Can Microsoft’s complicated software licensing policies survive?

Moderated by Jason Hiner | March 25, 2013 -- 07:00 GMT (00:00 PDT)

Summary: Matt Baxter Reynolds and Ken Hess debate the future prospects of Microsoft's approach to volume licensing.

Matt Baxter-Reynolds

Matt Baxter-Reynolds

Yes

or

No

Ken Hess

Ken Hess

Best Argument: No

17%
83%

Audience Favored: No (83%)

The Rebuttal

  • Great Debate Moderator

    Check in

    Good morning

    Posted by Jason Hiner

    Ready

    Let's go to it.

    Matt Baxter-Reynolds

    I am for Yes

    Me, too

    Rarin' to go

    Ken Hess

    I am for No

  • Great Debate Moderator

    Current policies

    Sum up Microsoft's current licensing policies and how they support Microsoft's business model, and then answer this question: Is it sustainable?

    Posted by Jason Hiner

    Too complex

    Microsoft's current licensing policies can be described as complex. They have a number of programs available looking to satisfy the needs of different types of customers.

    Do I think it's sustainable? Yes. For reasons I'll go into, on-premises makes more sense to licensing traditionally using Microsoft's current models, whereas SaaS makes more sense on a subscription "per user/per month" basis.

    Matt Baxter-Reynolds

    I am for Yes

    Too complex

    I don't think that Microsoft can summarize their licensing policies in 500 words or less, so it will be impossible for me to do so in the alotted time and space that I have. The complexity of their licensing is so high that they offer a two-day course and a 57 page Microsoft Volume Licensing Reference Guide that they've self-described as follows: "This guide is an overview of the key features of Microsoft Volume Licensing programs." Let me reiterate that this is a 57 page overview. So, no, I can't summarize Microsoft's current licensing policies here. Sorry.

    To the second part of the question, "Is it sustainable?" No, the previous paragraph and associated document should prove this. There's so much complexity built into Microsoft's licensing and there are so many people dedicated to licensing at Microsoft (500 to 1,000) that it is not a sustainable model.

    Ken Hess

    I am for No

  • Great Debate Moderator

    How do they compare?

    How do Microsoft's licensing policies compare to enterprise rivals like SAP and Oracle?

    Posted by Jason Hiner

    Same nightmare

    More or less the same level of nightmare complexity. No major enterprise software provider has a straightforward licensing regime!

    Matt Baxter-Reynolds

    I am for Yes

    Oracle's is better

    Oracle offers a simple matrix type price guide for its software licensing options. It doesn't appear to be very complicated in this 13 page document where it lists its products, license levels and corresponding prices. There are a few different price lists available including ones for applications, business intelligence, Oracle On Demand and a few others.

    SAP licensing isn't as straightforward as Oracle's but is nowhere close to Microsoft's level of complexity. SAP offers a 26 page guide to explain the different software licensing models  - Use the second link in the list.)

    Ken Hess

    I am for No

  • Great Debate Moderator

    Starting fresh?

    How are new rivals like Salesforce and Google Apps changing the game?

    Posted by Jason Hiner

    Need flexibility

    The advantage of this model is that it's relatively easy to budget for. You have "n" employees at "x" per month, therefore you know what the ongoing cost is.

    The disadvantage of that model is that you can't get off if you need to. If you come under budgetary pressure, you have to turn the system off. With perpetual licensing, you have the flexibility to stop spending on, for example, maintenance and upgrades if it comes to the crunch.

    Matt Baxter-Reynolds

    I am for Yes

    Web-based is the key

    Software as a Service (SaaS) is a good model for businesses to use because it really levels the playing field for small- and medium-sized businesses whose budgets and profit margins are often very thin. Salesforce.com and Google Apps not only have a better overall cost model, the applications are web-based, which means that they can be accessed from anywhere by user login, not by seat or device.

