Costly benefits

The economics of desktop software are changing fast. Microsoft, the almost-universal presence on the desktop, has radically overhauled its licensing model, with the result that many of its users are seeing their costs go up by half. The response in some quarters: to look for lower-cost alternatives.

Microsoft’s new corporate upgrade scheme, Software Assurance (SA), provides users of Windows 2000 and XP with desktop and server software updates as soon as they are released, and is


Hands on: MAT Group – the thin-client option

Freight-forwarding company MAT Group switched from a mixed PC and dumb terminal architecture because the cost and time taken to support its PCs was getting “out of hand”, says David Prentice, MAT Group’s financial controller. Employees originally accessed the company’s Coda accounting software and its core freight-forwarding application, FCL, through dumb terminals connected to central Unix servers. However, some staff members – particularly users in the accounts department – began using Windows PCs to supplement their Unix dumb terminals.

MAT’s IT department eventually found itself supporting about 100 PCs across the company’s 10 international branches – a job for which they were not prepared. MAT needed to reduce the burden of desktop support, but Windows was too valuable to remove from the architecture. “With Windows, users have the processing power to create presentations based on data from both FCL and Coda. Windows is, of course, also the most common platform used by our customers,” explains Prentice.

The company instead chose to move to a Citrix thin-client architecture hosted by UK managed services company CSF. MAT was able to consolidate its Unix and Windows applications at CSF’s data centre, and deliver them to employees using low maintenance thin-client devices. Users are progressively being migrated to new thin-client devices, but the Citrix architecture also allows employees who are still using the old hardware to access applications on the CSF servers. The entire project cost around £100,000, the majority of which was spent on upgrading the internal network infrastructure, setting up a wide area network with CSF, and migrating MAT’s data centre hardware to CSF’s facilities. MAT now rents hardware and services from CSF as part of the agreement.

Overall, the new architecture has not reduced IT costs, says Prentice. However, MAT did reduce its IT staff from ten to one full-time and three IT staff who are seconded from other departments within the company. Not only are these staff less costly than fully-qualified IT professionals, but the full-time IT executive can now focus on more strategic IT issues rather than worrying about the day-to-day running of desktops and servers, says Prentice.



now the only method of upgrading Microsoft software for volume users. Those companies that did not sign up for SA before 31 July 2002 will have to buy completely new licences for the next versions of Windows or Microsoft Office.

There is a sting in the tail with SA. Customers will pay an additional 29% on average to cover desktop software, and about 25% more to cover server upgrades, according to Gartner analyst Alvin Park.

A recent survey at Information Age‘s web site,, supports these figures. Of the companies polled that had signed up to SA, 48% thought their costs would increase. Only 16% said costs would go down.

The consensus among analysts is that SA will reduce software licensing and upgrade costs only for those enterprises that upgrade their Microsoft software at least once every three years. Typically, these are companies that rely on up-to-date software for competitive advantage, such as technology companies or the development teams of large corporations.

Microsoft has one more trick up its sleeve that may convince corporate customers it is worth paying for the privilege of sticking with its software. According to Microsoft, its web services based .Net framework will reduce the burden of client support while improving the user experience. The bulk of .Net software will sit on the server, with a small part on the desktop to provide access to server applications. IT staff will be able to configure and maintain this software on each client from the server.

But many of .Net’s vaunted desktop capabilities have yet to come to market, and enterprise-class applications will have to be re-written to make best use of .Net. On top of that, many analysts remain sceptical about what .Net will ultimately provide. All that Microsoft can point to at the moment is that .Net’s potential will be delivered most effectively through SA.

In effect, Microsoft has presented an ultimatum to its corporate customers: pay to keep up with the cutting edge when it arrives or get left behind. But it seems most customers have called the company’s bluff. According to AMR Research, over 60% of businesses have decided not to sign-up to SA or are assessing their options. Infoconomy’s own research suggests that one third of companies have chosen not to upgrade and a quarter are still conducting a review of whether to switch to SA. Half have instigated reviews of desktop cost of ownership.

