Microsoft: breaking with licensing tradition

Corel, Sun looking for fall-out

ComputerWire: IT Industry Intelligence

These are critical times for Microsoft Corp. The company deliberately broke its software licensing model with Thursday's introduction of the unpopular Licensing 6.0,

Gavin Clarke writes


Until now customers paid Microsoft's licensing charges, shelling-out hard-won IT budget while complaining of expense and confused details. For Microsoft, this was a reliable - if imperfect - revenue model.

After all, what alternatives were there to Microsoft's products?

As Microsoft ushered in Licensing 6.0, though, alternatives were - for the first time - emerging. Unfortunately for Microsoft, those alternatives compete in the company's lucrative desktop homeland.

Corel Corp yesterday joined Sun Microsystems Inc and Ximian Inc offering a new take on either low-cost or Linux and open source desktop alternatives. Corel introduced a new licensing program to propel Word Perfect - touted as the most popular productivity suite after Office - into Microsoft's Enterprise Accounts.

Ottawa, Ontario-based Corel follows Ximian Inc, offering a 25% discount and introductory price-cut on its open-source Desktop Professional Edition. Sun Microsystems, meanwhile, is seeing growing interest from concerned corporates in its radically re-worked StarOffice.

And there a lot of concerned corporates out there. A survey of InternetWeek 319 readers published this week, confirmed resistance - persistent for nearly a year - to Licensing 6.0, remains solid.

The survey found 40% "will definitely not" upgrade to Licensing 6.0. Thirty eight percent of corporates, meanwhile, are seeking alternatives products to Microsoft offerings, according to a Sunbelt Software/ITIC survey of 1,500 senior IT executives published in April.

One concerned Microsoft customer is the MGM Mirage, operator of 26 hotels across the US including the high-profile MGM Grand hotel and casino in Las Vegas. The MGM Mirage runs thousands of desktops and is a Microsoft ship, but one top IT manager is about to recommend Ximian's Desktop and Ximian Connector in some company locations where Office, e-mail and AS/400 are his users' only requirements.

Another is the Burlington Coat Factory. The retailer is currently debating whether to replace Office 97 and older versions of Star Office with either Sun's Star Office 6.0 or's OpenOffice 1.0 on up to 500 head office desktops. The move completes installation of StarOffice at PCs in Burlington Coat Factory's 315 stores.

StarOffice 6.0 looks like winning this particular contract. Sun has smoothed the older suite's rough edges, introducing geometrically correct and Asian fonts, regression testing, packaged binaries and improved documentation. Plus it offers support.

Tim Brennan, store services group manager, said Star Office 6.0's price and feature set are compelling reasons not to adopt either Office XP - the latest version of Office - or Licensing 6.0. Office is too feature rich many of Brennan's users.

Brennan said Licensing 6.0 is suitable for pure Microsoft shops who are experimenting with .NET, and who anticipate lots of upgrades. Lots of upgrades would - theoretically - give some return on investment under Licensing 6.0's new Software Assurance program. "If you like to stay on the cutting edge [Licensing 6.0] makes sense. But that's not us," Brennan said.

StarOffice has enjoyed steady downloads with version 6.0 - 70,000 since May's launch. Tony Siress, senior director of marketing for Sun desktop solutions, attributed demand to Sun's decision to finally support StarOffice, ending its drift in the open source community.

"[Customers said] we need to know you are serious and will continue to support development," Siress said, adding corporates "don't like surprises."

Price and licensing is also a factor. StarOffice 6.0 costs $25-50 per user for five desktops with an additional 17-20% support and maintenance cost, which includes upgrades and patches.

"My goal was to create a business model, not a $10m profit engine," Siress said digging Microsoft. But then, Sun can say that as software isn't Sun's core business - unlike Microsoft.

Partnering with Sun is Boston, Massachusetts-based Ximian, offering its own price incentives. Until August 15, Boston, Massachusetts-based Ximian is offering a 25% discount on Desktop Professional Edition for Linux, normally $59.95. The product includes Ximian's Outlook alternative Evolution, Mozilla Browser 1.0, the Red Carpet online software update service and StarOffice 6.0.

Ximian's appeal is further enhanced with a 10-user starter pack for $449, saving $150.50 on 10-separate copies of Ximian Desktop Professional Edition for Linux. The starter pack is not available after 15 August.

John Parr, Ximian vice president of marketing, sees the break in Microsoft's licensing model as an opportunity. Customers finally have an incentive to actually test Linux and open source software.

Parr predicts the next 12-24 months will see increased penetration of the Linux desktop and open source productivity, browser and messaging software among corporates. "Now is the time to do the evaluation," he said.

However, Parr struck a cautious note. Gone is the vision of the Linux operating system and open source applications offering a wholesale replacement to Windows and Office on the desktop. This dream was largely killed by ease-of-use problems and failure of a credible portfolio of applications to materialize.

Linux and open source software is now being pitched as filling certain need. That need could be call center or warehouse users where browsing, email and word processing are needed instead of a fat Office suite.

Also seeking to exploit the break in Microsoft's licensing model is Corel. The company yesterday launched two licensing schemes: Corel Transactional License (CTL) is for customers who wish to purchase a broad range of products without a volume agreement. Corel Contractual License (CCL) is a "tailor-made" volume licensing deal with support and services.

Microsoft is aware of the danger it faces. Transition from any old product or old way of doing business to something new opens a chink in the armor, which rivals can exploit. Hence, Corel, Sun and Ximian are lining-up.

Little wonder, then, company chief executive office Steve Ballmer urged caution over Licensing 6.0's potential for immediate success at Microsoft's annual financial analysts' conference last week. Ballmer warned Microsoft had only a "rough feel" for customer uptake. He blamed customers' failure to understand changes.

Speculating on the rate of adoption and impact on Microsoft's fiscal 2003, Ballmer said: "Until we get into it, we don't know."

© ComputerWire

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