CIO — For all its warring with competitors, Microsoft’s relationship with its corporate customers had been relatively peaceful. Until October 2001.
That’s when Microsoft’s new licensing scheme started going into effect.
Redmond’s decision to shift from a business plan that let its corporate customers decide when to upgrade each PC or server to a subscription plan that exacts a yearly fee for the software?whether you upgrade or not?has fueled a new kind of anger.
It’s a dangerous kind of anger, the kind that flares up when you think you’ve lost control over something that was once yours.
Of course, CIOs long ago ceded control over the desktop to Microsoft, but they held on to the power to decide when and how they would upgrade. And they had the leverage to negotiate on price when they did. The new scheme, called Licensing 6.0, requires enterprises to buy a two- or three-year subscription that covers any number of upgrades. Those who don’t buy a subscription can still buy individual licenses, but they’ll pay the full license price the next time they want to upgrade.
Microsoft defends the plan by saying that it simplifies its old byzantine pricing structure, which customers had complained about. Customers say simplicity is fine?but not at the cost of control.
Anger about the new licensing plan reached a fever pitch in late 2001, when 15 percent of 122 respondents to an October 2001 CIO survey said they planned to sign up (see "The Meter Is Running," www.cio.com/printlinks). More than a year later, that anger is still simmering, even in customers that went with the new program.
"We caved," says Tom Jeffery, vice president of IT at Pittsfield, Mass.-based retailer KB Toys, who estimates that KB will pay $135,000 per year more for Microsoft products under the new plan. "We felt strong-armed into doing this. But because we don’t have any other option, we felt we just had to play the game."
But many still aren’t playing. Though Microsoft’s deadline for customers to sign up for the new licensing plan passed at the end of July 2002, by November a new CIO survey of 375 IT executives found that 51 percent of respondents still had not upgraded to Microsoft’s new product line, XP. Now, if they do, they’ll have to pay the full price, even if they already have older versions of Windows software.
Who wouldn’t be angry?
Anger used to be a wasted emotion when it came to the colossus of Redmond. You had no choice, so you paid your money and you moved on. But this time Microsoft’s high-handedness, combined with an intensely cost-conscious economic environment, and the arrival of an increasingly viable competitor in GNU/Linux and other open-source software products (see "Your Open-Source Plan," Page 52), has encouraged CIOs to dig in their heels. Judging from the CIO survey and our interviews with respondents and others, many CIOs have chosen to play chicken with Microsoft. They’re freezing their Microsoft infrastructure investments and buying new licenses only as needed, waiting to see if in the next few years Redmond blinks.