    The game changing behavior is in that ability to access an application from any device without having to install any local software. You don't have to purchase one license for your desktop computer, one for your laptop and another for your tablet, which must be compatible with the software. Using the SaaS model, you pay for a user access license and it doesn't matter which type of device the user connects from. The user experience is the same on any device and there's a single license subscription fee.

    Ken Hess

    I am for No

  • Great Debate Moderator

    Learning from the past?

    What moves is Microsoft making to adapt to the new paradigm?

    Posted by Jason Hiner

    Choices

    They are looking to create a blend of more "retail"-style SaaS licensing (Office 365 is one example) with their existing licensing programs. The idea here is that the customer has a choice, depending on the sort of organization they are and what strategies they have in place.

    Matt Baxter-Reynolds

    I am for Yes

    Making it easier

    Microsoft recently debuted its Office 365 as a SaaS offering. Microsoft has setup plans for every size of business plus plans for individuals. The pricing is very low, as little as $5.00 per user per month. Office 365 takes a lot of the complexity out of its Microsoft Office suite licensing with this product.

    One thing to note about SaaS offerings as my own observation. Every year Microsoft loses millions of dollars in pirated software. SaaS will stop that. So, Microsoft, in the end, stands to gain legitimate users with Office 365 and make more money with fewer issues dealing with piracy. I believe that this new paradigm is a win-win for users and for Microsoft.

    Ken Hess

    I am for No

  • Great Debate Moderator

    Office is slipping

    According to one recent study, 97 percent of "top ranked startups" have chosen Google Apps over Microsoft Office and Exchange. Given a green field, are most new companies going to choose the SaaS model over traditional licensing?

    Posted by Jason Hiner

    Depends on income

    I think that would depend on who the startup hires to help them and how much money they have.

    A small startup with a distributed team without any weird requirements would do well to put everything in the cloud under SaaS licensing, simply because it's a much simpler way of incepting a new "IT department". However, a larger startup with a CTO from an enterprise background with an understanding of complex licensing may feel that's the better choice going forward in terms of budgetary control and flexibility.

    Matt Baxter-Reynolds

    I am for Yes

    Making them happy

    Yes, they will choose SaaS for the reasons I discussed in Question #4. Lower cost, no licensing stress, no chance for piracy and the ability to access applications and documents from anywhere on any device creates a more powerful, more capable and more financially stable work environment.

    For twenty years, I've heard the moans and groans of small business owners lamenting the high cost of Windows, Microsoft Office and Client Access Licenses. SaaS is an excellent way to diffuse most of the complaints and the costs

    Ken Hess

    I am for No

  • Great Debate Moderator

    The enterprise...

    While SaaS makes sense for many small businesses, what about the enterprise? Is it realistic for SaaS to be able to deal with the complexities of enterprise software?

    Posted by Jason Hiner

    Over its head

    I think these two issues are tied together into the ideas as to whether things are living in the cloud, or things are living on-premises.

    The rationale for subscription models on cloud-based services makes more sense if you consider that as well as a the cost of the software, you're also paying for electricity, staffing, and everything else that you need to run a data centre.

    If you're running systems on-premises, you're paying for the costs to "keep the lights on", so actually is it reasonable to pay a subscription for on-premises systems? I would say not -- a traditional "software and services" package makes more sense here.

    I'd also say that, no, I don't think SaaS is enough to deal with the complexities of enterprise software. If you're looking at very large (multimillion dollar deals), I don't think that fits well into a message of per user/per month subscription.

    Matt Baxter-Reynolds

    I am for Yes

    Much simpler

    It's far less complex than rolling out 20,000 or more new versions of a software product to users. I've been on the delivery end and it's a mess. With SaaS, there's only one upgrade--on the server side. All employees receive the same version of the software at the same time without regard to patch levels, desktop configurations, antivirus software or other local software problems that plague large software upgrades and rollouts. Enterprises, perhaps, could benefit the most from SaaS.

