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Microsoft ends Upgrade Advantage

Michael Kanellos CNET News.com

Published: 30 Jun 2004 09:35 BST

One of Microsoft's popular licensing programmes will end on Wednesday, and the question now is what its customers will do next.

Upgrade Advantage, a licensing programme that allowed companies to upgrade Windows and Microsoft applications fairly infrequently, will come to an end on 30 June, according to Cori Hartje, director of marketing and readiness in the worldwide licensing and partnering program at Microsoft.

Although these customers may continue to use the software they bought under the programme, they will not qualify to receive further product upgrades. Upgrade Advantage represents around $1bn (£0.55bn) in sales.

Instead, to get upgrades, these customers will have to buy full versions of Windows or other applications, or join Software Assurance, a subscription-like programme under which customers pay Microsoft annual fees.

The end of the programme will probably serve as something of a litmus test for Software Assurance. Introduced in May 2001, the programme generated complaints from corporate customers and analysts who said it would raise software costs.

For many, it did. Close to 50 percent of medium-sized businesses that signed up for it saw increases in the fees they paid to Microsoft, according to Alvin Park of consulting firm Gartner. Less than 10 percent of those polled believed they were paying less to Microsoft because of the programme.

"The main complaint has always been that it is not cheap to buy into it," said Jeff Sherman, a representative of software reseller Warever. "Few or none of my clients really bought into SA initially, so nobody's really at that point of renewing."

Longhorn, the next full release of Windows, will not come out in time for the customers who have already signed three-year Software Assurance deals. The lack of a major upgrade in the first cycle of contracts has been a source of consternation, Park and others said.

Still, around half of Microsoft's licensing customers are participating in Software Assurance in one way or another because of discounts and changes to the programme the software giant has added in the past few years.

"I've seen a real transformation from the outraged scepticism," said Laura DiDio, an analyst at the Yankee Group.

Some of the benefits added along the way include a programme that lets employees use free versions of Office at home, employee discounts on Microsoft software and enhanced tech support.

Microsoft estimates that only around 10 to 30 percent of the Upgrade Advantage customers will move to Software Assurance. Park, however, said that the figure could come closer to 50 percent. DiDio added that between 40 and 60 percent of existing Microsoft licensing customers will renew under Software Assurance.

Discounts have also been a motivating factor, with Forrester analyst Julie Giera stating that many customers are individually "pushing for deep discounts and creative concessions" in Software Assurance licensing terms.