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IT-DISCUSS  November 2000

IT-DISCUSS November 2000

Subject:

11/13 Microsoft Tests New Pricing Policy

From:

Steve Cavrak <[log in to unmask]>

Reply-To:

Departmental Technology Coordinators <[log in to unmask]>

Date:

Mon, 13 Nov 2000 12:57:21 -0500

Content-Type:

TEXT/PLAIN

Parts/Attachments:

Parts/Attachments

TEXT/PLAIN (67 lines)

http://www.theregister.co.uk/content/1/14686.html

MS to intro 'annual sub' price structure with Office 10
By: John Lettice
Posted: 13/11/2000 at 15:58 GMT


Microsoft is to introduce its long-anticipated
"annuity" model for software sales in the middle of next
year, the company announced today in Las Vegas. But
although renting out software as a service is a key part
of the .NET strategy, the software the company will be
renting first will be exactly the same as the packaged
version you buy (well OK, license) outright.

Essentially, when Office 10 ships "towards the end of
the first half of 2001" Microsoft will be testing out
the mechanisms before it's actually shipping the
product. Office.NET, which presumably will be the real
thing, is a separate development track to Office 10,
which to all intents and purposes will be a traditional
packaged product.

The new rental model will work like this. You'll
"subscribe" to Office 10 at a "lower initial cost" which
Microsoft has not as yet specified. You'll get product
upgrades during your subscription at "no additional
expense," and you'll have to renew your subscription
annually, via phone, Internet or by buying "a new
subscription product" at retail.

Although the subscription Office 10 will be exactly the
same as the non-subscription, i.e. not Office.NET,
Microsoft says it's taking "a significant step toward
our vision of an Office.NET subscription service."

Until Microsoft comes up with pricing and some clearer
definitions it will be impossible to tell whether or not
the 'software as a service' initiative will be a good
deal. If the 'free upgrades' include whole new revs of
Office, then it might turn out to be a good way of
keeping pace with developments. But on the other hand,
the upgrade path will likely be along the Office.NET
track, and under that regime you'd surely expect
whatever you were renting to be current.

Although Microsoft is pitching the new scheme as a kind
of prelude to .NET, it has some similarities to an
approach it has used in the enterprise market for
years. There, customers are offered substantial
discounts in exchange for signing up their users for a
number of years, and for agreeing to take the upgrades
made available during the term of the contract. This of
course locks the enterprise into Microsoft software for
the period of the contract, and makes it more difficult
to switch away again, because of retraining costs. If
Microsoft offers extra discounts on the subscription for
signing up for longer periods (a la MSN), then a similar
lock in factor could start to apply to the home and
small business markets.

Related Stories
Microsoft's plan to levy annual rental fee for Windows
MS to ship new Win98 in May - annual rental here we
come?
MS squeezes out free service pack distribution

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