XP - by October 1. They then have until January 31 next year to buy Software Assurance.

* Buying Software Assurance entitles users to all Microsoft upgrades in the three-year contract period.

* Those who upgrade every three and a half years or less will benefit most.

* "Infrequent" upgraders may face increased costs with Software Assurance.

Example - Windows Server.

Company A runs Windows NT Server 4.0. Previously the firm could upgrade to Windows 2000 whenever it chose for $639. Now it must upgrade by October 1 and buy Software Assurance at $319 a year over three years.

* Or, the company can upgrade when it likes and pay $1279.

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