Thursday February 17, 8:54 pm Eastern Time
Microsoft to press fresh levies on firms-GartnerGroup
By Sara Ledwith, European Technology Correspondent
LONDON, Feb 17 (Reuters) - The launch of software giant Microsoft Corp.'s
(NasdaqNM:MSFT - news) new Windows 2000 operating system could press many large
companies to pay thousands of dollars in extra licensing fees, a leading industry consultancy
said on Thursday.
GartnerGroup, which has criticized Microsoft's pricing policy for years, said the ``significant' new charges for Windows would
affect 90 percent of large firms over the next two years, no matter what other software products they used.
Released to Reuters on the official launch day of Windows 2000, the report looked set to aggravate allegations of dominance
against Microsoft that last week prompted the European Commission to launch a probe into Windows 2000.
While many software companies sell licences to users of their software, Microsoft is broadening its definition of access -- and
therefore of licensing requirements -- with the new launch, Gartner said.
Gartner, which advises nearly 10,000 corporate clients worldwide on information technology purchases, counseled some
companies to investigate possible alternative suppliers for some applications. Alexa Bona, Gartner analyst in London,told
Reuters that may cost them more overall, however.
``Regardless of other vendors' products used, by (the second year after launch), 90 percent of enterprises with more than
1,000 desktops will have no choice but to purchase Windows 2000 client access licences for all their users,' the report said.
Microsoft's operating systems are run on more than 90 percent of personal computers although it is not as dominant in the
corporate market for server PCs used to manage desktop PCs, where it has a 30-35 percent share, Gartner has estimated.
USERS OF NON-WINDOWS NETWORK MANAGEMENT COMPUTERS ALSO HIT
The charges will affect not only existing users of Windows NT, Microsoft's current corporate operating system, but also offices
that are not complete Windows software shops. This would include server systems used to manage networks of Windows
desktop computers such as incumbent leader Novell (NasdaqNM:NOVL - news).
``Users who are using Novell as a network operating system and (Microsoft) Exchange for e-mail will typically find their costs
increasing from five to eight times,' Bona said.
Microsoft Exchange offers companies an organization-wide group messaging and e-mail system that runs with Windows.
Bona, who said she submitted her report to Microsoft for fact verification prior to publication, said the average cost of a client
license to large organisations was about $20 per user in the United States and 20 pounds ($32.13) in Britain.
``Essentially what we're saying is that before, if you were running Novell and Exchange on the NT side, you didn't buy anything
apart from server licences. Now you're having to buy Windows 2000 client licences at 20 pounds times however many users
you have of Exchange,' she said.
Gartner's warning on pricing is not new. Analysts of the Stamford, Conn.-based technology market research firm have publicly
criticized Microsoft's pricing practices for years. But Bona said there was little understanding among users of these tactics, nor
their impact on upcoming products.
``There are probably less than 10 people in the world who really understand this -- and that's because Microsoft bury it deep
into their terms and conditions and make it very difficult to understand,' she added.
BACKOFFICE TO COST UP TO 30 PERCENT MORE
Gartner also said that companies licencing Microsoft's BackOffice software suite should expect to pay up to 30 percent more
per year through 2002 as a result of the changes to terms and conditions.
BackOffice is Microsoft's suite of behind-the-scenes software products used to manage large computer networks and e-mail
systems.
``Effectively you could say Microsoft is making up to 30 percent more a year based on these changes,' Bona said, and noted it
was not possible to break out this revenue total.
For some uses like Web serving or e-mail, Gartner suggested companies might consider ``less restrictive' server operating
systems such as Sun Microsystems' (NasdaqNM:SUNW - news) Solaris and the Internet-hatched Linux operating system for
the future.
``You could look at something like Solaris or Linux, but to be honest, most organisations will find the cost of doing that
conversion more expensive than any incremental licence fees that they have to pay -- and Microsoft know that,' Bona said.
``Once you've standardised on a very dominant vendor, they don't negotiate the terms and they will come back and ask you for
more money,' Bona said. ``I would say, it's not just Microsoft, if you standardise on any dominant vendor you will find your
negotiation leverage is very small.'
Microsoft spokesmen in the United States and Europe were not immediately available for comment.
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