Force, not value, to drive upgrades--the new Microsoft way (?)

Microsoft is "upgrading" its Software Assurance program, but not in a way that benefits customers.

Rather than rely on customers actually wanting to buy its products (and for the long term), Microsoft is apparently intent on forcing them to do so. In a move reported by eWeek, Microsoft is forcing customers into buying its "Software Assurance."

What does this mean?

Microsoft wants to change how businesses buy Windows by essentially driving IT organizations to purchase Software Assurance upgrade protection. In a dramatic departure from the past, Software Assurance or Enterprise Agreement is required to buy the main business version of Windows Vista and to obtain vital desktop deployment tools.

Windows XP Professional carries no such requirement. Office 2007 imposes similar licensing changes, but there is a difference: Many businesses already buy Office through volume licensing. By contrast, most businesses buy Windows on new PCs.

Why the change? Well, money, of course.

Software Assurance obligates businesses to a two- or three-year contract attached to Open, Open Value and Select agreements; subscribers pay 29 percent of the desktop software price annually for the term of the contract. Microsoft realizes Software Assurance subscription payments on its balance sheet as unearned revenue....

The forced path already is resulting in changes. In Microsoft's 2007 fiscal fourth quarter, unearned revenue balance for the Client division, whose major product is Windows, grew 25 percent.

Hurray for Microsoft! In an attempt to boost revenues and smooth them out (i.e., ongoing annuities instead of purchases clumped around product releases), Microsoft has shown a callous disregard for the customer as it seeks out its own benefit.

This despite Forrester showing that only 11 percent of Software Assurance customers plan to renew it. Why? Well, because Microsoft's Software Assurance tends to drive up prices. What's not to love?

Much, if you're a Microsoft customer. But if you're a Microsoft CFO looking for ways to lock in customers over the long haul, this is a Faustian bargain made in....


Via Slashdot's Firehose.

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About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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