Under the Software Assurance program, customers pay an annual fee for upgrade rights to Microsoft products, but the upgrade cycle has been somewhat slow for some products. Did that put pressure on you to add value to Software Assurance?
Bill Landefeld (BL): Did the rate of the upgrade cycle put more or less pressure on us? I would say no ... Really, what this is in response to is customer feedback after the Licensing 6.0 rollout, in terms of what more they expect from a vendor like Microsoft through a Software Assurance type of program.
Under Software Assurance, customers pay an annual fee of 25 per cent of the volume-licence fee for server products and 29 per cent for desktop products to gain upgrade rights to products. Several people have complained that other vendors charge a lower percentage fee and include support with it. Did Microsoft look at competitive offerings and try to do something that was comparable?
BL: Our customers keep us very aware of what our competitors are offering. So yes, we definitely look at the industry. We see what our competitors are doing. Our competitors are changing all the time, and this is a fast-moving industry.
In response to the percentage rate, I think the important thing to look at is (a) what’s included in that, and (b) what is it a percentage of, rather than just the actual percentage rates. Particularly on the server side, customers look at offerings from Oracle or from IBM, compare them with what we have at Microsoft, and that’s really where the industry precedent has been set for including support with upgrade protection and security and maintenance updates as well.
The one thing that we’re very pleased about is that we give customers a choice whether to include services in their software upgrade purchases or not. You can’t get upgrade protection without buying services from several of our competitors.
I think our Software Assurance percentage rates, if you just look at that, are actually pretty close to where Oracle and IBM would come with our new offering here, in the low to mid-20s.
Is there any chance that Microsoft will lower those percentages in the future?
BL: It’s not currently something that we’re looking at. But we are always monitoring the price of our software and services to make sure we’re competitive in the marketplace.
What type of support will customers get with Software Assurance, and what type of support will they have to purchase separately from Microsoft through a Premier Support contract?
BL: Premier is actually very complementary with Software Assurance. For a customer that wants a technical account manager and 24/7 support across all their products, then Premier is definitely the direction that we would recommend to them.
Software Assurance will give customers unlimited type of support for our server products on a business-hours basis. It does not cover our desktop products. And that’s based on customer feedback. Customers really value the support on the server side. What customers value more on the desktop side are training and e-learning, and security and reliability.
Have you received any indication from customers as to whether they’ll be able to eliminate portions of their Premier support contracts because of the new options with Software Assurance?
BL: There are a lot of links between Premier Support and what we’re doing with Software Assurance. And we’ll be talking to those customers in the coming weeks and making sure that they understand what their choices are. However, I think that they are very complementary, and that what most of our Premier customers want is a very persistent support relationship with Microsoft — 24/7 across all their products. Software Assurance will complement that, but it is not meant as a replacement for Premier.
Has Microsoft done any studies on the impact that the free supporting and training options with Software Assurance will have on the company or on the partners offering the training services? Does Microsoft pay them? How is this going to work?
BL: We’ve looked at that very carefully. This will be an investment by Microsoft in support, in training, because these partners who are out rendering these training services to our customers will be reimbursed by Microsoft. This will be in the ballpark of hundreds of millions of dollars for us, probably, over the next year. So it’s a very serious commitment by Microsoft.
When you went out and talked to customers, did you ask them specifically how they would like to see Software Assurance enhanced?
BL: We work very closely with our research group, and we did a number of different surveys based on the amount of time and the type of interaction we had.
We asked our customers what they expect from a relationship with Microsoft, what they expect from a maintenance type of offering like Software Assurance. And you would give them some examples of benefits that could be delivered, but we tried to go about it in a more open-ended way so that we could get real feedback on what was valuable to customers, as opposed to saying, “OK, here’s a choice of three things. How would you prioritise this?”
What’s your impression on which of the new benefits will be the biggest hits with customers?
BL: There are three that I think are going to be very popular: the support for our server products, the home-use rights for Office, and the training benefits that we’re going to deliver.