the oem gestapo 12 may, 2002 by johnmichael patrick monty monteith

At the end of July, the deadline will have arrived on Microsoft's Software Assurance program. If you are a CIO, by now you have received fifty-three strongly worded reminders, sixteen spreadsheets showing how much it will cost your company, nineteen software packs describing the transition, and seven calls from Microsoft representatives begging you to make the purchase. If you haven't, please let me know your secret..

If you are a bit in the dark about this Software Assurance stuff, I will quickly describe the scenario: Microsoft is transitioning corporate software "upgrades" to "Software Assurance". In the past when a company wanted to move from an older version of Microsoft Office to the latest version, you would purchase an "upgrade" for each copy. For companies with five or more copies, you would likely purchase an "Open License" upgrade, which gives a very slight discount on the price by purchasing five copies or more of the upgrade. The biggest 'plus' is that you do not get all of those retail boxes, although Microsoft does make you pay an extra cost for that one CD media. (Yes, it is quite amusing to spend tens of thousands of dollars and then have to pay extra for the software media.)

Microsoft has since realized that their customers are not purchasing every upgrade they come out with, and as a result their cash stream is not as steady as they would like. Without corporations purchasing every upgrade, Bill will not be able to purchase the world five times over by the age of fifty. Enter the solution: Software Assurance. Essentially, this is a subscription for two years where any upgrade that Microsoft develops during that time, the customer will get. Pay now for a two year subscription, and if Microsoft releases any upgrades to that product over the next two years, you will get it. As an extra bonus, they will even throw in the software media at no additional cost. What a deal!

The cost for Software Assurance is about the same as an upgrade. So, following this logic:
1. If Microsoft comes out with one upgrade over the course of the next two years that you would have purchased, you saved the cost of the CD media (twenty five bucks).
2. If Microsoft does not come out with any upgrades over the next two years, Bill Gates laughs all the way to the bank.
3. If Microsoft comes out with an upgrade, but you will never use that version, you wasted your money, but can sleep easy that Bill appreciates your support.

The folks that work for Microsoft are really some of the best people out there. That being said, the Microsoft Reps that will call you about Software Assurance will have a slightly different take on this situation. I have shown their corporate line as the "a" listings, and my response as the "b":

1a. Because there will no longer be "upgrades" available, by not purchasing Software Assurance, you will have to purchase the "full" version. Therefore, if you plan on upgrading Office just once over the next three years, you will save money by purchasing Software Assurance.

1b. So, Microsoft essentially will be raising the price of their products (eliminating upgrade) to make Software Assurance seem like a good deal. How many people are you fooling with this, Bill?

2a. Software Assurance licenses do not have the complicated product activation that retail / OEM product does, so by purchasing Software Assurance your I.T. department will have to work less.

2b. Microsoft adds copy protection to their product, and I have to spend $200 per workstation to remove it? Pardon me if this does not fill me with warm fuzzies for the folks in Redmond.

3a. Act quickly and Microsoft will throw in some free training dollars.

3b. Any company that has an Open License has enough workstations that they already have their own training facilities in-house. Thanks for the offer of something we would never use.

This whole Software Assurance deal is directly tied to the copy protection ("product activation") that Microsoft has started to use. Without copy protection there really would be no advantage to the Open License system. Particularly troubling to me is the hypocrisy behind all of this considering Microsoft knowing pirates software as well.

Why not just purchase retail copies? What will stop companies from purchasing retail upgrade copies? Is Microsoft going to eliminate retail upgrades as well as open license upgrades? Perhaps for a while, until Bill realizes that he is starting to lose market share because no one can afford the full retail price of Office. Yet, if Microsoft keeps on this course, and retail upgrades are available, Software Assurance is doomed.

Even with these issues, I ultimately like the 'concept' of Software Assurance. The concept being that I have a set number of licenses for these products, and I can move them around whatever way I like. When a new product comes out, I can simply disburse it through Intellimirror to the whole office, and not have to worry about it. Very simple, and very nice.

