Commentary: The problem with Microsoft's Software Assurance program
The problem this time centres on Microsoft's Software Assurance program, which the company says offers users "automatic access to new technology and provides productivity benefits, support, tools and training to help deploy and use software efficiently."
Microsoft says this will simplify the purchasing process for customers, many of whom are drawn to shorter upgrade cycles. The program also complements Microsoft's strategy to sell software by subscription -- a good theory.
In reality, it's a software maintenance and upgrade program that puts even greater pressure on customers to renew existing Windows software. And time is running out: one-third of eligible contracts with Microsoft's biggest customers will be up for renewal by July 2004.
Customers who decide to put off their decision beyond the deadline will be penalised with higher upgrade fees and miss out on product discounts. Small and medium-size businesses, which are the meat and potatoes of Microsoft's business, will suffer the most, because many don't have the cash to spend on increases in licencing fees.
Few customers need to upgrade the Windows server operating system every 18 to 24 months, which is Microsoft's typical product cycle. Many of the customers our company consults are still happy running Windows NT or 2000. Those running non-Microsoft mail packages have little need and even less desire to upgrade. Of course, Microsoft's Exchange mail servers are tied to specific operating system releases.
Most companies use their file servers to share files and printers. Linux offers a reliable alternative to the Windows server. As a result, we've been seeing an aggressive move from Microsoft-based servers to Linux or other platforms.
When it comes to Windows server software, it's tough to justify an added expense for an operating system that pretty much does the same thing as before. Try explaining that one to senior management.
Customers also balk at the plan because Microsoft has a history of charging to support product upgrades that never occur. Microsoft has been charging customers to support SQL Server's upgrade -- code-named Yukon -- which has been delayed until 2005. That means customers paid twice -- once for the initial licence, and then again for the right to upgrade. What did they pay for? Vision and promises? For those who paid, let's hope that the ship date doesn't slip again.
Software Assurance would be fine if it delivers enough value to customers. But failing that, companies are going to be motivated to evaluate alternatives to Windows, such as Linux, which is already the fastest growing operating system.
Three years ago, we had one Linux server and less than 5 percent of our customers were talking about Linux. Today, one-third of our servers are Linux, and half our customers either run Linux in production or have Linux as part of their strategic plans.
Microsoft's next-generation operating system -- code-named Longhorn -- won't be available until 2006, according to the company's most recent announcement. That means customers will have to wait at least two years for a dramatically improved version of Windows.
That also means customers have two years to dip their toe in the water with alternative platforms, or maybe even take the plunge and replace Windows. That's bad news for a plan that may deliver little software and even less assurance to customers supporting the Microsoft monopoly.
All this does offer a silver lining. Customers who decide to stick with Windows now have ammunition to negotiate discounts with Microsoft. The company has a lot at stake because it draws about a quarter of its revenue from licencing fees.
The customer's biggest ally is choice -- the choice to adopt an open-source operating system for servers that is not tied to Windows-only computers or the burden of maintenance fees. Now customers have the choice to press for lower licencing fees, or abandon Windows altogether.
Ian Altman is the CEO of Rockville, Md.-based ITM Associates, a software and consulting company.