Microsoft's Licensing Response

Apparently that report about Software Assurance renewals hit a nerve at Microsoft. After rebuffing my Friday request for comment about renewals, Microsoft PR sent a heady, 331-word response that, in close reading, is a wonderful writ of misdirection. The statement, from Stacie Sloane, Microsoft's Worldwide Licensing and Pricing marketing and communications director, doesn't address a single point made by the Forrester report or my post about it.

Recap: A Forrester survey of IT procurement professionals revealed that 86 percent of businesses with 3,000 or more employees have Software Assurance contracts expiring this year. Only 11 percent of the same procurement professionals said that they would surely renew contracts. By contrast, 26 percent won't renew and another 31 percent are uncertain if they will renew.

Microsoft's response is a tactful way of saying we support reports we pay for; otherwise don't listen to the analysts:

"Analysts, like any other third party source have their assumptions and ideas about Microsoft's programs. While we value this perspective and the feedback they bring, we also recommend that customers rely on their Microsoft sales representative or local Microsoft Certified Partner for ongoing, direct and accurate information."

The insinuation is that only Microsoft licensing professionals give "accurate information."

While Forrester focused on Software Assurance, which is a separate contract for Open, Open Value and Select volume licensing agreements, Microsoft's response mainly was about Enterprise Agreement. Upgrade protection is built into Enterprise Agreement, which covers only a subset of Microsoft customers. For its part, Microsoft accused Forrester of looking "at a subset of our customers."

The statement asserts: "Microsoft's renewal rates are on target and in line with our expectations. An estimated 75 percent of our existing EA customers are renewing their Enterprise Agreements." The targets aren't stated. They actually could be lower than past renewal cycles. Microsoft didn't say. Additionally, Forrester's report focused on Software Assurance and not Enterprise Agreement. Based on surveys I did when working as an analyst, well more than half of Microsoft volume licensing customers aren't Enterprise Agreement subscribers.

Microsoft's statement then goes on to only discuss Software Assurance in context of additional benefits unrelated to software upgrade protection. The statement then touts 1.5 million MDOP (Microsoft Desktop Optimization Pack) licenses sold in the first six months. Oh? Forrester found that many customers already have upgrade rights to Office and Vista as part of their current Software Assurance contracts. Those upgrade rights are one reason many businesses either plan to skip this renewal cycle or are thinking about it. That 1.5 million figure is likely more reflective of existing contracts than any renewal intentions. It's a nice, big number that misdirects from the real Software Assurance renewal question.

I spoke with the analyst who wrote the report. Besides the surveyed IT procurement specialists, she spoke to 400 companies since the New Year about their licensing intentions. Additionally, Microsoft knew this report was coming—and for some time. The company had early review of the report for fact-checking purposes. Why then did the official response come after the report's release and the weekend after my request for comment on Software Assurance renewals?

The report's veracity or inaccuracy will be shown as Microsoft reveals earnings over the next couple of quarters. Next week's fiscal 2007 fourth quarter and year-end results would be one indicator on Software Assurance renewals. If contract renewals decline, there will be impact on recurring, or on the balance sheet "unearned," revenue. Within two quarters, there should be little doubt whether Forrester got it right or not.

As for the official response, it's not much of one. Microsoft largely avoided Forrester's assertions.

While we're all waiting on next week's earnings report, how about we do an informal survey? There's no need to wait. Is your company planning to renew its Software Assurance contract? Our comment lines are open for your responses.

Related Posts:

• Software Assurance Storm Warning, Microsoft Watch, July 9, 2007
• Say It Ain't So, Microsoft Watch, July 6, 2007
• TechEd: Vista Logos, Server Tools, Microsoft Watch, June 5, 2007
• Volume Licensing: It's a Buyer's Market, Microsoft Watch, April 10, 2007
• Convergence=Integration, Microsoft Watch, March 12, 2007
• Software Reassurance, Microsoft Watch, February 19, 2007