Except, Microsoft wants their cake, your cake, your neighbors cake, and any other cake in the world - and will eat them all in front of us, too. What I mean is that Software Assurance is only being done in a way that will bring in extra revenue while preserving Microsoft's monopoly. Let me explain:

The number one product I would like to see a Software Assurance model on is the operating system. Due to OEM licenses and Microsoft forcing hardware manufacturers to include Windows, every computer we purchase has Windows and MS Office installed. However, the manufacturer builds these systems for consumers, not for business. Meaning, they use FAT32, and they include a lot of crap I do not want on the system.

So, the first thing our department does when we receive a new machine is format the hard drive to NTFS and install the OEM copy of the operating system. Then, because we were forced to purchase an OEM copy of MS Office with the machine, we re-install that OEM copy of Microsoft Office. This is a lot of work with each individual system, but due to Microsoft licensing tactics, we have no choice.

In an ideal world, we would be purchasing blank machines from Dell or IBM, and we would Intellimirror the operating system and all of our applications (such as MS Office) to the machine. We would not be forced to purchase OEM copies of the OS and Office because we already have Software Assurance for those products. Installation would be simple for I.T. staff, we would know every workstation was configured the same, and our company would not be paying Microsoft twice for the same software.

Ah, but that is exactly what Microsoft wants you to do. They know that you have no choice but to purchase OEM copies of Office and the operating system. Microsoft worked very hard forcing every major manufacturer to include those products with every machine they sell, thereby assuring a monopoly in the market. But, Microsoft would also like you to purchase Software Assurance, doubling up your licenses - and doubling Microsoft's profits. Isn't it great to be a monopoly?

If you are a company that replaces your hardware every three years, it simply does not make sense to purchase Software Assurance. Why should you? You will be forced to purchase an OEM copy of the OS and Office with any hardware you buy. Do you really want to pay for it twice?

Greg, one of the Microsoft Reps whom I spoke with very candidly about this situation, agreed with me completely. (I told you they were good guys.) He recognizes that Microsoft's OEM policy is incompatible with Software Assurance since it forces customers to purchase products twice. Will Microsoft fix the problem before the deadline at the end of July? No. So, even though this is absolutely an unfair situation to their customers, Microsoft has no immediate plans to correct the situation. In fact, their deadline will come and go, and no effort will be made to adjust the OEM situation. If you wish to upgrade Office 2000 to Office XP after July you will have to pay the full price, as though you had no version of Office at all.

So what is Microsoft's answer to just using OEM copies? Greg says that most hardware manufacturers include Microsoft Office Small Business edition which does not include Access or PowerPoint. To get the Professional edition, which includes these products, that is an extra $200 on your OEM copy, which is the same price as Software Assurance. (Funny how that works out, huh?)

I do have a solution to this dilemma that Microsoft is not going to like. We have one hundred and fifty workstations at the office, and about thirty staff use PowerPoint and ten use Access. To have Software Assurance on all of the workstations is $36,000. However, if we use OEM copies and simply purchase a retail upgrade copy of Access and PowerPoint for those forty folks, the total cost is $4000. Lets say, for the sake of argument, that Microsoft does indeed drop retail upgrades. Full cost is $300, which brings my total to $12,000. Even in the worst case scenario, I saved $24,000 by using the OEM copies that I am being forced to pay for anyway.

If Microsoft truly wants Software Assurance to work, they need to stop the OEM Gestapo. They need to stop forcing hardware manufacturers to include OEM copies, and allow them to sell completely blank systems with no software at all. Yes, Microsoft might lose some of their monopoly in this transition since some might install RedHat Linux instead of Windows. So what? If you are truly interested in simplifying this process for corporations (which you claim to be the goal), then this is the only way to do it. Once I can call up IBM and Dell and have them ship me blank systems, I will be happy to subscribe to Software Assurance for Windows and Office. However, until that time, I will try to minimize how much 'free money' I am giving to the Bill Gates Retirement Fund.