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Real Software Assurance

By Frank Hayes
July 16, 2007 12:00 PM ET

Computerworld - About one quarter of big Microsoft customers have had it with Software Assurance. Thats according to Forrester analyst Julie Giera, who said in a report last week that along with the 25% who wont renew their maintenance contracts, another third havent yet decided whether theyll stay with the program.

Why? Because right now, Software Assurance is for losers.

To be clear, Giera didnt use that word. She did describe more SA users than ever before as in the mad as hell category. And she said a major reason customers are angry is that they can join the program expecting to get an upgrade to the next version of a product, such as Windows or Office, then pay more than the cost of new licenses in maintenance fees and still get no upgrade because the products schedule has slipped beyond the contracts window. (Think Vista and Office 2007.)

Microsoft disputes Gieras assessment, pointing out that its based on a survey of only 63 big customers and doesnt match what the company is hearing from customers. Fair enough; with the margin of error for Gieras survey, the number of SA-dumpers might be as low as 12.4%. Thats still a half-billion dollars in quarterly revenue Microsoft stands to lose.

Maybe Microsoft should be listening harder.

After all, SA should be a win-win deal. Microsoft gets a steady stream of maintenance revenue and locks customers in; if they jump ship, theyll be paying twice, because Microsoft already has their money. Customers get an easy-to-budget annual fee and  they expect  the next version of the product.

But that hasnt been happening. Microsofts ever-slipping schedules have turned SA customers into losers who end up paying more than if theyd never been in the program. No wonder theyre teed off.

Microsoft points out that customers get more than just upgrades with SA, including a bewildering array of niche technical services. But most customers dont care. The big-ticket item, the thing that justifies the cost to the CFO and CEO, is the upgrade. Thats what customers are paying for, and thats what theyre not getting.

Its time for Microsoft to turn this back into a winning proposition.

How? Microsoft cant cut SA prices; Wall Street wont stand for that kind of revenue drop. And short of adding full-blown technical support  very costly  throwing more features into SA wont make users happy.

But there is a way, one that doesnt have to cost Microsoft a nickel in legitimate revenue.

Starting now, Microsoft should guarantee that SA customers will receive the upgrades they were originally scheduled to get.

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