Report finds Microsoft customers increasingly leery of Software Assurance

Report finds Microsoft customers increasingly leery of Software Assurance

Summary: Microsoft subscription maintenance program for its volume licensees has never been overly popular. But according to a new report from Forrester Research, Software Assurance is looking like even less of a good deal to Microsoft customers than before.

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TOPICS: Software, Microsoft
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Microsoft subscription maintenance program for its volume licensees has never been overly popular. But according to a new report from Forrester Research, Software Assurance is looking like even less of a good deal to Microsoft customers than before.

Microsoft introduced Software Assurance (SA) in 2001, and has tweaked continually the SA program to respond to customer complaints. SA is designed to supplement customers' volume licenses for Microsoft products by guaranteeing them upgrade rights for a three-year period for covered products.

Forrester's Software Assurance study, released on July 9, is based on interviews with 63 Microsoft customers in April 2007. Why are these users leery? Some of the top reasons, Forrester's researchers reported:

  • High cost: "Software Assurance costs, on an annual basis, 29% of the license for desktop products, and 25% of the license for server products." In fact, SA might end up costing more than simply buying a new license, Forrester said. "If Microsoft was able to adhere to a four-year major release schedule, desktop SA customers could pay more in Software Assurance than the cost of buying a new license (29% x 4 yrs = 116%). Server SA customers might break even (25% x 4 yrs). And, that’s if Microsoft upgrades its products on a four-year release schedule; which hasn’t necessarily been the case in recent years," Forrester added.
  • Deployment lag times: Because new software releases take months to test and install, users aren't deploying software when Microsoft does eventually release it. Even though SA covers customers for three years' worth of releases/upgrades, lag times can make this coverage less of a good value, Forrester claimed.
  • New Enterprise Client Access Licenses (CALs) "weakened the perceived value" of SA. Forrester's findings: "Many organizations have paid Software Assurance on their Client Access Licenses’s (CALs) for years, expecting they’d get rights to all of the features of the new products. Instead, Microsoft has told customers that if they want rights to some of the new features of products like Exchange and Sharepoint, they must buy another CAL (on top of the base CAL’s they already own)."

To me, however, the most interesting reason that users are rethinking whether SA is a good buy, according to Forrester, was that customers feel like they're in the dark about what's next for Windows, Office and other Microsoft products.

"Microsoft hasn’t published a product roadmap for the wave of products released last November — Windows Vista, Office 2007, Sharepoint 2007, Exchange 2007, etc. Informally, Microsoft has been telling some customers to expect a 'minor' release every two years, and a 'major' release every four years. At this point, minor and major remain undefined. This uncertainty regarding product releases makes it very difficult for IT procurement and sourcing professionals to justify a three-year SA renewal," Forrester said.

Secrecy does have its dark side. Sure, a company can claim it never missed a ship date or cut a feature if it never tells its customers and partners what to expect when. But too much information control also means customers can't plan. And why shell out big bucks for a maintenance plan when you can't predict exactly what you'll be installing and deploying in the coming year, two or three?

Forrester's new study includes a number of recommendations for Microsoft customers when evaluating whether to add SA to their licensing agreements. Forrester advises users to hold out for more discounts and incentives; negotiate early; actually run the numbers to see whether SA makes sense; and "consider the risks."

The risks, in this case, are the growing number of products and technologies that Microsoft is making available only to SA users (such as Windows Vista Enterprise Edition and the Windows Fundamentals for Legacy PCs release) to persuade them to sign up. Forrester researchers are expecting Microsoft to use this carrot/stick approach even more in the future.

I've asked Microsoft for comment on Forrester's latest study. Not sure what, if anything, they'll have to say. Stay tuned.

Update: On July 9, a Microsoft provided the following response to the Forrester study from Stacie Sloane, director of marketing and communications for Worldwide Licensing and Pricing:

"The recent Forrester Research report on Software Assurance only looks at a subset of our customers and is not consistent with the feedback we have received. In fact, Microsoft's renewal rates are on target and in line with our expectations. We are pleased that an estimated 75 percent of our existing EA (Enterprsie Agreement volume-licensing) customers are renewing their Enterprise Agreements, as it demonstrates that our customers find value in a licensing program that allows them to standardize their enterprise and take advantage of the benefits of centralized purchasing, as well as leverage all the additional benefits we've added to Software Assurance. We also know that customers that deploy at least one SA benefit are more satisfied with their relationship with Microsoft, which can largely be attributed to the significant investments we've recently made in innovation and customer awareness of SA benefits.  We are seeing Software Assurance customers consume their benefits now more than ever:

* MDOP (Microsoft Desktop Optimization Pack) has been the fastest sold new product from Microsoft ever in Volume Licensing, on track to exceed 1.5M licenses in the first 6 months.

