Microsoft licence plan may boost Linux

Microsoft's new licensing programme is likely to prove unpopular with buyers, who may be prompted to defect to alternatives such as Linux
Written by ZDNet Staff, Contributor

New changes to Microsoft's software licensing programme may give rivals a chance to lure away several key customer groups, according to analysts and competitors.

On Thursday, Microsoft told customers it would revamp its licensing programme. Among the changes, the software giant is selling optional "software assurance" contracts that commit customers to annual upgrades for a fee. Some customers will also have the option of buying software through subscription services.

While the changes will benefit some customers, competitors hope others will be turned off by attempts to lock them into potentially expensive upgrade paths.

"I think it gives us more opportunity," said James Neiser, chief marketing officer for Linux leader Red Hat. "What's happening with their new licensing model is they're locking in the customers to paying a fee regardless if they get upgrades or not."

Under the new licensing plan, Microsoft will sell assurance contracts to large customers. With these contracts, customers will pay an annual fee but then receive new versions of the software for free. For those who upgrade rapidly, the programme could save money. For those that upgrade in three- or four-year cycles, expenses go up.

Customers don't have to enter into assurance agreements, but customers could spend more on upgrades than they ordinarily would.

Some customers could end up paying 22 percent to 68 percent more than under the current licensing agreement, according to Guernsey Research. Gartner estimated costs for such customers would rise anywhere from 33 percent to 107 percent.

Such increases could hurt Microsoft, but probably not on the desktop, IDC analyst Dan Kusnetzky said.

"It certainly does open up opportunities because people are suddenly facing costs they didn't plan for," he said. "The desktop is largely driven by the selection of applications. If the application they wish to buy is not there, then the (operating system) doesn't get selected at all."

In other words, without a version of Office running on Linux, even lower prices may not lure business customers to the free operating system. With Microsoft Office owning 94 percent of the market, according to Kusnetzky, Linux is unlikely to storm the desktop market.

However, many desktops are used for so-called transactional applications: databases, order entry and Web site production, to name a few. Those PCs could be moved to Linux, said Kusnetzky.

"Linux could be the platform of choice for that transaction software," he said.

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