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Five Reasons Microsoft Wants A Pay As You Go Model

With its traditional packaged software licensing model under pressure, Microsoft wants to change the rules of the game.

software

The software giant last week received approval for a patent from the U.S. Patent and Trademark Office detailing technology to meter software use and access to specific computer hardware.

According to the patent, fees would be charged against a prepaid or billed account for software and services that may include word processing, email, browsing and database access.

Here are five reasons Microsoft is eyeing the pay as you go model.

1. The Road Has Run Out On Microsoft's Traditional Software Licensing Business Model.

For years, big businesses have bought costly Microsoft software licenses that provided them a pathway to free upgrades. The problem is Microsoft either never delivered a viable upgrade or businesses underestimated the heavy cost of upgrading beyond the software license. Any junior CIO knows that the real cost of moving to a new software product is the countless incompatibilities that have to be worked out and the huge cost of training. Businesses are smarter about software costs today.

The patent expands Microsoft's ability to use its financial muscle to take that astronomical up front software capital investment issue that is giving it fits completely out of play. The patent enables Microsoft to bring the Software as a Service (SaaS) model down to consumer focused tasks such as word processing and web browsing. That consumer focus could be an important differentiator in the increasingly crowded SaaS market.

2. The Pay As You Go Model Makes Microsoft The Sole Toll Taker.

The software giant is no longer the low price point value leader in the game and it doesn't like it one bit. Remember what Microsoft wants more than anything else in the post PC era is to control its own fate on software pricing as was evidenced by its Online Services announcement at its worldwide partner conference in July. Remember Microsoft is the company that put Netscape out of business by making its Internet Explorer free.

Microsoft is sick and tried of getting caught in Catch 22 conversations with CIOs demanding that the software giant lower licensing costs. Now Microsoft can give those CIOs just what they want: a model that allows each and every business to use only what they pay for.

What CIOs and every other person on the planet better worry about is just how much that pay as you go model will cost them two, three and four years down the road once they are locked into the Microsoft cloud.

3. Microsoft Wants Your Credit Card.

It's no small matter that Microsoft points out that the pay as you go model will be based on access to a prepaid or billed account. Microsoft wants a monthly recurring payment similar to those that you pay to your cell phone provider or your cable company. To put it simply Microsoft wants your credit card.

Microsoft sees all the money being made by the telecommunications and cable giants locking in consumers and businesses and it wants a piece of the action. You think your cell phone and cable TV bills are hard to decipher wait till you get a load of what Microsoft has to offer when it starts billing you for word processing, browsing, and database access.

Microsoft has finally figured out that the old software licensing model is dead. Salesforce.com and all the other SaaS players have the right business model particularly in an economic downturn.

4. Google Is Eating Microsoft's Breakfast, Lunch And Dinner.

Anyway you slice it, Google has replaced Microsoft as the darling of the technology world. Microsoft needs something big, brash and bold to take back the high ground in computing from Google. And this it.

Google may own search, but Microsoft still controls the bulk of the bread and butter applications market. This is a plan to once again make those applications the center of gravity. Microsoft sees its software at the center of the internet experience and wants every user from the youngest child to the biggest corporate chieftain to pay a toll to take a ride on the Microsoft internet. That's been Microsoft's ambition from the early days of the internet. This patent is its dream come true. That is if it can use its financial might and muscle and technical know how to make it happen. That's a big if of course. And if it does happen, look out Google. My bet is Microsoft will make it difficult for anyone that buys its pay as you go ticket and then tries to do some searching on Google.

5. Microsoft Wants To Control The Horizontal And Vertical Of Your Internet Experience.

Remember the old Outer Limits television series. The spine tingling opening to that series made you feel like some alien force was taking control of your television set with an opening voice over narration warning: "Do not attempt to adjust the picture. We are controlling transmission."

Make no mistake about it. Microsoft wants to put itself at the center of the internet universe. It wants to control the applications experience of each and every user on the planet. And this is a way to do that. Microsoft Chairman Bill Gates and Microsoft CEO Steve Ballmer have never been comfortable playing second banana to anyone. Remember these are the guys that started the PC revolution. Do you really think they are going to ride off into the sunset and watch their bring computing to the masses revolution spoiled by a one time CEO of Novell. Not in a long shot. Gates and Ballmer still want to make history. This pay as you go model may be their biggest play yet.

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