Microsoft To Announce Licensing 6.0 Tweaks Next Week

As first reported by CRN in February, the software giant will throw in some technical support at no additional cost with its Software Assurance contracts to reduce the overall cost of ownership of Microsoft software and push more customers to buy upgrade rights. Software Assurance is Microsoft's maintenance program.

Currently, Microsoft charges separately for Software Assurance upgrade protection and various levels of technical support, from per-incident calls that can cost hundreds of dollars all the way up to multimillion-dollar premium contracts signed with major enterprises.

"Microsoft has mulled over the concept of increasing technical support, and there's an unflattering comparison between the price of their upgrades and support v.s the competition," said one source briefed on the change. "It's been a struggle for them to figure this out. There are real costs associated with this, and support is expensive for everyone."

Other value-add features will also be announced for Software Assurance next week, sources said.

A Microsoft spokesperson confirmed that the company intends to unveil changes to Licensing 6.0 next week but would not elaborate.

One solution provider said the move will help his company sign more maintenance contracts.

"If they are in fact offering support with Software Assurance, it is the greatest thing since sliced bread," said Michael Cocanower, president of ITSynergy, a Microsoft Gold Certified Partner in Phoenix. "Microsoft has one of the best support organizations in the industry, and if they offer access to that support with the purchase of SA, they just made it a whole lot easier for me to sell SA."

Microsoft has faced significant criticism from customers and analysts since its controversial Licensing 6.0 program was announced in May 2001. Many have complained about the cost of the software and requirements to upgrade more frequently to qualify for discounts--a move some have labeled as an "unfair tax" levied by Microsoft.

While Microsoft has made some changes over the past year to ease some concerns about server licensing, it has opted not to cut the actual cost of the software as many customers requested, said sources briefed on next week's announcement. Instead, it will integrate technical support and other free services to add value to Software Assurance, which today provides only upgrade rights.

It's not clear what level of technical support Microsoft will dish out to increase the value of Software Assurance. However, Microsoft wants to be considered more competitive with rivals such as Oracle and IBM on the question of software costs, sources said.

The cost for an annual Oracle maintenance contract with upgrade protection and patches is about 15 percent of the total cost of the software license, while technical support is another 7 percent, bringing the total cost of software and maintenance to roughly 22 percent.

In contrast, the cost for Microsoft software upgrades under Software Assurance starts at 25 percent, and that's "without any tech support at all," sources said.

"Right now, customers can pay for SA for two or three years and get virtually nothing for it," said another source briefed on Microsoft's plans. "Being able to access technical support on an ongoing basis could help deliver some ongoing value for these ongoing payments. However, customers will need to do the math on this one because the devil is in the details."

The added technical support will increase Microsoft's direct relationship with customers, but many expect it will also benefit partners by driving more software purchases,and thus technology services business,as well as reduce support headaches solution providers must field for Microsoft without compensation, one analyst said.

"It depends on the kind of technical support Microsoft provides for free. [If] Microsoft just offers problem resolution, these are things VARs aren't getting paid for anyway, so it can help VARs provide higher value-add," said Laurie McCabe, an analyst at Summit Strategies.

One solution provider said the decision will be good for his business and for Microsoft customers. "I think it is good for the channel," said Michael Goldstein, vice president of sales and marketing at LAN Associates, a Fort Lauderdale, Fla.-based solution provider. "It gives the channel the ability to utilize the client's free support incidents vs. utilizes channel incidents."