These companies have three choices: join SA after paying for full versions of all the latest software; continue using the existing software and buy new licences only when an upgrade is necessary; or replace Microsoft software with cheaper alternatives.

Alternative options

The dissenting mood among many Microsoft customers has spurred several other desktop application vendors into action. Sun Microsystems has recently released its first commercial office applications suite, StarOffice 6.0; Corel is offering rebates on W


Hands on: Pauleys – productivity without PC pain

UK-based fresh food distributor Pauleys has no love of PCs. To keep technology costs down, access to the its server-hosted applications for its 400 employees was, until 2000, through ‘green screen’ terminals.

That meant that there were only five PCs available to employees. Even so, says David Lane, Pauleys’ research and development director, PCs represented 95% of the company’s support costs. “We are in a high-volume, low-margin business, so we have had to stay away from PCs to keep costs down,” he explains. One problem: the dumb terminals did not provide the users with graphical user interface-based productivity tools for word processing, spreadsheet work and browsing.

In 2000, Pauleys decided it needed to address that, and became the first company to deploy a web terminal-based architecture based on Sun Microsystems’ Sun Ray offering. The existing Wyse green screens were replaced by 80 Sun Ray terminals, which had high resolution displays and used Sun’s StarOffice suite, a then-free competitor to Microsoft Office that runs on Solaris.

Lane says that choice of deployment saved around £2.2 million on licences compared to a Microsoft Office deployment. In effect, he explains, Pauleys managed to upgrade to modern desktop applications, while maintaining its centralised applications architecture.

Yet the Sun Ray platform has not displaced the company’s standalone PCs. Certain applications still only run on Windows, and Pauleys needs the PCs to run web design packages, such as Dreamweaver and FrontPage, as well as specialist software for distribution route planning and lorry tacograph analysis.



ordPerfect Office purchases; and Ximian, a distributor of enterprise-class open-source desktop software, has been attracting several large customers that have grown tired of their reliance on Microsoft. The up-front cost savings are clear. StarOffice 6.0 sells for around £50 per user in the UK, while Ximian’s desktop software costs even less at $50, even though it includes StarOffice. This compares favourably to MS Office’s price tag of £400 to £600.

But Gartner Research analyst Michael Silver warns that even partial replacement of Microsoft may not provide the expected savings. A theoretical model composed by Silver suggests that, in a company with 2,000 MS Office licences, it would cost between $1.9 million and $4.5 million to migrate 70% of users to StarOffice 6.0. Those costs largely stem from training, incompatibility issues and migration.

“Software acquisition costs may only be the ‘tip of the iceberg’ compared with migration and learning costs,” says Silver, “Ongoing costs of managing a diverse automation environment should also be considered.”

Of those polled in Infoconomy’s research, 84% include licence costs when considering the cost of desktop support, but the majority also look at support staff and security costs. Meta Group analyst Ashim Pal says that 50% of an IT department’s budget is spent on supporting and maintaining desktops. “The industry average per machine is $3,500 for highly controlled desktops, $5,000 for lightly managed desktops and $7,000 to $8,000 for laptops.” Companies thinking of migrating, therefore, need to consider how much support they will need to provide afterwards.

“Microsoft Office is part of the basic IT infrastructure of the enterprise,” argues Silver, “and cannot be eliminated or easily replaced.” It is naive to think that the alternatives will replace Microsoft software entirely, he says. And vendors such as Sun, Ximian and Corel agree. “You should not completely replace your desktop software with Linux, but start by piloting small projects and targeting departments,” cautions John Perr, Ximian’s vice president of marketing. Employees who only need email and word processing functions can run the cheaper StarOffice, while employees who rely on Excel, PowerPoint or Access applications can use the more expensive Microsoft suite.

It is clear that licensing and support costs for desktop software are set to rise. But businesses are not faced with an ‘either/or’ choice. More than 50% of companies will have a mix of architectures and software vendors’ products in the next few years, according to Silver. The key to success will be managing those different packages and architectures to best effect.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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