Judy this in CRN on line today?
Do you ever doubt Bill Gates when it comes to squashing other software companys? Now what do you think? When is Ingrams Q #s out?
Scott
By Melanie Marshall & Mary Jo Foley
Seattle
7:00 p.m. EST Fri., July 25, 1997
.............
Microsoft Corp. executives last week trickled out the first public details of a forthcoming subscription model via which it
ultimately could sell all of its application and system software.
While ISPs who jump on the subscription bandwagon early may find the model to their liking, traditional VARs and
integrators could end up cut out of Microsoft's software equation all together.
Microsoft Chairman Bill Gates told financial analysts attending the company's annual Financial Analyst briefing here last
week, "our large accounts already are moving quickly to the annuity model. . . . Next year, we plan to take this to a broader
set of customers."
Gates was referring to Microsoft's volume purchasing program, called Microsoft Select, by which its large corporate
accounts agree to purchase a predetermined number of licenses of its various products directly from Microsoft.
Under Microsoft's forthcoming subscription model--which will go into effect for Office customers first, according to
company officials--regular service packs and yearly releases will be delivered to "subscribers" on a regular basis, primarily
via the Internet. Microsoft is building the infrastructure required to do this into Windows 98 and Windows NT 5.0.
Simultaneously, Microsoft is focusing on decreasing the size of its service packs, which are updates to its various products,
containing new features and bug fixes, said company officials.
The new subscription model could give Microsoft a way to sell software directly to mid- and smaller-size business
customers, and possibly even end user consumers.
Channel and industry players were quick to react to the proposed subscription model.
"The channel is going to go ballistic about this," said one Microsoft Solution Provider familiar with the company's plans.
"Microsoft is going to own the entire software loop."
Another reseller agreed. "If Microsoft took our customers direct, it would impact our business figures significantly," said
Brad Curtis, software product manager for reseller Entex Information Services, Rye Brook, N.Y. Curtis added he would
not expect Microsoft to bypass the channel and would expect to get the initial revenue from the sale.
"Delivery over the Web is fantastic if it means bypassing Microsoft's worldwide fulfillment department, who are difficult to
work with," Curtis added.
"This will have a definite impact on our software sales revenue, which will go down," said Salman Ijazi, sales manager for
reseller Axxys Technologies Inc., based in Dallas.
"This is inconsistent with Microsoft's current distribution strategy of only going through third parties," said Don Tuck, an
official with Computer Center, a VAR based in Boston.
Others were more tempered in their take on the proposal.
"The impact on the corporate reseller is going to be minimal, while down the road, a portion of upgrades that come out of
the retail base is likely to diminish," said Chris LeTocq, an analyst with Dataquest Inc., San Jose, Calif.
"This is the natural progression and refreshing to the customers who are tired of shelling out $100 every 18 months for a new
operating system," said Gary Lundberg, market analyst with Input, located in Mountain View, Calif.
"This half-life of Windows is becoming cost-prohibitive, and Microsoft has realized that constant innovation and refinement
was practically becoming a detriment," he added. "Unless the channel can provide the elements of subscriptions as well, it
may be detrimental to channel business."
While Microsoft needs to perfect a number of technologies, such as integrated ADSL-level networking and central server
management, in order to enable the subscription model to really take off, it told analysts it expects to begin moving
customers to the model during fiscal 1998.
At the financial analysts' meeting, Gates talked about the company's concept of the "Windows dial tone," a capability that
could make it into the next versions of both Windows and Windows NT, which would allow users to maintain near-constant,
high-speed connections to centrally managed servers that could automatically download the latest versions of software and
components to desktops. |
