Windows 7 Enterprise Asks Too Much
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News Analysis. Microsoft is like an old dog that even when beaten won't stop peeing on the rug. |
Microsoft doesn't learn about some things. Windows and Software Assurance is one of them.
According to a "Windows for Your Business" blog post, Windows 7 Enterprise carries Software Assurance requirements, just like Vista. Microsoft blogger Gavriella Schuster writes:
Windows 7 Enterprise is part of the Windows Optimized Desktop offering, which also includes the Microsoft Desktop Optimization Pack (MDOP) tools and will only be available to customers with Microsoft Software Assurance on their Windows client licenses.
This is information I should have caught when Microsoft made its Windows 7 versions announcement last week. According to the Windows 7 Enterprise Web site: "Like Windows Vista Enterprise, Windows 7 Enterprise is only available to customers through Microsoft Software Assurance licensing."
The licensing policy is disappointing and short-sighted. Microsoft isn't going to get what it wants. Windows isn't Office.
Some background: Annuity licensing contracts have done well for Office and Microsoft server software. The contracts smooth out Microsoft revenue. Rather than steep hills and deep valleys of revenue aligned with release cycles, Microsoft collects fees upfront and amortizes them over two or three years. The money appears on Microsoft's books as unearned revenue.
Microsoft introduced the Enterprise SKU with Windows Vista, which carried a Software Assurance requirement. The company packed exclusive features that enterprises would want but couldn't get without first signing up for Software Assurance.
When I first blogged about the requirement, in July 2007, businesses were looking at heftier upfront deployment fees. Some customers were angry at Microsoft. But something surprising happened. The power of monopoly failed to move enterprises forward. According to numerous analyst reports, only 10 percent of businesses had migrated to Windows Vista by the end of 2008.
Enterprises didn't upgrade for many reasons, but I'd bet money that the Software Assurance requirement is one of the main ones. Why should businesses already reluctant to migrate from Windows XP to Vista pay even more to do so, because of Software Assurance?
Something else: At the end of June 2007, Microsoft claimed that Windows annuity contract penetration was about 19 percent. As of Dec. 31, 2008, that number hadn't really changed. OEM sales accounted for 81 percent of Windows revenue. Annuity licenses account for most of the remaining 19 percent. By that measure, Microsoft's Windows Vista Enterprise Software Assurance experiment has failed.
Isn't it time to stop peeing on the rug?
But Microsoft can't easily let go. The allure of all that steady, unearned revenue is too strong. Microsoft doesn't want 80 percent of customers buying Windows through OEMs. The company wants numbers at least like Office—around 45 percent of revenue tied to annuity contracts. Problem: The market isn't buying into it, and there's even less incentive now.
In December, I encouraged Microsoft to chuck Windows' Software Assurance requirements. I wrote:
Be sensible, Microsoft. If enterprises have less to spend, do you really think they'll spend more on Windows 7 Enterprise because of Software Assurance? Be smart. Dump the requirement, but keep it as an option with something extra. How about this: big discounts when buying enterprise versions of Office 2007 and Windows 7 together with Software Assurance.
But that's tough advice to take. Software sales are slowing with global economies, and Microsoft executives must hope that annuity license contract conversions will smooth out Windows Client division revenues and ensure they will continue. The problem with the reasoning: If businesses are buying less, there's no reason for them to spend more for Windows' licenses. Microsoft's Software Assurance priority and its customers budget-constrained spending objectives are contradictory.
Windows 7 Enterprise has seven features not found in the Professional version. For some businesses, some, or even all, of these features would be enough reason to take Software Assurance. But more than 80 percent of customers already have chosen not take Software Assurance coverage for their Windows client licenses. I don't see the number going up much. So why deny customers useful features? I could go on, but enough is enough. I just had a strange insight that will be topic of the next post.
[Please send your tips or rumors to watchtips at live.com].
Related Posts:
- Perilous Migrations: XP to Windows 7?, Microsoft Watch, Feb. 11, 2009
- Six Sevens Is 5 Too Many, Microsoft Watch, Feb. 3, 2009
- How Much Microsoft Tax Do You Pay?, Microsoft Watch, Jan. 12, 2009
- 2009: Definitive, Unsolicited Advice for Microsoft, Microsoft Watch, Dec. 31, 1008
- Vista Pushes Volume Licensing, Microsoft Watch, July 26, 2007
- Microsoft Software: Rent Me, Microsoft Watch, July 20, 2007
Comments (8)
Agreed. But at the same time, in some ways, I would like to see M$ raise the price even more, LOL.