* Demand for Windows Vista Enterprise has made Windows Vista the fastest growing business in Enterprise Agreements the last year.

* Over 39,000 customers are eligible for training vouchers and this is the #1 activated SA benefit.

Topics: Software, Microsoft

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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20 comments
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  • Microsoft trying to milk this so aggressively will hurt them in the long

    run. They would be much better off cutting prices right now, or the prices will be in a free-fall later.

    The other problem is that MS needs to drastically reduce the cost and complexity of MS Office. As printing on paper gets less and less important, the very baroque feature of MS Office are looking more stupid every day.
    DonnieBoy
    • Software Assurance was always a lemon....

      ... that was obvious even back in 2001 before they had a chance to "refine" the policies. It looked good on paper but when you looked closer there were plenty of "catches" in it. Some upgrades you could not have unless you repurchased SA all over again - those on W2K could upgrade but those on XP got no upgrades.

      Why they needed Forrester to tell them that 29% costs over 4 years was a bad deal I'll never understand. I'd expect primary school kids to spot that one!
      bportlock
  • Yeah, there's "ASSURANCE" alright.. LMAO!

    The thing that was ever "assured" was a steady stream of income for Microsoft.
    shawkins
  • People are still buying SA?

    We dropped that [b]long[/b] ago.

    It was a bad deal then. It is still a bad deal today.

    The more important question.

    [i]Why are people just now realizing it is a bad deal?[/i]
    dragosani
  • i don't even sell it...

    and i'm a reseller. i'm not ripping off my clients. all microsoft products are way overpriced. vista should range from $50 to $150. office should be about $50 per module. my small business clients can't shell out ~$400 for office. it's a rip.

    let's face it, software assurance and wga aren't about the customer. it's all about ms trying to make more money. i don't care how they try to spin these programs, they are NOT for the benefit of the customer.

    if it was more affordable, i may be able to sell it and make some money myself, but that's not the case with my small business clients.
    g_keramidas
    • Monopoly pricing power

      "vista should range from $50 to $150."

      In most cases we could have a good idea what the software is worth; the market would set the price. But not when Microsoft still maintains its government-sanctioned monopoly. The prices are whatever Microsoft wants to charge, your job is just to shut up and write the check.

      Our company is transitioning to a web-based email and calendar system that is simple, easy to train, and very easy to support. The savings are incredible, even considering the existing Exchange licenses that we have already paid for.

      Nobody said software had to be overly complex and expensive. It just has to do the job well, and MS stuff has been failing all the metrics for us on reliability, cost, and usability. It was time to push "reset" and start over.
      terry flores
      • Value = What the software is worth

        TO YOU! ( this applies to ANYTHING!! )

        My perception of the value of M$ software ended with W2000. Quite a few small business see that too. They don't want or need the " glitz and glamor " and the problems of new M$ software. Paying THEM to keep OUR business running? MADNESS!

        My end user:
        I turn the key. I go to work. I don't want and can't afford ANY software distraction. I have a business to run....
        Old Timer 8080
      • Web-based email and calendar system?

        "Our company is transitioning to a web-based email and calendar system..."

        Could you provide any more details on that? We're currently looking at some in-
        house options, or possibly even Google, to replace Exchange for mail/calendar
        functionality.
        pointzerotwo1
  • What a deal!

    Everything Microsoft does is out of fear and desperation. You can see the same behavior from Yahoo right now. Charging for everything when everyone else is giving things away adding real value in the spirit of the Internet. Microsoft has been fighting this tooth and nail since 1995 and now the chickens are really coming home to roost.

    Users look at Windows as a free product anyway, most have pirated at least several version with absolutly no guilt whatsoever. It is usually shipped on a PC and most people look at the price as a price for hardware an do not consider Windows as an expense. In their mind it is somthing they are owed, which is probably the truth of the matter considering the outright monopoly. They get to sell it to OEMs & that should be good enough for them, if they interfere with the flow of the software after its OEM puchase they are in for a rude awakening. After all the pirating has actually helped them, now they want to stab it in the foot. I've seen rich people try to buy a copy of XP and they walked away saying "My God!"; "that much?, forget it!". I went to purchase the XP for a client once, I saw the price and gave up on the idea (they stuck with their old Windows 98). Dell is near a monopoly because of the price they secure for OEM windows. You cannot build systems and compete with Dell, period. Big business collaboration (price fixing, backroom deals) is preventing small business creation in America. I guess all is good if they pay for our elections so us little folk don't have to.

