Microsoft's license price increase 'lose-lose' for enterprises, say analysts
Cashing in on BYOD by boosting 'user' CALs pricing by 15%
Computerworld - Microsoft's recent price increases for its client-access licenses (CALs) is a "lose-lose" deal for enterprise customers but likely a major revenue boost for Microsoft, analysts said today.
On Dec. 1, Microsoft overhauled its enterprise licensing price charts, most notably raising the cost of "user" CALs by 15%.
CALs are the licenses corporations must purchase so workers can legally access company application servers. Most of Microsoft's server revenue actually comes not from the software itself -- Exchange, for instance -- but from the ephemeral CALs it sells by the millions to enterprises.
Until last Friday, Microsoft priced both CAL categories -- "device" and "user" -- identically. The former, as the label implies, is a CAL tied to a specific device, typically a desktop or laptop PC. The latter is linked to an individual, who then can use the CAL to access the server from multiple devices, including desktop and notebook PCs, tablet and smartphones.
"Microsoft is looking for new revenue," said Daryl Ullman, co-founder and managing director of the Emerset Consulting Group, which specializes in helping companies negotiate software licensing deals. "[Their earlier prices] were very customer oriented, but now they are under revenue risk. Changing licensing is always a way vendors deal with a revenue problem."
Microsoft raised only the price of its user CALs, and left the device CALs alone. Experts like Ullman saw the change as a bid to cash in on the BYOD (bring your own device) movement to accommodate workers who use three or four devices to do their jobs. It's no coincidence, they said, that the increased revenue will come from the dramatic shift toward mobile.
If Microsoft can't make money on Windows -- which has virtually no presence in mobile, although the company's trying to change that with Windows 8 -- it will make money on the backs of mobile devices running others' operating systems.
"This has been brewing for quite a long time," said Ullman. "For years, they were selling user CALs knowing that companies would use them to their benefit. They knew they were leaving money on the table. But now they've realized that they can charge more for user CALs."
User CALs were a better deal for enterprises whose workers were armed with multiple devices: Rather than pay for three device CALs, one each for a notebook, desktop and mobile device, they could buy just one user CAL. Instantly, they slashed their CAL expenses by two-thirds.
But as more companies turned to user CALs to cut costs and deal with BYOD, Microsoft saw revenue slipping away.
"This will increase Microsoft's revenue," said Jeff Muscarella, a partner with Atlanta-based NPI, a firm that helps companies navigate technology purchasing and licensing. Muscarella declined to speculate on how much more it would bring to Microsoft's coffers, but in a report issued to its clients, NPI said it "could mean billions" to the Redmond, Wash. giant.
Others agreed. "I think this will raise more revenue for Microsoft," said Paul DeGroot, formerly an analyst with Directions on Microsoft, now a principal with Pica Communications, a consulting firm that specializes in deciphering Microsoft's licensing practices. "But while customers may not want to pay more, a 15% increase could be the lesser of two evils."
Many companies, DeGroot said, don't even realize that they are obligated to buy CALs to support non-PC devices. But if Microsoft audits a customer's licenses and find it's not bought enough, it can drop the hammer.
"If or when Microsoft comes in and starts asking how many devices in total are accessing Exchange email or using [Remote Desktop Services] sessions], it could get nasty," DeGroot said. "All those sent emails with the helpful signature 'sent from my iPad,' for example, are tip-offs to under-licensing."
Even with the 15% increase, experts like DeGroot continue to tell clients to switch to user CALs. As devices proliferate, they're still the better deal.
- Big changes and possible cuts prompt Microsoft to publicly air Nadella memo
- Nadella dumps Ballmer's 'devices and services,' coins his own strategy
- Want credit for June's Exchange blackout? File a claim
- Microsoft trolls for Office beta testers
- Critics blast Microsoft's takedown of No-IP domains
- Microsoft turns cloud storage into Office 365 feature
- Microsoft sneak peeks future IE with dev channel
- Outlook Web App goes native on Android
- Bug bounty program outs 7-month-old IE zero-day
- Microsoft CEO Nadella aces first-100-day test
- 3 Keys to Secure BYOD Deployment The new Bring-Your-Own-Device (BYOD) environment presents challenges for IT managers and business leaders. This paper discusses how IT managers can address those challenges,...
- Empowering Your Mobile Workers A modern mobile IT strategy is no longer an option, it is an absolute necessity. Here's how some of the nation's most progressive...
- Developing a Winning Mobile Strategy: Playing Offense vs Defense Don't lose time and money with a "throw an app against a wall to see if sticks" approach to mobile. You need a...
- The 5 Big Lies About Going Mobile You've heard about the power of mobile to change your business. But have you realized your mobile potential? It's about much more than...
- Mastering the Art of Mobile Content Management Mobile device usage in the enterprise has skyrocketed in recent years, and it continues to escalate.
- Why do you need an enterprise mobile platform? Today companies must offer great apps that run on a range of devices, and connect to an exploding set of backend data. Appcelerator... All Mobile/Wireless White Papers | Webcasts
Computerworld has launched its annual search for outstanding IT leaders who align technology with business goals. Nominate a top IT executive for the 2015 Premier 100 IT Leaders awards now through July 18.