A Boon for Competitors?

Gartner research reports also show Microsoft's new licensing has played a part in a surge of inquiries about StarOffice, the office productivity suite from Sun Microsystems Inc. available on Windows, Linux and other platforms. StarOffice may be a practical alternative, except that indirect costs like retraining will make large-scale migration of users hard to justify. Sun is also using competitive upgrades to get customers to consider replacing some of their Windows servers with Linux-powered server appliances from its Cobalt subsidiary.

"It did make me pause—maybe for all of 20 seconds—and wonder if we should get off Microsoft," says John Hummel, CIO of Sutter Health Group, a large west-coast network of physicians and hospitals and one of the organizers of the Microsoft Healthcare Users Group.

His staff did take a second look at competitive products from Lotus and Novell, but ultimately reaffirmed the decision to stick with Microsoft. However, except for an enterprise license that covers SQL Server, Sutter chose not to buy into a Software Assurance plan and it let its previous Enterprise Agreement lapse. "We decided we're better off waiting and just buying new licenses as needed," Hummel says.

At Apartment Investment & Management Co., a $1.5 billion real-estate investment trust, CIO R. Scott Wesson also found himself reassessing his commitment to Microsoft products because of the licensing change. Although in principle he likes the idea of a subscription model that would allow him to budget more predictably for software costs, he says, "Microsoft really torpedoed that concept this year." It's the right idea, perhaps, but at the wrong price, he says.

Wesson says he estimates his company will pay about 40 percent more for Microsoft software under the new plan. "In this economy, to raise someone's prices that much without some commensurate value exchanged is just heinous," he says.

Wesson has another couple of years to go on an existing Enterprise Agreement license, and he refused Microsoft's efforts to get him to renegotiate under the new terms. He is unlikely to abandon Microsoft technology, he says, but will consider reducing the number of Microsoft licenses he must maintain. For example, instead of running an intranet Domain Name Server on Windows, as is the case today, he might be able to substitute a Linux server.

Wesson also foresees stretching the useful life of Microsoft products farther now that the cost of upgrading has gone up. "That would be a change for me—I haven't skipped an upgrade on Microsoft or any other software product in many years," he says.