Strategies

Microsoft is phasing out its concurrent licensing system in favour of an individual licence. But will it be effective?

Some things in life seem to change constantly. Take the computerur of an individual licence. But will it be effective? industry and the way the goalposts keep shifting. Software is a case in point.

Until now it has been straightforward - you sell the licence with the package on standalone sales. Site licences are assigned on the basis of one per company, covering as many users as appropriate.

But now Microsoft is changing it again. As of 1 December this year, concurrent licensing is a thing of the past. Under the altered system, an individual licence is appended to each copy of the software. So far, only Microsoft is doing it, but other software companies may follow.

Microsoft says it made the switch because concurrent licensing was complicated and unpopular. This is how it worked. A corporate customer who wanted 200 copies of Office would ask Microsoft for a 200-user licence and only have to take one set of manuals. This replaced standard bulk purchases, under which customers had to buy a pre-set number of copies - 10, 20 or 30, for instance.

Dealers lapped up concurrent licensing. 'It was great for us - if we wanted a seven-user licence, that was what we would buy,' says John Dixon, managing director of Computime.

These days, you get the flexibility of the concurrent model but you have to buy a single licence for every user rather than buy one licence that covers all. 'Microsoft's licensing policy is all about simplification,' says a representative from Microsoft.

Do we hear the term cost control? I suppose it's possible. Microsoft believes its customers do not want to use the concurrent licence model anymore. Although there are suspicions in the channel that the move is little more than a thinly veiled price cut, some dealers are backing the company.

'We just bung Office on a PC when we sell it and advertise our computers as pre-loaded,' says John Chadwick, managing director of Minerva Systems.

'The only issue is that you don't get a manual, but most of our customers know enough about the software from other Windows experience so it's not a problem.'

With such positive backing at ground level, it is surprising that anyone is sticking to the concurrent model. Step forward Corel, which owns the competing suite package WordPerfect Office. Neera Panchmatia, Corel UK communications manager, confirms that if customers still want to buy concurrent licences they can.

Microsoft's reply is that only five per cent of Office customers wanted the facility in the first place. Five per cent of Microsoft's customer base is substantially larger than five per cent of other company's, so you can understand why someone might not want to administer such a cumbersome system.

Issuing a licence for individual users rather than for a number of users sounds like a minor tweak. But, the chances are there is more going on behind the scenes than you first suspected. After all, why bother fixing a system the dealers appear to like and isn't harming any users? Perhaps the user community and network managers have been assiduous about keeping their licences up to date during staff changes.

Consider the possibility that a few more users have started working at a site since the last software audit, perhaps in an environment with high staff turnover. How up-to-date is the licence going to be? In a busy workplace, the answer is 'not terribly', especially if the human resources department doesn't liaise well with IT personnel. The scope to operate applications illegally because a single piece of paper hasn't been kept up-to-date, is considerable.

If this is the sort of problem Microsoft wants to address then it must consider whether the solution is actually going to make a difference.

The answer is probably no, for two reasons. The first is that so few companies were using the concurrent model in the first place. As previously stated, only five per cent of Microsoft customers wanted to be concurrent users. Now it is quoting a figure closer to three per cent.

It is also possible that concurrency has not happened because there are simpler ways to buy software these days. Computime's Dixon sells mostly to SMEs rather than corporates, but the reseller's pricing as an OEM is different from that of a corporate licence seller. 'When we are upgrading systems, we usually go in and rebuild the computer, so we are more or less selling a new PC,' he says. 'So we bundle Microsoft Office with the new PC and charge about #150, which is much less than customers would pay for a new licence.'

When the site licence idea was formulated in the early 1990s - at least as far as PCs were concerned - there were three things that didn't work the same way as they do now. The first was that office suites were sold as a single package, the second was that pre-loaded applications were standard, and the third was that solid amounts of online help would come with every shrinkwrapped application. Your customer is unlikely to need or to want a manual, which certainly wasn't the case five years ago.

These elements of a sale affect customers' licence requirements because they tie in the application with the box and eliminate paraphernalia such as books and disks. Microsoft appears to have ignored these changes and is isolating licensing from any other sort of upgrade or system change, when actually major upgrades can require faster chips and more memory as well. Overlaying a software sale on top of that, as Computime does, should eliminate any possibility of poor administration leading to piracy, inadvertently or otherwise.

Instead, Microsoft has performed such a subtle tweak that it is difficult to understand exactly how the administrator's attitude is supposed to change. They are no more likely to remember to buy in fresh licences for new users than they were to upgrade an existing site licence.

If they get a legitimate copy with every installation or upgrade, they cannot forget about it, but the new Microsoft licences will have to be counted and new ones bought every time there is a change. Just how much hassle will be saved is open to debate.

And yet 75 per cent of Corel's global customers choose to pay for concurrent usage and non-concurrent home and laptop usage, insists Panchmatia. 'The majority of Corel's large accounts have realised substantial cost and deployment benefits from these features,' she adds. Again, it is worth considering whether there is more going on under the bonnet.

At this point we can usefully factor in Corel's commitment, reasserted last month, to writing versions of its application suite in Java. Once network computers and 100 per cent pure Java are written into the equation, any notion of pre-installation becomes automatically obsolete, as does any idea of tying an application to any individual PC.

Site licensing, whether concurrent or not, is the only way to handle software authorisation, so Corel and others which plan to go the Java route are tied to it.

At Microsoft, things are different - the intelligence is built into the system in the Windows model. Corporates are accustomed to paying per licence so the company needs to accommodate them, but this should be done in such a way that all the software is licensed properly.

When PC Dealer first reported the change in Office licensing, US vice president of software research at IDC, Anthony Picardi, suggested that one effect would be to raise the price per seat of Microsoft software by about 10 per cent, leading some observers to think the scheme was a ploy to increase revenue. But this fails to make the point. Revenue will increase, but it will be attributable to ease of administration and the extra licences rather than any price hike.

Users who buy their software through licensing are already paying over the odds for what they get, and another 10 per cent won't be much of a bother unless it prompts them to move away from the licensing idea altogether.

The key question is whether this will benefit the dealer.

In theory, it should boost the channel. Every time a piece of software finds its way to a user's machine without a licence payment, it represents lost revenue not only to the manufacturer but also to a reseller. So the dealer will always gain when a manufacturer comes up with a painless way for users to keep their system in check.

Meanwhile, back in the real world, dealers aren't likely to care a great deal. If it cross-fertilises its way into keeping Microsoft profits up and therefore dealer margins healthy, then they will like it. But as Chadwick says: 'It's years since we have sold software with licences anyway.'

Another reseller, who asked not to be named, confessed to selling Office at cost in order to close a sale and make his money on services instead.

There has been no money in selling shrinkwrapped software. Most customers get it as part of an OEM bundle, and think they get it for free anyway. If it works, there will be fewer pirate copies, which will help resellers.

But don't hold your breath.