    Ken Hess

    I am for No

  • Great Debate Moderator

    Licensing issues

    What does the recent backlash over Office 2013 licensing say about where Microsoft licensing is going?

    Posted by Jason Hiner

    Getting the message across

    I'm not really sure it was a "backlash" -- quite a few people were vocally upset about it, but it did get smoothed out.

    But it did get the message out there that Microsoft does like to see Office 2013 being sold on a subscription basis, particularly to individuals and smaller businesses.

    Matt Baxter-Reynolds

    I am for Yes

    No freedom of choice

    I assume by backlash you're referring to the PCWorld article by Tony Bradley that discusses Microsoft's Office 2013 licensing policy and the uproar it caused. Microsoft changed its policy in response to that uproar.
    The change says that Microsoft has to modernize its licensing to fit the new paradigm and it's long overdue. To license a software product to a specific bit of hardware is ridiculous and as PCWorld's Tony Bradley also put it, Microsoft's licensing policy was nothing short of "Draconian."

    If I purchase an operating system license, an Office license, a database license or any license, I am the one purchasing it. If I choose to uninstall it from one piece of hardware and install it on another, I should have that privilege because I've purchased the license to use. As long as I don't violate the license by installing it simultaneously on different pieces of hardware, I should be fine. Until Microsoft changed its policy, that wasn't the case.

    I recall having to call Microsoft to explain that a computer crashed and was dismantled before they would reinstate my Office 2007 license so that I could install it on another computer. Though I had to plead my case with the finesse of F. Lee Bailey, the support person finally relented and reset the license for me. It's wrong to think that I could lose $1,000 worth of software due to a hardware crash or decommission.

    Ken Hess

    I am for No

  • Great Debate Moderator

    Do both?

    Can Microsoft successfully compete against itself by simultaneously offering both subscription and traditional licensing?

    Posted by Jason Hiner

    Big improvement

    Yes, because what's happening here is "horses for courses". Smaller business that prefer cloud-based systems will choose the subscription path. Larger business that prefer on-premises systems will choose a "big ticket" licensing path.

    Matt Baxter-Reynolds

    I am for Yes

    It's evolving

    Certainly it can and it will, for a while anyway. Why shouldn't it? There are people who won't fully convert to a subscription or SaaS model for years, so Microsoft won't lose a huge amount of revenue from traditional licensing anytime soon.

    You only have to compare this situation to hardware vendors to see the proof. There are people who purchase laptops and those who lease them. It's not an all or nothing game in hardware and it won't be in software for a few years more. Eventually traditional software licensing will give way to subscriptions but you might have a few more gray hairs before that happens.

    Ken Hess

    I am for No

  • Great Debate Moderator

    The beginning of the revolution

     When do you foresee the tipping point when enterprises will no longer want to keep paying traditional licensing fees for software?

    Posted by Jason Hiner

    Not necessarily

    I'm not that that tipping point will come in the sense the question implies.

    I think there's a natural split between cloud systems and on-premises systems. The question is how far and how fast "all" businesses move to cloud-based systems. (And by implication effectively outsource their datacenter services and associated costs through SaaS subscription payments.)

    I'm not sure that will ever get to a point where we never see on-premises. Is it likely someone like a car manufacturer will give up their on-premises ERP and move it into the cloud? I'm not convinced.

    Matt Baxter-Reynolds

    I am for Yes

    Other options

    The tipping point will be when there are viable options for enterprises. Salesforce.com is a fine example that you gave earlier. There's been no complaints about that model and they're doing just fine. Microsoft will do the same. For products such as Office, Visio, Project and other standalone applications, the transition will be easy. It will be more fun to watch operating systems go subscription-based.

    Ken Hess

    I am for No

  • Great Debate Moderator

    Last question, Microsoft's survival?

    How important is Microsoft's handling of the licensing fee issue to the future of the company and its business model?

