Paying the price for poor competition

Microsoft put its new licensing scheme into place last week, to the expected cries of ‘unfair!’ from the analyst community.

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By  Mark Sutton Published  October 6, 2001

Microsoft put its new licensing scheme into place last week, to the expected cries of ‘unfair!’ from the analyst community. Ever since Gartner predict that the changes to the scheme would result in cost increases of between 33% and 107%, there have been rumblings of dissent over the way Redmond has handled the scheme.

The changes have been necessitated, in part, by the shift to software as a service. To really to deliver on .NET, Microsoft needs to get customers to see software as something you rent, not buy.

This seems fair enough to me. Microsoft may be leading the service model, but it is not alone, and the ASP model has a lot of potential to catch on. Many of us have software on our desktops that we don’t use often to justify the full price of it. Some of us may even have software products that we don’t want to install, because of the disruption that upgrading so often causes.

If you can get the latest version of the software, without aggravation, for just as long as you need it, then that should be a good thing. But has Microsoft handled the changes properly?

Ashim Pal of the Meta Group doesn’t think so. Speaking to Greg Wilson, the editor of Arabian Computer News, he rated Microsoft as ‘three out of ten’ for customer relationships handling of the move. Pal believes that it is the small to medium businesses that will suffer the most.

He said that Microsoft haven’t communicated the changes adequately at this level, leaving the SMB segment on its own. While larger companies have had adequate communication, can afford to sign up for the changes, and will probably welcome some simplicity—or can handle the change to open source alternatives if they decide they don’t like the changes, the SMBs don’t have the choice.

Some businesses have been caught out by the need to have up to date versions of Microsoft software—meaning XP—before they can take up one of the new contracts. Those companies that update their software the least will also find themselves paying more, as will those that don’t plan their upgrades, but only make them as necessary.

One thing that Gartner, Meta and IDC analysts all agree on—Microsoft would not be able to make the changes that it is making, if there were some serious competition in the desktop market. As it is, Microsoft’s dominance means they appear to be able to get away with strong arming their customers.

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