[BETA] Fortnightly

Microsoft's licensing practices push three utilities to re-evaluate their software needs.

The foundation of the Microsoft monopoly over operating systems and productivity applications may be developing hairline cracks, if the experiences of three utilities are any indicator.

Ironically, Microsoft's overly zealous attempts to sign up customers for a yearly licensing subscription program may have pushed these companies, and others, to look at options like Linux and IBM's Lotus SmartSuite.

The incipient revolt began in May 2001, when Microsoft announced a new approach to licensing its products to corporate users. Called Licensing 6.0, the program aimed to move business users to a yearly subscription fee to license software like the Office suite of products, or operating systems like Windows 2000 or Windows XP. Previously, Microsoft had discounted the cost of buying the upgrade version outright by 30 to 50 percent, so that Office, which retails for around $450, would cost businesses around $260 to upgrade-and they could upgrade at a time that suited business needs.

Under Licensing 6.0, yearly fees are due regardless of whether Microsoft releases an upgraded version during the license period. Those who did not sign up for a program under Licensing 6.0 have to pay the full cost of the new version when they do decide to upgrade.

Initially, Microsoft gave customers just six months to agree to the new licensing fee structure. But customers objected strenuously, particularly those who typically upgraded every four years and had not planned an upgrade in 2001 or 2002. For those customers, Licensing 6.0 meant paying immediately for software that the organization didn't need. Even for those who planned an upgrade in 2002, coughing up additional licensing revenues in 2001, when budgets had already been set for the year, was unpalatable, if not impossible.

As a result of these complaints, Microsoft eventually extended the deadline for signing to July 31, 2002.

Utility companies' responses to Licensing 6.0 ran the gamut. Some, like TXU, were at the end of their license term anyway, and decided that upgrading under the new program was a good fit with their needs, according to a TXU spokeswoman. Indeed, for companies that upgrade their software regularly every two to three years, Licensing 6.0 can probably save money, most IT consultants say.

Yet according to the Yankee Group, half of all corporate software users wait three years or more to upgrade, so many utilities hesitated to sign up for Licensing 6.0. Ameren, for example, signed up for a Select License, rather than an Enterprise License, and paid also for Software Assurance support and upgrades. Software Assurance provides additional training, discounts, and partner services for those licensees. But Ameren expressed doubts about what course it would pursue when that license is up in 2004. Another option, chosen by Westar Energy, was to sign up for a Select License, which covers fewer products than the Enterprise option, not sign up for Software Assurance, and start actively investigating alternatives to Microsoft products. At the far end of the spectrum are companies like Otter Tail Power, which decided not to sign up for any