    Posted by Jason Hiner

    It's too big to fail

    I'm not sure it is that important. Microsoft is a successful company -- they know how to get money out of their customer base. Being more "subscription heavy" might help them both in terms of cashflow and in terms of reducing piracy, but it's certainly not the most pressing problem that Microsoft faces.

    Matt Baxter-Reynolds

    I am for Yes

    Microsoft has to change

    If you're still talking about the Office 2013 backlash, I can only imagine that it shows that Microsoft can change with the times and that it does care about its customers. I think that Microsoft realizes that its "Draconian" licensing policies are outdated. Microsoft has to change them to fit the needs of businesses and individuals who are tired of paying a lot of money for software licensing that's locked to a single device.

    If Microsoft sticks with the old licensing plan, then they will lose a tremendous amount of revenue to companies like Google, Apple, Salesforce.com that will pick up the disgruntled user base because users aren't going to be bound to a single device or an outdated licensing policy.

    Ken Hess

    I am for No

  • Great Debate Moderator

    Thanks everyone

    It was great to have you. And I'm sure you'll agree that the debater's did a fine job. Check back Wednesday for the closing arguments. The final verdict will be posted on Thursday.

    Posted by Jason Hiner

Talkback

43 comments
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  • Licenses, yes. The question is one of enforcement

    I think that it would certainly be in Microsoft's best interest to greatly simplify licensing for their software, and subsequently enforce it. Microsoft can certainly continue their largely-unenforced, overly-convoluted licensing policy and continue to attempt to make it stick. We we in many software companies that among the last legs of their existence is the conversion of the R&D department to the legal department. I wouldn't be surprised to see Microsoft head down that road.

    Conversely, Microsoft's attempt to transform software sales into software subscriptions may also come into play here, though that will largely hinge upon their success.

    Thus, my vote is "yes, it CAN survive, but it's not in Microsoft's best interest to do attempt to do so". A well-asked question begets an answer. A poorly asked question begets a question.
    voyager529
    Reply Vote I'm for Yes
  • I am saying no

    Microsoft continues to make fumbles in licensing. They have great software, but they are not evolving with the times. For instance, SKUs. I think every single product needs to be a single SKU. Windows Server, Windows Client, Office, Lync, Visual Studio, Exchange, SharePoint, SCCM, etc. That takes away a huge portion of the complexity in licensing already.

    Next option:
    License each product at a reasonable price. Remove OEM restrictions.

    Windows $100
    Office $200

    I think products such as Exchange and SharePoint really should be services you subscribe to as needed.

    As for volume licensing, just buy what you need without signing up for a contract or any tie ins like Software Assurance.

    If I want 5,000 Windows licenses and a single retail license cost $100, cut that in half. Think of it as a damn privilege a customer still wants to use so much of your OS. If the customer experiences difficulties and can't afford the 5,000 license, be nice and say, don't worry, take as much as you need for uses.

    Cut out the BS with transfer rights. If I want transfer uckin' software to the moon, let me have that right.
    adacosta38
    Reply 3 Votes I'm for No
  • Complicated licensing only irritates those trying to be honest

    and truth be told, Open Office is catching up fast.
    happyharry_z
    Reply 3 Votes I'm for No
    • No not really.

      Its still stuck in the Office 95 paradigm. In fact, OpenOffice is far behind it will remain a niche option for persons who either don't know about Microsoft Office (which rare, but it does happen) or is staunch set against it like the average Linux user. Its a very inflexible suite to use, not to mention slow. I use Word daily and its such wonder how powerful it is. For instance, I emailed a set of photos inserted in a Word doc and emailed it to someone who needed them. The person replied saying they only needed 3 pics out of the doc. I just right clicked and save picture of the three requested and emailed them. (This functionality is not even in Office 2007. But it shows the power of Office in just the little things.
      adacosta38
      Reply 4 Votes I'm Undecided
      • People like you scare me.

