Licensing Licks


The most hotly contested issue on the table for Microsoft partners is licensing. After considerable criticism, last fall Microsoft eased its strict reimaging rules for 6.0 volume licensing programs, which previously forced customers and VARs to pay for two copies of Windows if the OS was erased from a PC and then reinstalled.

That didn't solve all the problems, however. Microsoft's Software Assurance program, a major part of the company's new licensing model, will replace the various one-time upgrade licensing agreements, such as version upgrades and product upgrades, with a higher-priced system that mandates two-year upgrade cycles that eliminate the choice to upgrade on longer cycles. Starting Aug. 1, Software Assurance will be the only way for Microsoft customers to get most new product versions without acquiring a new license.

Many partners were incensed with the loss of flexibility in making software purchases and upgrades, as well as the complexity of the new licensing model, which has put resellers in a pinch.

"You can't give customers an accurate quote, because it's so complicated," says one solution-provider partner who wants to remain anonymous. "I've had at least three calls to Microsoft where the managers on the phone had to stop in the middle of explaining the product pricing to check the information for themselves, and each time I got a different answer."

The solution provider says the new programs force customers and resellers to buy software licenses in high-priced bulk packages and the latest versions of Microsoft software,even if they don't need to upgrade. "Do the math," the solution provider says. "A vendor that makes partners and customers spend more money than they need to isn't going to be their favorite vendor."

Because the changes won't take effect until mid-2002, many companies are buying their software now rather than be bound to the new format, which would include expensive agreements for newer software versions, such as Windows and Office XP, along with purchases of older products.

"It's wise for most companies to buy their software now, before prices go up," says Gary Ribble, business development manager at solution provider Strategic Network Consulting, Houston. That doesn't mean companies have to deploy new software now. But even if the costs don't increase for certain licensing packages, the confusion over Software Assurance and 6.0 has customers reeling and VARs scrambling for answers.

Amid the chaos, Trevor Sides, an engagement manager at Middletown, Conn.-based Pinnacle Decision Systems, actually senses an opportunity. He says, despite its burdensome nature, Microsoft Licensing 6.0 can help solution providers because, by helping customers cut through the murky, complex licensing systems, they can demonstrate added value. Pinnacle offers services around Microsoft products but doesn't resell software directly to customers. Therefore, the company can provide consulting services around not only what products to buy but also how to buy them and in what capacity.

For its part, Microsoft has downplayed the upheaval over licensing, saying that it will take time for partners and customers to familiarize themselves with the new system and realize the benefits. Researcher Gartner, however, predicts adverse effects for most customers: Enterprises with four-year upgrade cycles will pay between 68 percent and 107 percent more for software upgrades, while companies with a three-year cycle will pay between 35 percent and 77 percent more, depending on their volume discount levels.

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