Customers will now have until Feb. 28, 2002, rather than the original Oct. 1 deadline, to make the change as part of the company's new "Software Assurance" licensing program announced earlier this year, said Simon Hughes, Microsoft program manager for worldwide licensing and pricing.
Software Assurance contracts effectively commit customers to buying operating system and application upgrades at a discounted rate on a periodic basis, rather than purchasing the upgrade when the customer decides it's time. The new program lowers costs for businesses that upgrade software frequently but would force those who upgrade less frequently to pay more.
A survey by researcher Gartner estimated that medium-sized businesses upgrading software every three years will pay anywhere from 33 percent to 77 percent more under the new plan than they did with the old plan. Four-year upgrades would cost 68 percent to 107 percent more.
One of the requirements for switching to the new licensing program is that companies must be using the latest version of a product, which would mean Office XP for customers of that software package.
Business customers using Microsoft's current "Open" and "Select" licensing plans can ignore the Software Assurance switch, but the Open and Select plans expire when Software Assurance kicks in. So when these companies do decide it's time to upgrade their software, they'll pay full price.
"The alternative to Software Assurance is that you resign yourself to the fact you're going to have to pay full price next time you upgrade," Guernsey Research analyst Chris LeTocq said.
The new deadline for upgrading to Office XP was prompted by feedback from customers who were ready to make the change but couldn't find the money so late in the year, Hughes said.
"We've had a lot of interest in the new program," Hughes said, "but customers have asked us for more time to plan and budget for the transition."
The new date gives business customers plenty of time to upgrade to XP under Microsoft's current "Upgrade Advantage" program for purchasing software updates, which also will be extended to Feb. 28, Hughes said.
LeTocq said the delay was a wise strategic move by Microsoft. "I think the main thing is that for most companies, coming up with another $200 per desktop was just an unreachable task," he said. "I heard complaints from a lot of companies, and some of them were looking very hard at whether they still need to depend on Microsoft."
Convincing customers to spring for new software has been an ongoing challenge for Microsoft. Surveys indicate that more than half of Office customers are getting by with older Office 95 and Office 97 versions.