Posted by Chips B Malroy | February 11, 2009 9:38 PM
I don't have much faith that MS will become more customer centric as the recession continues. With that said, there are other enterprise solutions besides Windows based products. Using MS software is not a business requirement nor is it mandated. While Windows remains the dominant desktop OS, it still cannot completely penetrate the enterprise. With software assurance, it is a guarantee that MS will never fully penetrate the enterprise. For example, the organization that I work at uses an encryption appliance that runs on Linux not a Windows server. It is used to encrypt all of our database systems including SQL Server. The company that built the encryption appliance does not have to pay any royalties to MS.
Posted by JM | February 11, 2009 10:04 PM
If a customer doesn't want SA, they don't have to buy Windows 7 Enterprise. They can buy Windows 7 Professional, which is more than sufficient for most enterprises. Professional will supports AD, domain joining, most of the other enterprise "goodness".
Although most of the SKU names between Vista and Win7 remained the same, the SKU definitions changed quite a bit. For example, Win7 Enterprise - if I understand correctly - will be a lot closer to Win7 Ultimate now than it Vista Enterprise was with Vista Ultimate.
Each SKU in Win7 will now truly be a superset of everything below it.
Posted by Jonathan Wong | February 12, 2009 8:52 AM
Software Assurance only makes sense if you're going to stay on top of the Microsoft product releases. Many companies got a bad taste of SA's problems when MS delayed many releases. They didn't see the benefits because there were no new products. Now, companies realize that even if there are more frequent product releases the costs and disruption to business are too high to constantly churn the environment with upgrades. MS really can't win either way with SA. I don't see much benefit for the majority of companies. In some ways they will prevent the massive adoption of their MDOP-related technologies by only allowing SA-subscribed companies to use them. There is a vast market for those tools but they won't sell them or bundle them in a more accessible way.
Chad
Posted by Chad Ingles | February 12, 2009 11:12 AM
"Windows 7 Enterprise has seven features not found in the Professional version."
Doesn't Windows 7 Ultimate include all Windows 7 Enterprise features?
Posted by JohnJ | February 12, 2009 12:04 PM
I never understood why a company would pay for annual contracts/software assurance. A company buys a computer with Windows, its a one shot deal and one shot expense for a few years. Its done and bought for. No more hassles with renewing anything. The hard drive dies, just do a reinstall.
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BTW, The secondary refurbished computer market is doing very well. I noticed refurbished XP computers being sold at Micro Center for as low as $99. Surely this is a much less expense option for companies who still need XP machines and are looking for the least expensive option (other than Linux).
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On another front and in my opinion MSFT made a mistake by not releasing WinFLP (Windows For Legacy PC's) to the general public. They could have rebranded it as "Windows Classic" sold it as a Windows on a budget for $49 at retail.
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Now the public has found other options such as Linux which fills the void (in my opinion) left by MSFT who opted instead for operating systems with high end requirements and huge sticker prices.
And so it goes.....
Posted by Ralph | February 12, 2009 6:52 PM
I think this is the cash cow they are looking to stabilize earnings through the recession. Basically as they've been jacking up the price and adding restrictions, big corporations have kept buying. The company I work for buys this, though I have no idea why, we never upgrade operating systems and never get support from MS. Just seems to give the IT guys re-assurance that their butts are covered or something. The other thing is that this is an asking price/policy that often gets negotiated down. When companies balk at paying for SA, then MS will usually do a one off deal and give them what they want. But as usual they do risk killing this cash cow, if word gets out that you can run just fine without paying all this money.
Posted by smist08 | February 15, 2009 3:54 AM
Another problem with the Vista Enterprise lincensing scheme is that it is only available in upgrade form. So if the company is buying new PC's it will have to buy them with Vista OEM then upgrade to Ent. The total cost of purchase would be 3 times that of Vista Business! A huge premium for those 7 features.
Posted by Hanno | February 22, 2009 7:43 AM