New Microsoft Licensing Program

This summer, Microsoft will revamp its entire system of volume licensing for software. Beginning August 1, customers can join Microsoft's Software Assurance program, which provides all upgrades for a product released during the two year subscription term. While retail upgrades are expected to be available for the foreseeable future, volume licensing may be a cost effective alternative, especially for companies considering software upgrades in the next few months. While the new system can be confusing, we will try to explain the new programs and how they might benefit your company.

Currently, most users buy software preloaded on a new PC (known as "OEM" software). This provides a big discount to the consumer, but also requires them to contact the PC manufacturer for technical support, saving Microsoft in support costs. The most expensive option is to purchase full copies of software (separate boxes) at retail prices. A third option is to use one of Microsoft's licensing programs. Licensing reduces costs by allowing a business to purchase multiple software licenses, and receive a paper license authorizing use along with one copy of the software at minimal price for just the media.

Most ITS clients qualify for Microsoft's Open Licensing program, which allows any company purchasing five or more licenses to receive a volume discount, with that same discount continuing for all purchases over the next two years. This program works for Windows, Office, and several other Microsoft titles. However, Microsoft is discontinuing the upgrade versions of their Open License software, steering customers towards their Software Assurance program. This means that customers will no longer be able to purchase an "Office XP Professional Upgrade License" but must purchase a license for the full non-upgrade version.

Upgrade Advantage

Prior to August 1, 2002, customers can join Microsoft's current Upgrade Advantage program to purchase upgrades and a subscription, even for selected older products. On August 1, all Upgrade Advantage licenses automatically convert to Software Assurance licenses (described below), providing rights to future upgrades. This makes Upgrade Advantage a great deal for companies considering upgrading in the near future. Better yet, the price for Upgrade Advantage licenses is comparable to or better than the regular upgrade price.

For example, a company which wants to upgrade five copies of Office 97 to Office XP before the end of July 2002 can either purchase five retail upgrade packages of Office XP, or purchase Upgrade Advantage licenses, saving almost $300. Plus the latter solution provides upgrades to any version released in the next two years.

Existing retail and OEM licenses can be upgraded using Upgrade Advantage before August 1 as well.

Software Assurance

The new Software Assurance program provides licensees with the option to purchase two years of upgrade protection at a savings from the regular purchase price. Without Software Assurance a company would have to purchase either individual retail upgrades or full licenses to obtain future versions of a program. This subscription then renews every two years.

Before August 1, companies will be able to purchase Software Assurance separately for their existing licenses. After August 1, new software may be enrolled in Software Assurance only at the time of initial purchase or within the next 90 days.

Is Software Assurance similar to Upgrade Advantage? Yes. But the latter is being discontinued in favor of the new program.

If You Rarely Upgrade

For those clients who rarely upgrade their software, it may make sense to bypass the Software Assurance program altogether. In four years one can opt to purchase a new full or upgrade copy of the new version of your software, and probably come out ahead, since they would have saved two terms of Software Assurance subscription fees.

However, Microsoft currently limits upgrade eligibility to the previous two versions. For example only users with Office 97 or 2000 can install a retail upgrade to Office XP. The rest must purchase a full copy or a full Open License to obtain a new version.

Planning Ahead

To get the most out of Microsoft's program, clients must determine their long term needs for future Microsoft software. If your company does not plan to upgrade to Office 2004 within the next few years, signing up for Software Assurance when you purchase Office XP may not make sense. Companies upgrading from older versions of Office may find it more economical to upgrade before July 31 so they qualify for special upgrade pricing.

Microsoft offers special financing for purchases over $2,000 made before June 30 to encourage participation. As we discuss in our "Alternative Financing" article on page one of this issue [see link below], leasing your software purchase may be an option as well.

May 2002

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