Microsoft Takes New Pricing Tact
As its customers deal with an explosion of extranets and electronic commerce, Microsoft Corp. is finalizing a major shift to a usage-based model for key server applications.
The Redmond, Wash., company is rolling out new per-server license options for accessing its software via the Internet. The move could mean significant savings for large customers that are opening corporate databases and other applications to partners and customers.
Microsoft uses a CAL (Client Access License) model for SQL Server and other BackOffice applications. The model requires corporations to pay on a per-seat basis.
While highly profitable for Microsoft--second-quarter revenues from Exchange and SQL Server CALs rose 80 percent over the same period last year--CALs have been a sore spot for many corporate users.
"Microsoft's stance on concurrent licensing is simply incorrect," said Kevin Busarow, an IT manager in Plano, Texas.
Microsoft already has begun implementing some changes. Earlier this week, the company introduced a $9,999 Internet Connector option for Windows Terminal Server, which gives 200 concurrent Internet users access to Windows applications (see story).
A similar option is now available for SQL Server, with an Internet Connector license for database servers costing $2,999 per processor, said Peter Boit, Microsoft's general manager of sales and solutions.
Next, Boit said, Microsoft will apply "within a couple of months" a new licensing option for the full BackOffice application suite. The goal is a more appealing cost structure for resellers and service providers looking to provide enterprise data management services.
"We need a licensing model that does not inhibit service providers, so we'll look at MCIS [Microsoft Commercial Internet Systems] as a successful example of that," Boit said.
MCIS is a suite of applications such as messaging and chat that service providers can offer to customers. MCIS licenses are usage-based, paid on a per-user-per-month price model. The new BackOffice licensing will follow this model, Boit said.
Such licensing changes are necessary to handle burgeoning extranets and electronic commerce, one customer said. "I don't want my customers to pay for licenses to access value-added services," said Frank Calabrese, IT manager at Bose Corp., a PC Week Corporate Partner based in Framingham, Mass. "Either you take the approach of paying a God-awful amount of money for open licenses [for customers], or you make [the license] scalable."
Service providers and resellers intent on managing enterprise data through suites such as BackOffice will also demand licensing models more feasible than the CAL system, which, depending on the application, can cost several hundred dollars per client license.
In fact, Internet application hosting will be the fastest-growing piece of the application market this year, predicts Dwight Davis, an analyst with Summit Strategies Inc., in Kirkland, Wash. To deal with that growth, Microsoft must come up with new licensing models to accommodate users accessing applications via the Internet instead of buying them outright.
"It's a significant but often overlooked challenge," Davis said. "Microsoft is doing quite well with the existing CAL model, and anything that shakes that up is a potential threat to them."
Microsoft is not alone in addressing the move toward rentable applications. Lotus Development Corp., for example, offers Domino Instant Host, a service for hosting and managing a suite of rentable groupware applications. Novell Inc. has also announced plans to deliver rentable applications via its Novell Directory Services.
Microsoft is likely to draw up new licensing plans for Windows 2000 and Office 2000, Boit said, although it's not as far along on models for those forthcoming products. The company is also looking at ways to simplify its traditional CAL structure.
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