Microsoft Volume Licensing Becomes Buyer's Market

Microsoft has long enjoyed a healthy, predictable revenue stream from its volume licensing programs, but that has slowed as more companies look for ways to cut costs. As a result, Microsoft is now willing to negotiate volume licensing deals with customers, according to a new report.

"There has never been a better time to negotiate volume licensing deals with Microsoft," said Rob Horwitz, research chair at Directions On Microsoft, the research firm that published the report. "And like the tax code, the more you know about how Microsoft's volume licensing programs work, the better chance you have to take advantage of the system."

Larger companies have traditionally been the only ones that could negotiate volume licensing deals with Microsoft, but the software giant is now willing to do the same with medium and smaller companies, Horwitz said. "Microsoft's stance has shifted from 'Take it or leave it' to 'Let's make a deal,' " he said.

Companies that play their cards right will be able to upgrade from Windows Vista Business to Windows 7 Enterprise Edition for under $100 per PC, as opposed to the several hundreds of dollars per machine it would cost normally, according to Horwitz. That's because Microsoft is now giving companies that buy new PCs 180 days to buy Software Assurance, compared to 90 days previously.

Software Assurance lets customers upgrade to new software versions released during the term of their contract with Microsoft and spread payments over a three-year period. SA is included with Microsoft's Enterprise Agreement, a volume licensing program for organizations with 250 or more desktop PCs.

One source told Channelweb.com that Microsoft's aggressiveness in pushing customers to sign Enterprise Agreements hasn't always been matched by a commitment to deliver software quickly enough to justify the investment.

"Everyone in the Microsoft channel complains about Microsoft's obsession with EA and how it's damaging to our business if they don't release software within the three-year insurance period. Microsoft's big issue is getting product to market quickly enough to make it worthwhile," said the source, who requested anonymity.

Scott Rosenberg, CEO of Miro Consulting, a Fords, N.J.-based firm that specializes in licensing issues, expects volume licensing revenue to continue falling when Microsoft holds its third-quarter earnings call on April 23.

"I think the economy is definitely going to have an effect," Rosenberg said. "Microsoft serves a broad swath of companies, and many of them are in a world of hurt right now, so they might be dragging their feet a bit when it comes to signing."