Microsoft introduces new volume-licensing plans

Next month's new release marks one of the most significant changes for business coming out of Microsoft in years. No, I'm not talking about Windows XP, a nice but not vital upgrade for business users already using Windows 2000. The release I'm referring to is Microsoft's new Software Assurance (SA) and volume-licensing agreements, which will effectively replace the volume-licensing schemes available today.

Microsoft's new volume-purchase plans are Open License 6.0, Select License 6.0, Enterprise Agreement 6.0, and Enterprise Agreement 6.0 Subscription. Open License 6.0 is a 2-year agreement with a minimum purchase of five licenses. Select License 6.0 is a 3-year license with a minimum requirement of 250 licenses. Enterprise Agreement 6.0 is a 3-year agreement with a minimum of 250 licenses in which pricing is tiered according to the number of licenses purchased, up to 15,000. Enterprise Agreement 6.0 Subscription is a new option that provides 1-, 2-, and 3-year product-use subscriptions at a discount.

Each of the volume-licensing agreements can be combined with the new SA plan, which lets you upgrade to the latest version of the product for the duration of the agreement. For Windows desktops and applications such as Office XP, SA costs a yearly fee of 29 percent of the current version's retail price. For server products, SA costs 25 percent of the current version's retail price. Note that SA's cost is based on Microsoft's current version of the product—not the version that you licensed.

Core CAL
In addition to these new plans, Microsoft has announced a new Client Access License (CAL) plan known as Core CAL, which consists of a license for Windows Server, Exchange Server, Systems Management Server (SMS), and SharePoint Portal Server (SPS). The price of Core CAL is equal to the sum of the prices of the CALs for all the individual components, minus 5 percent. The Core CAL price isn't affected by whether you use all the different server products. Notably, SQL Server CALs aren't included in Core CAL; you must obtain them separately.

Microsoft intends the new plans to simplify licensing decisions for customers and, of course, add to the company's bottom line by encouraging customers to upgrade to the current versions of its products. The new licensing schemes are simpler because for the first time they combine desktop, server, and application licensing under the same plan, rather then treat them all separately. And any change that simplifies Microsoft's arcane license schemes has got to be regarded as a plus. However, basing your projected costs on totally unknown prices of future software releases is a budgetary black hole. Further, the Core CAL price certainly isn't warranted for organizations that don't use the less common SMS and SPS products.

Caveat Emptor
Microsoft's problem is this: How do you continue to make profits when you own the market and the only real competition is from the earlier releases of your own products? When these earlier product versions already have more features than most customers need, forcing customers to upgrade through licensing changes is easier than enticing them with still more features. How this new licensing scheme benefits Microsoft is clear, but its benefits to customers aren't as clear.

Certainly, one thing you must do is negotiate the contract up front to make your cost predictable. You don't want to enter into a multiyear agreement only to find that the price of the next retail version will be twice as high as that of your current version—and that you have to buy the software at that price for all your systems.

You can find out more about Microsoft's new licensing plans and SA at http://www.microsoft.com/business/licensing/sahome.asp. In addition, look for an upcoming Windows 2000 Magazine article for an in-depth analysis of Microsoft's new licensing options.