        Word is a poor page layout application. It fails at the most basic layout tasks and often ignores basic formatting. That's if it doesn't corrupt things when you get complex "layouts".

        Using it as a storage mechanism for transmitting pictures is equally appalling. Better to just send them the JPEG's than kill them in a Word Doc.

        I cringe when people try to use Word as a layout program and want help. Word truly is a horrible app.
        itguy10
        Reply 4 Votes I'm Undecided
        • Word is bloated garbage

          Absolutely correct! My wife recently took a college class for Word 2010, she thought it would be an easy credit... WRONG! The text book attempted to show the student, step-by-step, how to create layouts and where all the little hidden features were to make text flow correctly on the page. The problem is that half the options shown in the screen shots had been moved by Microsoft in an update, or no longer worked as described in the text book! In the end, by trial and error, she would mess with settings until she could get the result shown in the text book...

          Once the class was done, she wanted Word OFF HER COMPUTER and went back to LibreOffice. She said, and I quote, "Word is stupid! Most things are hidden all over the place! I did learn something about page layout, but it's so much easier to do the same stuff in LibreOffice!"

          While it is just her experience, I personally agree, and I think most people are seeing the light these days.
          Technical John
          Reply 2 Votes I'm Undecided
          • If you feel that way, then why do you use it?

            Word is far more powerful (and thus more complicated) than most people need.

            Certainly, there are plenty of free or nearly free alternatives which are compatible with Word, and there are other alternatives which are not compatible but still meet most people's needs. I am sorry that your wife was surprised to find out how complicated (powerful) Word is but if it were easy to use, one would not need a class to learn how to use it.
            M Wagner
            Reply 1 Vote I'm Undecided
        • Actually, Word has some pretty good layout options

          The new guides in Word 2013 work very well; older versions don't have as many features so to make this relevant to licensing I'll point out that SA and EA and VL licences give you rights to get new versions of software without extra payments - if that's not what you want, you can choose a different licence. Complexity is an unavoidable element of choice.
          mary.branscombe
          Reply 1 Vote I'm Undecided
        • The issue isn't with Word itself...

          The issue is misuse of Word. It is a word processing tool that can do side duty as a light weight page layout tool...for people who don't have anything else. The problem is that people tend to use what they have. Its the old saying "if the only tool you have in your bag is a hammer, then everything starts to look like a nail".

          We see the same thing all the time with Access and Excel as well where people try to do things with them for which they just are not well suited just because they don't know any better. There is nothing wrong with those programs when used within their intended purposes.

          I think that those of you arguing the merits of things like Libra Office etc, just don't get this. The word processor in other packages still has its pros and cons Vs Word and it is still a word processor - not a full blown desktop publishing tool. So over using those other products is equally problematic.

          Speaking of other products though, since the topic is licensing, cost and licensing issues are the the main reason for using an alternative product - not because one product is inherently better than another.

          But, the recommendation I give to most people is that its easiest to use the same products at home that you do at work so you don't have to learn both. Most companies that use MS Office will be on Volume License agreements with Microsoft that allow "Home Use" which basically allows employees to download a license key for $10.00. So if you use it at work it is nearly free to use at home too...and yes that is yet another "complication" added to the mix. Students can usually buy through school at cut rate "academic" licensing prices. More complication. Most computers these days seem to come from places like Best Buy or Dell with a "starter" version that is plenty for most home users. More complication and yes more different versions.

          But the complications and different versions also mean choice. If you don't like the idea of choice, go buy a Mac (sorry had to slip that one in there) With choice comes a certain amount of need to be a knowledgeable buyer to find the best deal for you or your company. It also means that there are probably not all that many people out there buying a shrink wrapped full version of Office with their own money.
          cornpie
          Reply 1 Vote I'm Undecided
      • Hahaha

        You're emailing photos inserted in a Word doc?
        I believe it is YOU who is stuck in an old paradigm!
        adacosta28
        Reply 6 Votes I'm Undecided