Microsoft softens licensing stance for SMEs


27 November 2002 US software giant Microsoft yesterday responded to mounting criticism of its new pricing structure by promising to ease the financial burden for small and medium-sized enterprises (SMEs).

The Redmond, Washington-based company is softening its stance on its corporate software licensing structure to allow SMEs to spread their payments over a three-year period. The new price plan is called Open Value and is due to take effect in early 2003, the company said.

At present, customers must pay a fee up-front in addition to annual fees as part of standard two-year or three-year contracts.

Microsoft said it was setting up a training programme for its channel partners to help them sell the new payment plan to their clients.

The move is being interpreted as an attempt by Microsoft to discourage SMEs from defecting to cheaper rival desktop software products, such as Sun Microsystems’ StarOffice or open-source Linux-based alternatives.

Market research company Gartner claims that Microsoft’s new pricing structure is resulting in price hikes of between 33% and 107% for most of its customers.

Estimates vary, but most analysts agree that the majority of Microsoft’s customers in the SME sector have yet to sign up to the new structure, despite its coming into force in August 2002.

Alvin Park, a Gartner analyst, says that Open Value will appeal to SMEs that plan to upgrade more than every three-and-a-half years or that want to standardise on Microsoft software.

The timing of the announcement may have a wider significance. Microsoft has decided to tone down its new pricing structure at an important moment in the European Commission’s long-running antitrust investigation of the company. A group of 30 rival technology companies has intensified its lobbying efforts in Brussels in recent weeks.

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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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