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Microsoft volume licensing changes in the pipeline

Microsoft Corp. is finalizing changes to its enterprise volume licensing contracts that are expected to provide the company with more revenues -- and customers with more "incentives" to upgrade.

Microsoft Corp. is finalizing changes to its enterprise volume licensing contracts that are expected to provide the company with more revenues -- and customers with more "incentives" to upgrade.

Microsoft is expected to announce the changes to its Select and Enterprise Agreement volume programs as early as this week.

Currently, corporate customers who purchase Microsoft operating systems and applications under Select and EA receive perpetual licenses for the software they buy. Microsoft is expected to change its volume licenses so that licenses for these products will expire on a set date.

For example, the current Office Upgrade Advantage and EA volume licenses stipulate that: "At the expiration of the terms, you have the rights to the most current version of the covered product. That is a perpetual license and can be installed at any time, even after the terms have expired."

If Microsoft did away with these perpetual licensing terms, users would be required to upgrade to a newer version of a Microsoft product or switch to a competing product.

"We're continually looking at how we do volume licensing and product support to benefit our customers," said a Microsoft spokeswoman. She declined to comment further on any pending changes.

Removing an obstacle

Word of the possibility of Microsoft's introduction of nonperpetual licenses leaked out on Monday. USB Warburg analyst Don Young told participants on a conference call that Microsoft recently had struck new contracts with some of its European enterprise customers that did away with "perpetual use clauses." Reuters reported Young's remarks.

By ending perpetual-use licenses, Microsoft will remove one of the biggest current upgrade barriers noted by many of its customers. If older versions of Windows, Office or other applications work well, customers have asked, why should they upgrade?

The lack of compelling upgrades has hurt Microsoft's Office line, in particular, in recent years. Sales of Office have been lackluster for a number of quarters, and some enterprise customers and Microsoft watchers have speculated that quite a few users of older versions of Office would not find Office XP, Microsoft's upcoming Office release, to contain sufficient new features to warrant an upgrade.