Microsoft extends deadline

Responding to concerns about an abrupt transition this fall to its new Software Assurance licensing program, Microsoft Corp. announced last week that it will give enterprise customers an extra five months—until Feb. 28—to plan for their future software upgrade purchases.

The extension applies to all Microsoft customers but is especially important to some federal agencies that otherwise would have had to make a difficult — and potentially costly—upgrade decision by Sept. 30.

Originally, the Software Assurance program, which will replace the current array of upgrade programs used by enterprise customers, was set to kick in on Oct. 1. That was the date Microsoft was to begin offering just two ways to get the latest release of its software: enroll in Software Assurance or buy a new license, which has traditionally been more expensive than upgrade pricing.

However, to be eligible for enrollment in Software Assurance, customers must own the latest version of their Microsoft products. Under the original Microsoft timetable, agencies that did not have the latest software would have had to upgrade by Sept. 30. That is the last day of the government's fiscal year, and some agencies had not set aside money in their budgets for upgrades.

Now, Microsoft will still start offering Software Assurance on Oct. 1, but it will postpone the expiration of one of the current upgrade programs, called Upgrade Advantage, until the end of February, according to Jim Miller, a licensing executive with Microsoft. An agency that wants to upgrade to a current version of Microsoft software can do so in fiscal 2002 by purchasing rights through Upgrade Advantage, which is available on the General Services Administration schedule.

"The extension is great news," said Brett Bobley, chief information officer for the National Endowment for the Humanities.

Bobley's agency currently runs Microsoft's Office 97 software on its approximately 200 desktop computers. Under the original program changeover schedule, the endowment faced a tough choice: somehow find money in the current budget to upgrade to Office XP by Sept. 30, or wait and miss out on the initial opportunity to get into Software Assurance and end up buying new Office XP licenses in the future, at considerably higher cost.

With the extension of Upgrade Advantage, endowment officials can purchase the upgrade in fiscal 2002 as originally planned.

As for why Microsoft is changing its licensing programs in the first place, there are a number of reasons. Company officials say a main objective is to simplify what they admit is a sometimes confusing bundle of current upgrade options, and many customers agree that an overhaul is needed. "The Microsoft licensing model has been horrendous for years. It's very difficult to understand," said Jack Garman, vice president of enterprise information technology outsourcing for OAO Corp., which provides Microsoft software to NASA under a seat management contract.

Microsoft's Miller also said that Software Assurance "reduces the financial spikes of new software [for customers] because they know what they have to pay" to enroll in a program that keeps them automatically updated with the latest products.

Of course, those financial spikes go both ways. When discounted upgrades are available on demand, as they have been until now, some customers postpone upgrades for various reasons. By compelling customers to enroll in a regular maintenance program, Microsoft gets "a much more predictable revenue stream," said Richard Ptak, a senior vice president for the industry analyst Hurwitz Group.

The standard Software Assurance agreement will last three years. The program will apply to all Microsoft software, with the exception of game products. The enrollment fee will be based on a percentage of what a full software license would cost, multiplied by the number of years remaining in the agreement. The cost will be 29 percent of a full license for desktop products and 25 percent for servers.Timing is everything

After Feb. 28, there will be only two ways to buy the latest Microsoft Corp. software: Enroll in the new Software Assurance automatic upgrade program or buy a new license every time you need the newest release.

So which will be the better deal? From a cost perspective, customers who upgrade their application software within three-and-a-half years or their server software within four years will be better off enrolling in Software Assurance, according to Microsoft officials. Wait longer than that, and you'll be better off just buying the new license when you need it.

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