With contracts coming up for renewal this year, many Microsoft customers will have the chance to pass judgment on the company's software maintenance plan. Some analysts see the looming contract expirations as the biggest challenge yet for the much-critiqued Software Assurance (SA) program.
The most enticing aspect of the three-year SA agreement is that it allows customers to obtain the latest software free of charge. But, given that the next big wave of Microsoft products will not come before 2006, the software maker could experience customer backlash.
"We agreed to SA primarily because of pending upgrades and the fact that it simplified things," vice-president of IS at NetJets, Randy Keefer, said. "Going forward, we will always weigh whether we should continue with SA or revert back to the pay-as-you-upgrade model."
For Microsoft, SA agreements are guaranteed revenue. Because of this, the company is intent on making the program work. Last year, Microsoft changed the plan to appease customers who said the program cost too much and offered too little. This year, analysts at Gartner think that Microsoft may ship interim releases of Windows and Office to make SA more attractive.
"If Microsoft continues to elongate release cycles, it could be that customers won't get an update in their contract period and would be upset that they are not getting a new version for what they pay," research director at Gartner, Alvin Park, said.
Many Microsoft customers are nearing the end of their two-year Upgrade Advantage (UA) contracts, purchased just before Microsoft retired that option on July 31, 2002. Software Assurance was since introduced and has become the only volume-upgrade option, apart from buying a new license. Although hoping to sign the last of its UA customers to SA agreements, Microsoft recently lowered its expectations, projecting that no more than 30 per cent of current UA customers will buy SA.
"There is too much money at risk here not to do your homework," analyst at Forrester, Julie Giera, said. "The benefits are worth the cost, but you have to use and deploy them."
Another option is to postpone an upgrade until a new version is released, analyst at Directions on Microsoft, Paul DeGroot, said.
"If you don't think Microsoft is going to come out with anything compelling enough, you wait," DeGroot said. "Without locking yourself in for an upgrade, it becomes easier to switch away from Microsoft. My guess is that the Linux desktop will look a lot better three years from now than it does today."
Microsoft planned to offer a tool developed by Forrester Research to help customers determine the value of SA, Microsoft's product manager of licensing and pricing, Sunny Charlebois, said.
The tool, which runs in Excel, examined the SA benefits a customer plans to use, license prices, and IT staff salaries, she said.