MS trials Office XP subscription model Downunder

MS trials Office XP subscription model Downunder

Microsoft will make Office XP available through subscription in Australia and New Zealand when the product is released in those countries, a company spokeswoman said.

The announcement comes after Microsoft confirmed on Friday that it is rescinding its plans to sell the desktop software on a subscription basis, with the release of Office XP in the US on May 31.

With the slated debut of the latest Office suite - the first of Microsoft's desktop software products to incorporate functions tied to its .Net initiative - select customers in the US were to test the software maker's planned subscription model. The company announced the Office XP subscription plan for the US in November 2000 at Comdex in Las Vegas.

But since then, Microsoft has scrapped such plans in the US this year, and said it will test the model outside the US when Office XP ships in select countries.

"This is a big move in their business model," said Michael Silver, research director at Gartner Group. "Doing it in some market that might not be as large and risky as the US will offer a better test run at figuring out how to do it right."

Microsoft has already tinkered with a non-perpetual licensing model, where customers pay a fixed price for periodic upgrades, maintenance and services. The company also uses a subscription model in at least one type of licensing agreement with academic customers, according to Gartner analysts at the recent Windows 2000 conference. While a more aggressive migration toward subscriptions sales has been put on hold in the US, Gartner still predicts Microsoft will offer such a model to business customers by the end of the year.

The shift to offering maintenance and version upgrades to customers through a monthly fee will be an important evolution for Microsoft as its traditional strategy of pumping out continual version upgrades withers in a slowing economy. Office and other desktop applications account for about 46 per cent of Microsoft's gross revenue and the majority of its earnings, but that is becoming less dependable, Gartner analysts said at the recent conference.

Also, as Microsoft retools much of its product line to be compatible with the .Net framework, which will focus on adding new services and functions at a greater clip, subscription deals will allow the company to offer more small upgrades to customers.

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