Survey: Microsoft Facing Major Backlash To Licensing 6.0 As Deadline Approaches

Microsoft

That's according to a recent joint survey conducted by Clearwater, Fla.-based Sunbelt Software and Boston-based Information Technology Intelligence Corp. (ITIC). The survey found that nearly 41 percent of respondents say they do not have the money for the annuity-based licensing even as the July 31 deadline approaches.

Meanwhile, about 36 percent of 1,400 businesses polled said they will not upgrade to the Licensing 6.0 plan and another 38 percent are seeking alternatives to Microsoft products, according to the survey.

Under Licensing 6.0, customers pay an annual fee for the software license. The new Software Assurance clause requires that they can't skip upgrades if they want special pricing under the licensing. If companies choose not to participate, they will be required to pay the full cost of a license each time they upgrade. Customers currently receive discounts when upgrading.

"They still haven't cooled down," said Laura DiDio, president of ITIC, referring to customers. An October 2001 survey by Sunbelt also revealed anger and resistance to Microsoft's Licensing 6.0. "They don't understand the terms or conditions of version 6.0 any more than their existing contracts, and most of them abhor the subscription licensing scheme where they rent software instead of buying it. Customers are still pretty resentful," DiDio said.

The online survey, which polled an even mix of small businesses, midsize businesses and large Fortune 500 companies last week, also found that while many had serious license noncompliance problems, most said they won't adopt Licensing 6.0 because they don't have the funds to sign on and don't want to negotiate with the software giant directly.

Some 80 percent still have a negative view of the annuity-based licensing plan, and 90 percent believe it will increase their licensing costs.

The survey also found, however, that 63 percent of the businesses haven't done the due diligence or a cost analysis of the licensing plan and 50 percent believe they are very unprepared to negotiate directly with Microsoft.

"If they don't have the money, and they don't want to negotiate, this could be a real backlash for Microsoft," DiDio said.

DiDio also said that some very large enterprise accounts have been trying to use their leverage and weight to wrestle some pricing concessions, but Microsoft's sales reps won't budge. As a result, at least two major named accounts have been in "protracted negotiations" with Microsoft and are considering alternatives as the deadline approaches, according to DiDio.

While many in the survey expressed an interest in moving to alternatives like Linux and StarOffice, "that may not be [economically feasible," said DiDio. "It might just be talk."

In a small percentage of cases, some reluctant customers have been threatened with software audits by overly aggressive Microsoft sales reps, DiDio said, noting, however, that this tactic is not a stated policy or sanctioned by Microsoft corporate headquarters. "Some who have voiced uncertainty are getting pressure...they're being threatened with audits. There are pockets of places where this has been a problem," she said.

At least one source in the Enterprise Software Agent (ESA) business said the protracted negotiations and additional extensions being handed out by Microsoft sales reps to corporate customers are delaying much-needed licensing services revenue to the ESAs, who no longer get a margin on software sales because they are no longer authorized to sell licenses to large corporations.

Microsoft recently launched a special financing deal to encourage reluctant SMB customers toward Licensing 6.0 and is considering a plan that would allow SMB VARs to sell a repackaged portion of the Enterprise Agreement to small and midsize customers.

However, the company maintains that no major changes are expected for Licensing 6.0 before the effective date, a company spokeswoman said recently when asked about potential changes.

"We certainly agree that there are still some customers who are confused," said Rebecca LaBrunerie, Microsoft's program manager for worldwide pricing and licensing. "That's why we have launched a new effort to reach out to customers who have not yet decided how they want to take advantage of the new program. This outreach will include direct mail to customers, free licensing sessions around the country, free conference calls with analysts where people can ask questions. All of this is an effort to make sure customers have the information they need."