Commentary: Will Office XP be your last big upgrade?

Microsoft has already said it wants to move to a subscription model--under which customers "buy" the right to use software for a certain period of time and get "free" upgrades during that time.

Subscriptions are good for Microsoft because upgrades don't matter nearly as much as they used to, as witnessed by the lengthening of customer upgrade cycles. The differences between Office XP and whatever you are using now are mostly cosmetic and in improved ease of use.

Yes, these changes matter, but it's not like XP makes Office tremendously more useable than it is already. Nicer, yes, but this is an upgrade you don't have to buy--though people running something before Office 2000 should seriously consider upgrading. Changes do add up over time.

Still, Microsoft can't count on the upgrade revenue it once enjoyed yet still needs to invest to support .Net. This project, along with Web services created by other companies, are an attempt to fundamentally change how people and computers interact. Microsoft needs money to finance .Net and its many other projects. So Redmond is turning to subscriptions and is cracking down on piracy to protect its cash flow.

The subscription plan was supposed to start in the United States this year, but has been delayed while additional "testing" goes on overseas. Read: Microsoft hasn't figured out quite how to make this palatable and is using foreign markets for taste-testing by consumers and small businesses before making its play here.

When Microsoft announced the delay, some people thought--mistakenly--that Microsoft was backing off. I don't think so, though we may get a reprieve if the current push to move big corporate customers to subscription-like licenses hits the rocks.

If consumer subscriptions follow the same pricing scheme as the plan being foisted on corporate customers, expect to pay about 30 percent of the cost of "new" software for each year's renewal. And, of course, you have to own the software to begin with. How Microsoft will deal with this isn't clear. Corporate customers are being forced onto Office XP and Windows 2000 or XP in order to join the licensing program.

If you replace your software every three years, a subscription plan is essentially a wash and has the benefit of spreading the upgrade cost over three years. Yes, Microsoft does get use of your money, but you don't face a giant upgrade bill, either.

Should the subscription lapse, Microsoft promises not to wipe your documents from your hard drive--but you won't be able to create new docs and may have to rely on "reader" software to open the files you already have. Of course, other applications would still be able to open the documents if you choose to switch.

Microsoft can also be expected to offer a buyout option for customers who want out of subscription software and want to keep the applications they are already using.

And here's something else you won't like: Microsoft's software authorization scheme, already in use for some versions of Office 2000, effectively ends small-scale piracy and stomps on some home users as well. If your company is prone to using a single set of disks to illegally load all the machines in the office, Office XP is the end of the line. That's a good thing.

Of less social value is Microsoft's limit of two copies per disk set, which will inconvenience some small business and home users who have a number of computers--as I do--but only seek to use the software on one machine at a time. I am expecting Microsoft will do something to solve this problem, perhaps on a case-by-case basis. And before you complain: Yes, Microsoft does have a way of dealing with necessary reinstalls, system crashes, and the like, so don't worry.

Microsoft will be getting smaller at least where upgrades are concerned. In the future, perhaps after Office .Net, I expect upgrades to be dribbled on an application-by-application or even a feature-by-feature basis, perhaps with users having the ability to accept or reject the individual changes.

Microsoft has technology to do this, and it's being improved in Windows XP, so I won't be too surprised when this happens.

I am 80 percent sure these predictions will come to pass. And after Microsoft does this, I am betting the rest of the desktop software industry will fall right into line, creating a new world for both customers and software developers. The almighty major upgrade will be replaced by a trickle of smaller changers, as "buying" software will be replaced by "subscription" software, even for consumers.

Consider Office XP to be the last of the major upgrades, and make way for subscriptions. Yes, I know you hate this--at least if your e-mail and TalkBacks are any indication--but it's going to happen. At least you've been warned. So, are you ready for software by subscription, or do you like the current upgrade system just fine?