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national.com
Revolt hits home for Microsoft
May 7
Mandy Bryan and Emma Connors
Microsoft's Australian customers are preparing to join a worldwide revolt against the software giant's new licensing deal which comes into force at the end of July.
St George Bank is one of the many corporates that has rejected the new arrangements and Australian state governments are joining forces to present a unified front against Microsoft's subscription-based licensing model, which they say will see their software costs skyrocket.
The premise behind the new licensing regime is that instead of buying a Microsoft operating system or application software licence up front, organisations will pay a regular subscription fee for a fixed period that automatically entitles them to any upgrades.
If an organisation's buying plans are in sync with the Microsoft model, which assumes companies will update to new releases soon after they become available, the new pricing program, known as Software Assurance, will cost roughly the same as existing arrangements. The problem lies with the many who prefer to set their own upgrade path.
Microsoft Australia has acknowledged the new regime has required some adjustments on behalf of its customers but rejected suggestions many of these customers are likely to consider alternatives rather than fall in line.
However, customers insist they have acquainted the software vendor with their thinking on this issue, which includes a possible switch from Microsoft desktop products to so called "thin client" technology, which does not require personal computer strength software, or to desktop versions of open source software like Linux, which is supported by many mainstream IT companies.
State governments, which have calculated their software bills could increase by tens of millions of dollars each year, are among those considering such alternatives, according to one high-level purchasing manager.
The states could look seriously at non-Microsoft alternatives should their mission to control their software costs fail.
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"State governments are talking about a combined response to ensure the costs are held consistent with current pricing, although alternatives also have to be seriously considered and we will do so as a group," the purchasing manager says.
St George would not sign up for the subscription-based model, preferring to take its chances by paying for maintenance as needed, says John Loebenstein, St George group executive, information technology.
The bank, which rolled out Windows 2000 across its 8,000 desktops last year, did not expect to upgrade for at least three years, meaning the "right to upgrade" obtained through the Software Assurance program was of limited value. When the time to upgrade did arrive, the bank might consider an alternative to Microsoft. Right now it was focused on more immediate purchasing decisions, Mr Loebenstein says.
"Microsoft has chosen a certain economic model and I have a choice as to whether I will accept this model or not. And I have decided not to," he says.
A refusal to sign on the dotted line has become increasingly commonplace in the corporate market-place worldwide. Earlier this year, a New Zealand law firm, Clendon Feeney, hit the headlines when it opted to launch a complaint with the NZ Commerce Commission, claiming the new pricing regime allows Microsoft to "advantage of its market power for prohibited purposes" by forcing customers to upgrade their software faster than they might desire.
A survey of 4,550 technology professionals in the United States, conducted by market researcher Giga and technology company Sunbelt Software, found 80 per cent of customers expected to pay more for Microsoft software once the Software Assurance program kicked in. And more than one third of those surveyed said they would now consider alternative products.
The backlash was widespread, according to Gartner analyst, Greta James.
"There is huge unease amongst enterprises because of the lack of choice of desktop technology," she says. "Many enterprises feel trapped and then they get hit with price rises which aggravates their feelings of unease".
One Australian corporate IT manager, who asked not to be named because of a partnership between his company and Microsoft, says he had talked to hundreds of his local counterparts about the new licensing deal and most had said it would cost them more money.
He says in the present economic environment, IT vendors like Microsoft could initiate a backlash from companies who might start to seriously question their IT spend.
"The result may be that this might turn around and bite them big time. There is not a savvy IT director in the land not talking about thin client, which would also hurt [the] PC market," he says.
"We've already had our IT budgets screwed 30 per cent, and there is no way we can take extra burden in order for Microsoft to increase its revenue. As a result, we are all sitting on our hands, which means the ball's in Microsoft's court and if 90 per cent of customers are saying this is not getting my support, what can they do?"
Microsoft, meanwhile, has delayed introducing the new regime twice already. The original introduction date was pushed back from October 2001 to last February and then until July. Microsoft Australia said it was not willing to make any further changes.
Microsoft Australia's licensing manager, Robert Vogler, says he had not heard of any indicators anywhere in the world which suggested the company needed to change its approach. "Generally, the trend is that people are taking to this positively," he says.
"Some people say it means I may have to rethink my deployment strategy or accelerate my deployment outlook but no-one has said we are dropping you for a competitive product or that they want to renegotiate."
Meanwhile, Microsoft chief executive Steve Ballmer is not in the mood to change the rules, telling the US magazine Computerworld: "I think we're kind of done, because we have heard what people had to say."
Mr Ballmer also says he thought the Software Assurance price was "a fair price". It appears many of his company's Australian business customers do not agree. |
