Microsoft Finds Upgrade Plan A Tough Sell

Despite a looming deadline, business IT buyers have yet to embrace Microsoft's new software licensing program, which gives customers discounts for signing longer contracts. Some doubt the program will save them money, while others want to keep the door open to cheaper choices such as Linux.

Two-thirds of IT buyers recently surveyed separately by research firms Gartner and Giga Information Group haven't enlisted in what Microsoft calls its Version 6 licensing program. July 31 is the deadline to qualify for discounts.

Microsoft says a company using Windows 2000 Server with more than 250 desktops would save up to 50% by enrolling in Version 6 of its Software Assurance program compared with buying one-time licenses. "If you're a frequent upgrader, you're going to save money," says Rebecca LaBrunerie, Microsoft's product licensing manager.

But the savings depend on how much a company buys. As a result of the longer contract, Version 6 requires customers to commit to buying more software to qualify for discounts. Version 5 required buying at least 1,000 points--which are based on price--worth of software over two years. Version 6 requires 1,500 points over three years. "The story needs to be a bit more convincing from our perspective in terms of how this benefits us and not just Microsoft," says Andy Lindahl, a Windows NT technology manager at Motorola.

Gartner doesn't think the deal makes sense for most companies. It estimates that a business with a four-year upgrade cycle for Microsoft Office will pay 68% to 107% more to upgrade under the new program.

Gartner also says that Version 6 licensing eliminates Microsoft's Version Upgrade program, which lets users buy a new version of a program at a discount when they choose. Customers told Microsoft the previous upgrade options were too confusing, LaBrunerie says.

But some users may be holding out so they have the freedom to use alternatives. Microsoft's attempt could backfire. "Everyone's now thinking that Linux is the next best thing, because we're trying to figure out how to best manage the nickels we have left," Lindahl says. "Does Microsoft realize that?"