Report finds Microsoft customers increasingly leery of Software Assurance

Microsoft subscription maintenance program for its volume licensees has never been overly popular. But according to a new report from Forrester Research, Software Assurance is looking like even less of a good deal to Microsoft customers than before.

Microsoft introduced Software Assurance (SA) in 2001, and has tweaked continually the SA program to respond to customer complaints. SA is designed to supplement customers' volume licenses for Microsoft products by guaranteeing them upgrade rights for a three-year period for covered products.

Forrester's Software Assurance study, released on July 9, is based on interviews with 63 Microsoft customers in April 2007. Why are these users leery? Some of the top reasons, Forrester's researchers reported:

• High cost: "Software Assurance costs, on an annual basis, 29% of the license for desktop products, and 25% of the license for server products." In fact, SA might end up costing more than simply buying a new license, Forrester said. "If Microsoft was able to adhere to a four-year major release schedule, desktop SA customers could pay more in Software Assurance than the cost of buying a new license (29% x 4 yrs = 116%). Server SA customers might break even (25% x 4 yrs). And, that’s if Microsoft upgrades its products on a four-year release schedule; which hasn’t necessarily been the case in recent years," Forrester added.
• Deployment lag times: Because new software releases take months to test and install, users aren't deploying software when Microsoft does eventually release it. Even though SA covers customers for three years' worth of releases/upgrades, lag times can make this coverage less of a good value, Forrester claimed.
• New Enterprise Client Access Licenses (CALs) "weakened the perceived value" of SA. Forrester's findings: "Many organizations have paid Software Assurance on their Client Access Licenses’s (CALs) for years, expecting they’d get rights to all of the features of the new products. Instead, Microsoft has told customers that if they want rights to some of the new features of products like Exchange and Sharepoint, they must buy another CAL (on top of the base CAL’s they already own)."

To me, however, the most interesting reason that users are rethinking whether SA is a good buy, according to Forrester, was that customers feel like they're in the dark about what's next for Windows, Office and other Microsoft products.

"Microsoft hasn’t published a product roadmap for the wave of products released last November — Windows Vista, Office 2007, Sharepoint 2007, Exchange 2007, etc. Informally, Microsoft has been telling some customers to expect a 'minor' release every two years, and a 'major' release every four years. At this point, minor and major remain undefined. This uncertainty regarding product releases makes it very difficult for IT procurement and sourcing professionals to justify a three-year SA renewal," Forrester said.

Secrecy does have its dark side. Sure, a company can claim it never missed a ship date or cut a feature if it never tells its customers and partners what to expect when. But too much information control also means customers can't plan. And why shell out big bucks for a maintenance plan when you can't predict exactly what you'll be installing and deploying in the coming year, two or three?

Forrester's new study includes a number of recommendations for Microsoft customers when evaluating whether to add SA to their licensing agreements. Forrester advises users to hold out for more discounts and incentives; negotiate early; actually run the numbers to see whether SA makes sense; and "consider the risks."

The risks, in this case, are the growing number of products and technologies that Microsoft is making available only to SA users (such as Windows Vista Enterprise Edition and the Windows Fundamentals for Legacy PCs release) to persuade them to sign up. Forrester researchers are expecting Microsoft to use this carrot/stick approach even more in the future.

I've asked Microsoft for comment on Forrester's latest study. Not sure what, if anything, they'll have to say. Stay tuned.

Update: On July 9, a Microsoft provided the following response to the Forrester study from Stacie Sloane, director of marketing and communications for Worldwide Licensing and Pricing:

"The recent Forrester Research report on Software Assurance only looks at a subset of our customers and is not consistent with the feedback we have received. In fact, Microsoft's renewal rates are on target and in line with our expectations. We are pleased that an estimated 75 percent of our existing EA (Enterprsie Agreement volume-licensing) customers are renewing their Enterprise Agreements, as it demonstrates that our customers find value in a licensing program that allows them to standardize their enterprise and take advantage of the benefits of centralized purchasing, as well as leverage all the additional benefits we've added to Software Assurance. We also know that customers that deploy at least one SA benefit are more satisfied with their relationship with Microsoft, which can largely be attributed to the significant investments we've recently made in innovation and customer awareness of SA benefits.  We are seeing Software Assurance customers consume their benefits now more than ever:

* MDOP (Microsoft Desktop Optimization Pack) has been the fastest sold new product from Microsoft ever in Volume Licensing, on track to exceed 1.5M licenses in the first 6 months.

* Demand for Windows Vista Enterprise has made Windows Vista the fastest growing business in Enterprise Agreements the last year.

* Over 39,000 customers are eligible for training vouchers and this is the #1 activated SA benefit.