Microsoft, in fact, announced that it would begin offering a brand-new subscription license this month for its operating systems and software, including Microsoft Windows Professional and Microsoft Office Professional. The Enterprise Agreement Subscription, as the new license is called, is a major departure from the perpetual model. CIOs will now lease the software under subscription licenses. While CIOs see the potential benefits of the subscription model, many are uncomfortable with the specific terms Microsoft is offering. For instance, Microsoft is requiring that customers pay a hefty annual fee even before new upgrades are released.

Microsoft has also introduced a new and more controversial twist to its perpetual Open and Select licensing agreements. These programs pressure CIOs to upgrade to new versions such as Windows XP by Feb. 1, 2002, at a discounted rate. If they don’t, they will have to pay twice as much to upgrade after that date. (For more information on this controversy, go to "Looks Can Be Deceiving" on www.cio.com/printlinks.)

Mark Grove, CIO of AmericasDoctor, a pharmaceutical services company based in Chicago, says software vendors that require perpetual licenses with constant upgrades are not serving their customers. "Any vendor who’s doing that is trying to force the customer to follow the vendor’s business model," Grove says. "When they tell a customer that he has to upgrade at a certain time, they’re forgetting that their customers have their own business cycles and busy seasons that they have to work within."

After his experience with Lawson, VisionQuest’s Seyk is also considering buying software from vendors on a renewable or subscription basis when it is offered. He likes the idea of not paying for the software entirely up front. "Once you give [vendors] the cash and the software doesn’t perform, you have no leverage," he says. "If [CIOs] could say, Sure, you’ll get 10 percent now and 10 percent after each quarter, and a year from now you’ll get it all if [the software] works," that would be a way to hold the vendor accountable. "It gives [the vendor] a financial incentive to make sure the product works," he adds.

Open Source, Open Sesame

Some CIOs believe open source could liberate businesses from their dependence on the dysfunctional software-making ma-chine. Linux now boasts important implementations at companies including Shell Oil, hotel franchiser Cendant, networking giant Cisco and retailer Burlington Coat Factory, while the Apache program is by many accounts the most widely used Web server software today. The prevalence of these open-source packages will only continue to grow, with big IT vendors such as IBM providing hardware with Linux and Apache bundled in.