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Microsoft slashes Windows XP custom support prices just days before axing public patches

Reduces after-retirement support costs for large enterprises as much as 95%

April 16, 2014 09:52 AM ET

Computerworld - Just days before Microsoft retired Windows XP from public support, the company drastically reduced the price of custom support agreements that give large companies and government agencies another year of XP patches, experts reported today.

"I believe that Microsoft changed prices because it decided that not enough customers were enrolling in the program, and it was apprehensive of the ramifications of any Windows XP vulnerabilities," said Daryl Ullman, co-founder and managing director of the Emerset Consulting Group, a firm that specializes in helping companies negotiate software licensing deals.

At Ullman's recommendation, one Emerset client had spurned a $2 million deal two weeks ago to provide 10,000 XP PCs with custom support. But Microsoft came back days later with an price of just $250,000. Ullman advised his client to jump at what he called "an insurance policy," and the firm signed on the dotted line.

Others told Computerworld of similar deals Microsoft offered at the last minute to get customers to commit to another year of patches.

Custom support agreements, or CSAs, provide critical security updates for an operating system that's been officially retired, as Windows XP was April 8. CSAs are negotiated on a company-by-company basis and also require that an organization have adopted a top-tier support plan, dubbed Premier Support, offered by Microsoft.

The CSA failsafe lets companies pay for security patches beyond the normal support lifespan while they finish their migrations to Windows 7.

Windows XP's retirement was major news last week, and not only in the technology press, because the nearly-13-year-old OS still powers almost 28% of the world's personal computers. With the patch spigot turned off, many security experts, including Microsoft's, believe that cyber criminals will have a field day hacking XP PCs.

Although Microsoft has been beating the dump-XP drum for years, it has had mixed results getting everyone off the aged operating system. Most attribute a combination of budgetary issues, the stability and familiarity of XP, the poor reception of Windows 8, and sheer inertia as the cause for Windows XP's stubbornness.

The turn-about on CSAs was a marked change from late 2012 and early 2013, when Microsoft significantly boosted prices by reinstituting a $200 per-device model and setting top-end caps of as much as $5 million.

Michael Silver, an analyst with Gartner, had tracked those price increases last year. Today, he said several Gartner clients had reported massive price breaks in the last two weeks. "Microsoft made it much more affordable, but still priced to encourage companies to migrate," he said.

The new ceiling is $250,000, according to several sources, although the $200-per-device price remained in place.

Like Ullman, Silver attributed Microsoft's discounting to a fear of the backlash that would result if a large customer's PCs were infected with malware after the patch halt. "[A CSA] provides a modicum of protection to organizations and to Microsoft, which likely seeks to avoid public criticism for any Windows XP security breaches," Silver wrote in a note to clients April 8, the same day Microsoft retired the OS.

Sources familiar with Microsoft's position claimed that the company changed its CSA pricing tune after chief operating officer Kevin Turner returned to Redmond at the beginning of the month from a swing through the sales force, where he got an earful about customers with thousands of XP machines and no chance of making the migration deadline. The decision to drop prices was made shortly after that.

Ullman and Silver corroborated the timeline, saying they began hearing about the price reductions around the first of the month.



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