Clock runs out on Microsoft upgrades

After getting pushed back 10 months because of customer complaints about the original timetable, Microsoft Corp.'s controversial new software licensing maintenance program will take effect this week as several long-standing upgrade programs used by the government and other customers expire.

Under the plan, July 31 will be the last day that customers can buy into Microsoft upgrade programs, such as Upgrade Advantage, that have allowed, with certain restrictions, an existing license holder to upgrade to a current version of a product at a price that is often 30 percent to 40 percent less than the cost of a new license.

As of Aug. 1, Microsoft's Software Assurance maintenance program becomes the only discount upgrade program. Agencies will buy the program at the same time a new software license is purchased.

Agencies that want to upgrade but are not on a maintenance or upgrade program are left with two choices after July 31: Buy a new license and pay for Software Assurance — in effect locking into a future upgrade purchase — or forgo Software Assurance and just buy a new license every time they upgrade.

The program changeover will not immediately impact the two-thirds of Microsoft's federal customers who have a software maintenance contract such as an Enterprise Agreement, in which agencies pay a fee for the rights to any new versions of certain software released during the life of the contract, according to Kathryn Mihalich, government licensing manager at Microsoft.

Officials at Microsoft reseller GTSI Corp. said that most of their customers have evaluated the program changes and have planned accordingly, either by being in an Enterprise Agreement or by paying for upgrade rights under one of the soon-to-expire upgrade programs.

Potential problems arise for those Microsoft customers who are not in one of those two situations. In many cases, those agencies will pay higher prices than before when they want to buy the latest version of the Microsoft software they use.

"In general, they'll be paying between 35 [percent] and 50 percent more to upgrade than they would have before," said Alvin Park, research director with Gartner Inc., a market research firm.

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The forthcoming changes to upgrade fees for Microsoft Corp. software should be no surprise. Microsoft originally announced Software Assurance in May 2001 with an original Oct. 1, 2001, changeover date. That timing was especially problematic for some government entities that would have had to find new money in the middle of a fiscal year for an unplanned purchase of an upgrade program.

"The earlier date would have caused problems with government planning cycles," said Scott Spencer, business development manager at GTSI.

So Microsoft postponed the date by 10 months and "spent a lot of money" on an extensive outreach and customer education program explaining the changes, said Kathryn Mihalich, government licensing manager at Microsoft.