    Stick a fork in us.

    By the way, does Microsoft EVER respond to this blog?
    seanka
    • I really don't see MS in fear or desperation

      I can't agree with you on Microsoft doing things out of fear and desperation and the reason is they do it for the sake of money, profit and control. Microsoft really has no reason to fear or be desperate, they do as they like, when they like, how they like with little or no opposition due to the way they control the market, licensing and everybody who buys, installs and uses their products.
      intrepi
  • Mary Jo Foley

    Mary, why does almost every article you write bring Microsoft into a negative light? What ever happened to fair and balanced writing? I don't care if you don't like Microsoft but at least balance your articles which is what a true writer should do. You should not always look to bash one company as they do both good and bad.

    Can you explain yourself to the rest of your readers on why you cannot bring more positive or neutral articles about Microsoft to this website? I don't respect a writer who is constantly one-sided.
    d_schinkel
    • It's obvious, no explanation needed really

      The articles in 99 percent of the news you read could be looked at as negative, from movie star tabloids, newspapers, magazine ads that compare one product to another, Now what point is there in telling us that Vista, IE or whatever else is the most secure, most wonderful OS or whatever ? Microsoft has already been there and done that, so what would be the point in writing anymore lies ?
      intrepi
    • Balanced writing is here

      Mary Jo Foley reports on findings from a company (Forrester), she gives references to historical information to back up (or refute) what they propose to have found, and she allows Microsoft to respond that they find that Forrester's research has no merit.

      That is a balanced article in my book. Any perceived negativity is in the mind of the beholder.

      You should also consider that "neutral" articles are a big yawn. So far, Ms. Foley's writings are a joy to read; well researched, well presented, and written with an obvious desire to bring new information to the attention of its readers.

      --GJ--

      --GJ--
      --GJ-- at csi ottawa dot ca
    • But everything was hunky-dory?

      When Open Source was the ones getting
      bashed, and Microsoft was everybody's
      hero? That was "balanced", huh?

      Then all we heard from the NBM crowd
      was "get used to it". They should have
      known the other foot would one day get a
      shoe.
      Ole Man
    • Fair and balanced means

      that you report what is fact and do not whitewash anything just to make it look good.

      When everything that can be reported is bad, then everything appears in a bad light.

      Microsoft has supported interoperability only with FUD and their proprietary software, which is NOT interoperable.

      Microsoft established attachments as the standard way for email to be sent which created the use of a programming language, Visual basic, which was used as a MACRO language in Microsoft products as a favorite method of sending virii.

      I should expect that for every good thing you can find for Microsoft, if any, there will be at least two post in opposition.

      Keep up the good work, Mary Jo.
      Update victim
  • As good a deal as paying for bug fixes!

    Reminds me of the Visual C++ subscription not too long ago where they sent you bug fixes if you paid for a subscription, but you got nothing if you didn't. I thought that was a trial balloon for this sort of thing, and when it was shot down (MS backed off of it very, very quickly), that was the end of paying for fixes. This new thing seems like a worse deal - you're not even guaranteed to get anything - you're just buying an option for X years to get discounted MS software that may or may not be released. When the option expires, it's worthless. Are these transferable? If so someone needs a secondary market to buy and sell them, so we'll know what the true value of these plans are at any given moment.
    scott1329
  • When MS learns to verify and manage licenses

    If Microsoft can't control, verify, activate their own software and licensing automatically via secure coding, then I strongly doubt they can assure me of anything. To have control, be in control and show control are things they would like us to believe they have with OneCare, Defender and whatever other ridiculous names they want to use. The fact is they need you to activate, verify and do it over and over and over again. This shows no assurance of them being able to assure me about anything aside from the fact that they are unable to manage or control their own activation and verification schemes without involving me, my time and expense. Ignorance is what Microsoft uses to their advantage. Anyone really know what OneCare or Defender will or won't do ? More importantly, can't do ? This is much the case with all Microsoft software where details become vague and little is known beneath the surface. Buyer is buying what ? Assurance ? No more than a word with little substance.
    intrepi
  • Software Assurance = " Protection " Racket

    Bottom line: The only winner: M$


    Read the evolution of the M$ EULA to get your proof. Note the trend in CALs too.



