The ins and outs of software licensing

Q.What is Microsoft doing?

A.Microsoft is simplifying its software licensing and changing the way it sells upgrades.

Software version upgrades, which used to cost about 70 per cent of the full version price, are eliminated.

To upgrade, you must pay the full price again or sign up for the maintenance program and get upgrades automatically. For this you pay an annual fee of 24 to 29 per cent of the original software price each year over about three years.

This comes in the form of a Software Assurance or Upgrade Advantage agreement.

Q. Why are they doing it?

A. The anti-Microsoft brigade believe the monopolist is trying to lock in the world for three years.

The more common view is that people have been upgrading their software less frequently and Microsoft had been relying on that upgrade revenue. It needed to ensure it had a steady predictable income.

Microsoft has said the changes are about simplifying licensing.

Q. What went wrong?

A. Perhaps surprisingly, the great marketer failed to communicate its message effectively about the changes.

And, by making the shift compulsory, Microsoft forced IT managers to do a lot of research and make a high-cost decision in tight business times.

Q. What is so complicated?

A. For each Microsoft application used, companies must make a calculated guess as to whether in the next three years they will upgrade.

Generally, if they plan to upgrade in three years they will take a maintenance deal.

There are other factors that can affect the decision, however, such as where existing agreements stand and whether a company has upgraded recently.