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Microsoft outlines Windows 2000 pricing

Microsoft details prices for Windows 2000 that are in line with current products, but a new method for calculating licenses could be costly to some e-commerce users.

A new pricing method for the forthcoming Windows 2000 operating system could prove costly to some e-commerce businesses.

Microsoft in a letter to its largest customers detailed the pricing scheme for the next Windows operating system for business-use PCs and server computers, setting the software's retail value in line with current products. But a new way of calculating the required number of user "licenses" may mean some businesses have to pay more than before.

Software makers require a license for each "seat," or PC system, on which a given product is installed, typically charging fees on a sliding scale that decreases as volume increases. Microsoft requires companies to pay for a license for each employee relying on Windows for services like network file storage or printing, but has not charged for Internet or Intranet access. In the future the software giant will also count Web surfers from the outside world who require "authorized " access.

When it debuts in February, Windows 2000 Professional will sell for an estimated retail price of $319, the same as its predecessor, Windows NT 4 Workstation. An upgrade from Windows NT will cost $149, the current price to move from previous versions of Windows NT, the company said yesterday in a briefing.

Customers looking to upgrade from Windows 95 or 98--both consumer operating systems--will pay $219. Microsoft previously offered no consumer upgrade, forcing customers to pay full price for Windows NT.

Pricing grows more expensive and more complex as deployment grows in size and sophistication. Windows 2000 will be sold in three different versions, for use ranging from desktop systems to sophisticated networks.

Microsoft's revised scheme for calculating so-called client-access licenses (CALs) could mean additional costs for e-commerce businesses.

Under the Windows NT 4 licensing program, Microsoft required a CAL for every user accessing a Windows NT server for filing and printing services, but not for Web surfers inside the corporate network or those coming in from the outside. Beginning with Windows 2000 a CAL is necessary for each individual requiring authentication, such as would be necessary for a secure online transaction.

As a result, customers planning to move e-commerce applications from Windows NT to Windows 2000 could face a price increase.

The cost of each CAL varies depending on volume discounts and other factors. Microsoft estimates that an e-commerce customer who needs more than 50 CALs would be better off paying a flat rate of $2,000 for authorization it calls the Internet Connector, essentially an unlimited license. The Internet Connector is intended only for external access over the Web and not for access across a corporate network or Intranet, the company said.

Customers confused about the previous pricing plan precipitated the change, said Mike Nash, a general manager for Windows 2000. "We found many customers were buying CALs when they didn't need them and still others weren't buying them when they did need them."

"If I decide to put up mikenash.com and I want to sell T-Shirts with my picture on them, for something uninteresting like me five CALs is all I need since I probably won't have more than five people buying at one time," Nash predicted.

Turning to larger corporate purchases, the big issue is how the pricing scheme will affect Internet service providers and particularly application service providers, analysts said.

Alternative operating systems
"There is no question they can price themselves out of that market, which would easily look to alternative [operating systems], like Linux and Unix," according to Aberdeen analyst James Gruener.

"Microsoft will be less aggressive on the pricing than three to six months ago, because there is kind of a ground swell with their major customers feeling more and more emboldened," Dataquest analyst Kimball Brown said. "Between the [antitrust] court case and Microsoft having less of an ability to strong-arm things and the growth being in places where Microsoft isn't, such as Internet service providers, companies are more confident about coming out with non-Microsoft solutions."

The much-delayed Windows 2000 Professional, Windows 2000 Server, and Windows 2000 Advanced Server are due February 17. Windows 2000 Datacenter is scheduled to ship about 120 days later.

Microsoft also released basic multi-user pricing information to corporate customers, who asked for it now as they prepare their fiscal 2000 budgets.

The five-user version of Windows 2000 Server will cost $999, or $499 as an upgrade from a previous version of Windows NT or Novell NetWare.

Windows 2000 Server with 10 user licenses will be available for $1,199, and the upgrade from Windows NT 4 or NetWare for $599. For 25 users, customers pay $1,799 or $899 if upgrading from Windows NT or NetWare.

Windows 2000 Advanced Server will cost $3,999 for 25 users or $1,999 as an upgrade from Windows NT 4 Enterprise Edition.

Nash pointed out these prices do not reflect volume discounts typically available to larger customers.

A customer subscribing to Microsoft?s volume Open Level B license, for example, deploying 10 Windows 2000 servers with 100 PCs would pay an upgrade price of $22,800; $17,500 for the desktops, $3,700 for the servers, and $1,600 for the client access licenses.