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Microsoft tweaks licenses, not prices

The software giant reveals new licensing provisions for big customers--but stays put on pricing for the next version of its Office software.

Microsoft is set to reveal on Monday that volume prices for the next version of its Office software will remain unchanged, as it introduces new licensing provisions that are intended to placate big customers.

The software giant routinely revamps schedules for products it sends to authorized distributors such as PC makers on the first of each month. Monday's update for the first time will include packages and pricing for Office 2003, the new version of the company's market-leading productivity package.

Microsoft representatives said volume pricing for Office 2003 will be identical to the cost of the current version, Office XP, confounding some analysts who expected a price cut.

Retail prices for Office XP were trimmed several months ago. Microsoft mirrored those cuts in retail costs it recently announced for Office 2003.

Paul DeGroot, an analyst for research firm Directions on Microsoft, said it may be a mistake for Microsoft not to push down volume licensing prices in sync with retail prices. Smaller businesses will be especially tempted to forgo restrictive volume licensing plans and buy slightly more expensive but much more flexible retail versions of the software.

"I think it's a real problem that retail prices and volume prices are getting very close to each other," DeGroot said. "A lot of customers are going to look at the fact they can purchase a retail upgrade whenever they want and decide that's a better deal."

As previously reported, Microsoft will also introduce a slew of new volume licensing provisions Monday. The licensing changes are aimed mainly at getting big customers to feel better about Software Assurance, the controversial and costly new plan the software giant introduced last year that locks customers into regular upgrades.

While Microsoft has held the line on volume pricing, the new licensing provisions are intended to add value by giving volume customers new privileges and services. Options include free online training through Microsoft and accredited training partners; enhanced tech support; and access to Microsoft's bug-tracking information service, TechNet. Customers can also opt for a license that allows workers to install the same copy of Office on both an office and a home PC.

Microsoft will also make it easier for customers to enroll in Software Assurance. New licensing provisions for Office 2003 allow customers who obtain the software preloaded on a PC to convert the OEM (original equipment manufacturer) license for the software into a Software Assurance plan. The company provided details of the plan to OEM partners early this month.

DeGroot said the licensing changes should make many existing Software Assurance customers feel better about the program, but they won't do much to draw in new accounts under the licensing plan.

"It's an additional benefit and may tip a few customers one way or the other, but overall it's not going to dramatically change the picture," DeGroot said. "It may change the minds of a few (Software Assurance) customers who are wondering whether they should renew or not. The additional benefits may give them the final push."