Microsoft Ponders Server 'SuperCAL' For Next-Gen Product Wave

Microsoft is hashing out dramatically different licensing options for its next-gen servers, including a universal client access license (CAL) option, several sources said.

Such a "SuperCAL," would bundle rights to many more server offerings than are now included in the "core CAL" as part of enterprise agreement (EA) licenses, several sources confirmed.

The universal CAL option could include access to BizTalk Server, SQL Server, Live Communications Server, Virtual Server and other "Windows Server Systems products, in addition to the Exchange Server, SharePoint Portal Server and Systems Management Server (SMS), and Windows and Office licenses offered in the current core CAL.

In another major development, Microsoft is working out a new Service Provider License Agreement (SPLA)-like option that would enable large managed service providers to license software on behalf of their large customers. Currently, customers now negotiate their own volume licenses with Microsoft even when the software is hosted and managed by a third party, typically a large integrator or services organization.

The extranet provision would essentially simplify and reduce costs for customers, who can pay as they go rather than pay up front for a three-year user license. One source said Microsoft was worried when a very large corporate customer attempted an end run around Software Assurance (SA) by setting up its own internal hosting operation and signed its own SPLA in order to reduce software costs.

One Microsoft insider confirmed that the Universal CAL and extranet licensing options are under consideration for 2005-2006 timeframe, and said Microsoft is also mulling whether to give the server software free to those who nod to the CAL option.

"The universal CAL won't eliminate Software Assurance because too many people signed deals, but there will be more options," said the insider. "The SPLA model will appeal to customers who don't want infrastructure in house. The SuperCAL will appeal to people who have IT in house. It solves the problem of complex licensing."

"Adding SPLA features to EAs is pretty much a done deal%85[and going forward] it will be possible to license on-demand provisioning, including try-before-use deals," said another source familiar with the talks. He also said Microsoft is under pressure to offer a "pay-for-use license for outsourcers who may be provisioning many clients via a central agreement," where such an arrangement is now not possible unless the outsourcer is also a reseller, this source said.

"We run Exchange Servers for out clients but keeping track of all of that is complicated, and we want to give the customer lower unit price in aggregate and there is no aggregate licensing going on today," he said. "We want to buy one [instance of Exchange- and use it to host 10 customers.. we want aggregate licensing."

Also under consideration is a "micropayment" pay-as-you-go option for corporate customers, one well-placed source said. "If you're a company authorized for 1,500 CALs and you're at 1,501, a payment box will pop up asking you if you want to license an additional seat for $15 or whatever--a very cool concept," he noted.

"These are all conversation points, trial balloons, right now. Nothing is set but many options are on the table," said one source.

Another partner familiar with the potential licensing options said the "pay-as-you-go" offering would enable greater flexibility for organizations whose workforces may increase or decrease dramatically seasonally.

"Right now, if you have volume license, you have to account monthly for active CALs and pay the same price," said this source. "It would be nice to have variability so that the unit price went down as the number of CAls went up."

Cori Hartje, director of marketing for Microsoft's worldwide licensing organization said no major changes are imminent for volume licensing but acknowledged that the company is always pilot testing licensing options. She would not comment on whether a universal CAL is now under test at any of those sites.

Microsoft's volume licensing has been under fire for more than a year now, with corporate accounts complaining that the latest program cloaked price hikes. And, recent slippages to key products from SQL Server 2005 and next-generation Windows or Longhorn, convinced many customers that buying three-year support contracts covering upgrades, might not be cost effective given a lack of major upgrades in that time frame.

One large reseller said customers are definitely questioning the value of Software Assurance, but was unsure if a Universal Cal is the answer. He recalled the ill-fated "BackOffice CAL", which bundled access to Windows Server, Exchange Server, SQL Serve, Systems Management Server, Internet Security and Acceleration (ISA) Server, and Host Integration Server (HIS), was discontinued two years ago.

"In my opinion, Microsoft should probably remember the lesson from the huge BackOffice CAL. Customers didn't like it. They thought they were being oversold," this reseller said.

But one east-coast Microsoft certified solution provider disagreed. "We've been telling them to do something like this. It would help Microsoft entrench its servers and get customers on the subscription model and it would make customers happier," he noted.

Microsoft already fields many licensing options for large customers. One of its biggest challenges going forward is balancing the need for flexibility with simplicity. There currently exists an Additional Products (AP) clause in that allows large customers to buy more server application CALs with their Enterprise Agreements but a more universal option would expand use of the desktop and the new server applications, said one analyst.

"Pricing for the EA is based on the number of desktops, not servers," said Paul DeGroot, an analyst with Directions on Microsoft. "With the EA today, you get Windows and Office desktop upgrades and core CAL with Exchange, Windows, SMS and Sharepoint CALS and you get roughly a 15 percent discount. It would be interesting, assuming the price is more attractive than now, to get additional server apps."

Many partners say Microsoft will loosen its terms and conditions as Linux becomes more mainstream and customers gain more leverage.

"I did the rapid economic justification for big retail grocery store last summer with 50,000 desktops, and most are on Windows 95 and Windows 98, and they wanted to go to Windows XP but Microsoft wouldn't budge on price, they wouldn't negotiate, " said Keith Powell, senior manager of the retail practice at Bearingpoint. "So they're looking at Linux, or SCO, and they're still [angry] at Microsoft on the desktop thing and haven't executed either way."

Still he sees a softening of Microsoft's stance in some respects, citing Microsoft's recent decision to loosen up licencing restrictions on Solution Accelerators. (See story.) "They're more open to change."

This story was updated to include analyst and integrator quotes.