Microsoft executive discusses licensing, pricing plans

12.05.2005
Von Carol Sliwa

Brent Callinicos, who became vice president of worldwide licensing and pricing for Microsoft Corp. last year, Wednesday disclosed plans to simplify the document that details how customers can use software products they license from the company. With the release of the new product use rights (PUR) document on July 1, products will be grouped into nine categories. Each product category will have a set of use rights that applies to it, whereas in the past, each of Microsoft"s 70-plus products had its own use-rights section, Callinicos said.

By stripping out repetitive passages for products that share the same or similar usage rights, Microsoft can cut the document"s length from 107 pages to 44, according to a company spokesman.

Callinicos spoke with Computerworld about the company"s efforts to simplify its licensing and pricing programs -- an ongoing area of focus for the company since it introduced its hotly debated Licensing 6.0 program four years ago. At the time, many corporate users complained about the elimination of a popular upgrade discount option that gave them flexibility to upgrade at the time of their choosing.

Under the Software Assurance plan in Licensing 6.0, customers pay an annual fee to receive the rights to product upgrades released during their contract time frames.

This is Part 1 of a two-part interview with Callinicos.

How does the latest effort to categorize products fit with your overall plans to simplify licensing policies? It"s a natural evolution of an historical effort that [the policy] just needed to become simpler. ... There are a lot of other efforts under way that have the same general theme about reducing the complexity of licensing as well as making it simpler for customers to do business with us.

We have 70-plus products in volume licensing. We ended up with 70-plus different sorts of customized versions of those use rights over time. When there"s 70, that becomes pretty confusing for customers to figure out. So this effort was essentially to look for where we meant the same thing. [We wanted to] have a common language, have common ways of thinking about it and categorize these into nine models that made sense -- based on the way customers have been asking for their use rights over time -- and eliminate some of those unnecessary complexities. That sets us up better for scale as we add more products to volume licensing.

So this change doesn"t affect the licensing terms for any product. It applies only to the document that explains how a customer can use a product. Yes. If you buy something under an Enterprise Agreement, for example, there"s a set of contractual terms around that. But then there are the products that you actually bought as part of that Enterprise Agreement, or a Select Agreement or Open [Agreement], or whatever it is. You have certain rights around how you"re allowed to use that product, and it"s those use rights that we"re addressing. Beforehand, it was more confusing than it needed to be.

Will the use rights be the same for each product listed in any given category? As close to the same as we could possibly get it. There are nuances in there, but we eliminated most of those.

Is confusion over use rights a big issue with customers? It is, even though customers might not necessarily say it that way when they say, "I"m confused about licensing." They were saying, "I have to figure out how I"m allowed to use this product."

Can you give an example of where the confusion was causing a problem with a specific product? There are client-access licenses that go with a lot of our server products. Understanding exactly when you need a client-access license and when you don"t was a source of confusion.

Microsoft introduced Licensing 6.0 four years ago. Is there a Licensing 7.0 in the works? There will not be a 7.0. These themes that I"ve articulated will continue -- customer flexibility, reduced complexity, more customer choice. ... There are efforts in these general themes that I addressed. But there is no Licensing 7.0 on the horizon. We change things as necessary. There is no, ""We"ve got to change it just because it"s been a year or it"s been two years." If it works, we"re not going to change it. If it needs enhancing, we"re going to change it.

But there could be a change in the long-term future? You will see an evolution. You"re not going to see this huge inflection point, which is why I say I would never approach it as a Licensing 7.0.... We don"t want to be dark and then come up suddenly out of the blue. It"s going to be customer feedback, iterate, customer feedback, iterate, customer feedback, iterate.

Microsoft has worked to enhance Software Assurance. Are you finding that customers have a good grasp on everything to which they"re entitled? On Software Assurance, we"re adding value to programs over time. We"ve added about 14 benefits to it. One of the other things that we need to do is make sure that people understand exactly what benefits they have. There are tools that have been put out for that. There"s more education we need to do. We"ve started to ask customers to understand what benefits they have and activate those benefits. Based on what customers are telling us, they want those additional enhancements around their core underlying licenses.

Are there any other ways that you plan to go about doing this that might have greater effectiveness? We match different customers in different ways. There are certain things around education that you can"t do in small or medium businesses, where we have partners or where we don"t individually talk to customers. There, a lot of that is about what"s online, what type of tools people have. We have a lot of efforts going on in that area.

Is this really enough to get more people to buy Software Assurance? Our latest data is that two-thirds to 75 percent of our Enterprise Agreement customers have renewed their agreements.

What about those who have the option to buy Software Assurance in other ways? The bulk of Software Assurance is in the Enterprise Agreements. There"s obviously the optional attach. People can do it on Select [Agreements] or Open [Agreements]. But that doesn"t drive that overall number. ... [There are] a couple of things that we"ve heard from customers. One is continue to enhance that value. And we are continuing down that path. Obviously, the effort for people to understand what they have is key.

But people aren"t viewing this as a three-year deal. People view this over a longer term period of time. That"s why you get those renewal rates. People can look at an ROI over a 10-year period and their total cost of ownership and what they get for the licensing, their own individual upgrade cycles, etc. We want to make sure that entire package is valuable -- not just in a three-year period, but over the longer term period of time. I"m not interested in having customers just for three years.

What other enhancements are you looking at to further increase the value of Software Assurance? We have nothing to announce at this time. This is an area where I"ve spent a lot of my personal time, and we"ve gotten a lot of customer feedback around different things that we"ve thought about putting in now or later. Stay tuned.