    Like any GOOD Racket, this one forces the business to accept THEIR demands. Your business becomes THEIR hostage. The Apple " Big Brother " commercial made that clear. Ironically. Look at what Apple has become. 8P..


    Smart people port their apps to FOSS. You can't be held hostage that way..
    Old Timer 8080
  • My "Assurance" in Microsoft

    Plus some of my fan's requests for me to
    present some fresh material inspired me
    to come up with this Microsoft summary:

    http://malfy.org/

    Corporate Malfeasance Information
    Repository : M
    Nicknames: Microserf, Microshaft
    "Information about the USA v Microsoft
    anti-monopoly trial has been found HERE.
    Have a look at Bill Gates' campaign
    contributions. (Non-Americans should
    realize these are essentially legalized
    bribery of public officials.)
    Microsoft allowed the NSA (National
    Security Agency) to build in a backdoor
    into Windows. Virtually all versions in
    use today are affected. Heise link.
    Alternative link.
    Microsoft has been shown to have
    supported SCO's lawsuit against IBM over
    Linux's source code. Groklaw story.
    Determined to blot out the sun one
    square inch at a time, Microsoft has
    filed a patent for a program to
    conjugate verbs, which is obviously a
    program that has been written 100s of
    times before in computer science
    departments and elementary programming
    classes. Not to mention the popular
    program Verbix, or perhaps the older
    Whittaker's Words.
    Microsoft is trying to get removed a
    paragraph from a US higher education
    body's report. The paragraph encourages
    use of FOSS (free and open source
    software). Story.
    Microsoft violated Vermont's consumer
    fraud law and will pay them $4.7
    million. Story.
    There is word that the Windows Genuine
    Advantage tool is actually spyware and
    therefore violates anti-spyware laws.
    Microsoft will be slapped with another
    clas action suit: story.
    Microsoft find clever way to commit
    arson and get away with it. Their Xbox's
    power supply seems rather flammable,
    according to these people. But Microsoft
    is blaming the power cable. One Swedish
    owner has informed me that this is a
    scandal in Sweden.
    Bill Gates, despite his company's
    getting over $1 billion per year in
    undeserved tax breaks from American
    taxpayers, has now made it clear that he
    doesn't want to employ any Americans:
    He has demanded that the H1B visa
    program's limits be dropped so that he
    can bring in to the country an unlimited
    number of foreignor workers. Link
    He has sponsored a programming content
    in India and plans to greatly expand the
    number of workers there. Link
    Microbox's Xbox 360, which clearly was
    rushed to market before the bugs were
    removed, is now widely understood among
    adult and kid gamers to have a major
    overheating problem, requiring several
    possible workarounds. Not surprisingly,
    there is now a class-action lawsuit to
    address this rather dumb mistake. Link
    here, or read MSNBC's article.
    Always trying to rake in new customers,
    Microsoft has accused Korea's third
    largest bank of piracy. The problem is,
    the bank's contract allowed for copying
    the software, and it appears M$ had been
    asking for too much money. Link.
    There were at one point something like
    35 class action lawsuits against
    Microsoft. Great company!
    Created at least these two front groups
    to lobby for its interests:
    Americans for Technology Leadership
    (ATL)
    Citizens Against Government Waste.
    "The antitrust settlement between
    Microsoft and the Computer and
    Communications Industry Association
    resulted in a $9.75M payment to the CCIA
    top official. Ed Black, CCIA president,
    received almost half of the $19.75M
    payment." Link
    Theft of $4.596 billion as "tax breaks"
    from US Taxpayers between 2001-2003,
    thanks to legally-bribed politicians,
    for an effective tax rate of only 19.4%
    instead of the normal 35%. Information
    here.
    Supported California Proposition 64
    (they contributed $105,000 to the
    effort), which unfortunately passed (due
    to fraud??). It prevents many just
    lawsuits against corporate criminals and
    was supported by many corporate
    criminals. Info here.
    Settled class action lawsuit brought by
    Californians who said Microsoft uses its
    monopoly position to overcharge for
    software. Info here.
    Microsoft lost a class action lawsuit
    brought on behalf of "permatemp"
    workers. Info here.
    Supports digital rights management which
    is a futile and increasingly Orwellian
    attempt to limit what people do with
    their own computers.
    Windows XP has built-in spyware that
    tells Microsoft what you are doing with
    your computer e.g. when you do a search
    it tells their computers what you
    searched for.
    Outsourcer of jobs to overseas,
    according to CNN's Lou Dobbs, at a time
    when huge numbers of US tech workers are
    unemployed."
    Ole Man
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