Foley on Microsoft
Feeling Assured About Software Assurance?
Analysts say customers are dumping it, Microsoft says they're signing up in droves. Is the truth somewhere in the middle?
- By Mary Jo Foley
Software Assurance (SA), Microsoft's annuity-licensing plan, is nothing if
not controversial. I've never heard a Microsoft customer voluntarily praise
anything about the program -- other than it allows them to spread out software
payments over multiple years.
A recent study by Forrester Research Inc. found that customers feel SA offers
them less bang for their collective buck than they believed previously. High
cost, coupled with unclear roadmaps of deliverables, is making for some less-than-content
SA customers, the Cambridge, Mass.-based researcher claims.
Flying into the teeth of this data, Microsoft released some very upbeat-sounding
SA statistics at the end of its fiscal 2007 on June 30. Among the new numbers
from Redmond's SA watchers:
- Enterprise Agreement volume-license renewal rates (which exceeded the high
end of Microsoft's historic 66 percent to 75 percent renewal range) and multi-year
license sales accounted for 40 percent of the company's revenues.
- The Microsoft Desktop Optimization Pack (an SA "benefit") has
been the fastest-selling Volume Licensing product ever, reaching the two-million-license
mark after just six months.
So which is it? Is SA the best thing to ever happen to Microsoft customers?
Or are they avoiding it like the plague?
"It's hard to figure out what the actual numbers are," acknowledges
licensing expert Scott Braden. "My take is that most customers buy
Enterprise Agreements, which include SA. So that makes the SA numbers look good
when Microsoft reports."
Ania Levy, president of Levy LeGette
LLC, an IT deal-structuring service provider, has similar qualms about reading
too much into the numbers. Levy notes that if 75 percent of some unknown number
of Microsoft customers are renewing their Enterprise Agreements, it means 25
percent aren't. Given the size of Microsoft's enterprise user base, that's a
Microsoft has been trying to build popular support for its SA program since
it was launched in 2001. Its current strategy is to offer SA customers incentives,
in the form of products and technologies not available to non-SA customers,
in order to attract and maintain its SA base. The aforementioned Microsoft Desktop
Optimization Pack (MDOP) -- which includes application virtualization, plus
desktop monitoring and management tools -- is an example of an SA-only offering.
While Microsoft hasn't gone so far as to make SA mandatory, analysts with Gartner
Inc. predicted recently that Microsoft might do so -- possibly by 2010, when
Windows 7 is set to ship.
"Many customers are afraid not to renew," Levy says. If they don't,
they might "suffer from Microsoft price hikes, totaling as much as hundreds
of percentage points for a product," she says. (Levy speaks from years
of experience, having negotiated numerous licensing deals between Fortune-class
companies and Microsoft and other tech vendors.) Some customers also are fearful
that "Microsoft might punish them [for not participating], like they do
their partners," Levy claims.
The vast majority of Microsoft customers signing volume-license agreements
often don't realize the choices available to them, Braden says. For example,
Enterprise Agreement licensees have the option of removing SA from products
where they don't need it. In other words, SA doesn't have to be a blanket purchase,
"Of the few that do [due] diligence, most of them end up with SA on only
a few products," Braden says. "Most customers will agree that for
many products, they didn't get the value they expected."
Braden's main message to his clients: When it comes to SA, "you shouldn't
make decisions based on what everyone else is doing -- just like your Mom told
you. Do your own analysis and understand your own reasons."
What's your SA experience? Have you found any silver linings in the Microsoft
SA cloud? Let me know at email@example.com.
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Mary Jo Foley is editor of the ZDNet "All About Microsoft" blog and has been covering Microsoft for about two decades. She has a new book out, Microsoft 2.0 (John Wiley & Sons, May 2008), about what's next for Microsoft in the post-Gates era.