Software Assurance: Windows licensing everyone loves to hate

Software Assurance can be problematic for enterprises on a budget since it requires companies to prepay a percentage of their license price for upgrade rights to a future release.

Customers have been unhappy with Microsoft's licensing since the company started selling its software via an annuity model. Software Assurance can be problematic for enterprises on tight budgets because it requires companies to prepay a percentage of their license price for upgrade rights to a future software release.

When SA was introduced in August 2002, it offered only upgrade rights. Since then, Microsoft has added technical support, training vouchers, home-use rights and what amounts to a hefty, albeit complicated, matrix of benefits designed to sweeten the value proposition.

To benefit from upgrade rights, an enterprise must be on a steady release cycle, said Joseph Foran, IT director at FSW Inc., a healthcare and social services nonprofit organization in Bridgeport, Conn.. It's quite possible a company might pay money upfront and not see an upgrade, as was the case when Vista was delayed. If you skip a release --- as many IT shops did with Vista -- there may be no benefit.

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"When we go to Windows 7, maybe in 2011, we may pick it up again, and hopefully we would be on a time schedule to go to the next release," Foran said.

However, not everyone wants -- or uses -- the benefits, and companies often skip software releases -- as FSW did. Therefore, whether SA is worthwhile really depends on the individual company, said Paul DeGroot, an analyst at Directions on Microsoft, a Kirkland, Wash.-based consulting firm.

"We advise companies to look at all the benefits and see how much it would cost to buy each separately and read the fine print," he said.

For example, DeGroot said on SA for Office you might get one free tech-support incident for every $200,000 you spend, but if a tech-support incident costs $250, it's not a good deal. Most IT shops have trouble figuring out exactly what benefits they do have, and the benefits may not exist on the product for which SA was purchased, DeGroot said.

Down the road, more applications will be written to run on Web servers, and Microsoft will need new reasons to get enterprises to upgrade their Windows desktops. IT shops typically hang onto whatever infrastructure they have unless the change can save some money. Indeed, Microsoft has said its biggest competitor is "good enough," meaning that many IT shops keep desktops in place longer than Microsoft wants them to because they are working just fine, DeGroot said.

In addition, he said IT shops don't upgrade because of high costs, and Microsoft doesn't reward its loyal customers with discounts. A company without SA will hold onto its software for as long as possible, which ultimately also doesn't benefit Microsoft.

-- By Margie Semilof, Executive Editor

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I think the issue that everyone, especially Microsoft miss, is that it cost a huge amount of time and support calls to upgrade a environment to the next OS release. As such companies don't want to constantly be upgrading and therefore the perceived benefit of having a "cheaper" upgrade path is immaterial if you don't want or need to upgrade. In effect it can be a waste of money paying for a upgrade\ support you may never actaully get round to using. As such the Assurance begins to feel more an Insurance.