The systems manager for Yakima County faces a July 31 deadline to enroll in a new software upgrade program at Microsoft or else end up paying even more in the future.
"It's a hate-love relationship," Sloon said. "Microsoft can put out great products, but some people are calling this a ransom."
Like it or not, companies and governments are anteing up, paying hundreds of thousands of dollars in some cases for an insurance-like policy for upgrades of Microsoft software.
Two weeks remain before the July 31 expiration of a grace period to switch to the controversial program, called Software Assurance. After that, customers not enrolled will face higher costs to upgrade such popular programs as Windows and Office.
The changes affect companies and governments who buy software in bulk. The premise is that customers aren't buying a commodity, like a PC, but rather a relationship with their software provider.
Microsoft said it is changing its "volume-licensing" in response to customer complaints over its confusing array of upgrade choices. But the new program is still pretty confusing, Microsoft admits.
In fact, the grace period was set to expire twice earlier but customers protested that they couldn't understand the new pricing options -- much less come up with the money to enroll, said Rebecca LaBrunerie, product manager for Microsoft worldwide licensing and pricing.
Microsoft then launched a $20 million campaign of direct mailings, free seminars and Web-based call-in shows to help customers decide.
Here's how it works: Software Assurance is similar to an insurance policy for your software. Companies pay a premium each year and receive rights to software upgrades during the policy's contract term _ typically two to three years.
The annual premium is either 25 percent or 29 percent of the original cost of the software program, depending on the software's function.
Companies that don't subscribe must pay the full price of upgrading a program when they decide to do so -- without any of the discounts that Microsoft has offered until now.
Software Assurance isn't for everyone, LaBrunerie said, and will depend on such factors as how frequently customers upgrade. But it helps companies spread out the costs of software upgrades from year to year, rather than paying one lump sum every few years, she said.
A majority of customers affected by the change have enrolled, she said, although she would not release specific figures.
Analysts say many customers like the idea of spreading out software costs -- as opposed to paying one lump sum -- but also feel they have no choice but to enroll. That's because abandoning Microsoft, which holds a commanding market share in desktop operating systems and productivity software, would be prohibitively expensive.
Still, the new program is spurring some customers, including Yakima County, to at least consider alternatives. Sloon said the county is testing office software from Microsoft rival Sun Microsystems because of its lower price and compatibility with multiple technological platforms.
Many local governments that are considering Software Assurance are having trouble finding the money, said Joel Woods, past president of Washington state's Association of County and City Information Services.
"Our elected officials have the challenge of determining where is the best place to put dollars," said Woods. "In technology or people or public safety type items."
For Microsoft, by doing away with previous discounts, the new program will boost sales, smooth out the revenue pattern and eradicate uncertainty over whether customers will upgrade, said Rob Horwitz, co-founder of the independent consulting firm Directions on Microsoft.
At the same time, the program puts the onus on Microsoft to produce software of a quality that makes it worth customers' while to renew.
"Not only does Microsoft have to release something very compelling every three years, but it has to create the perception that something even more compelling is going to come out in the next three years," Horwitz said.
Others say Microsoft's strategy may backfire as cash-strapped companies and municipalities look to cheaper alternatives such as open source products or decide to upgrade Microsoft products less often.
Some people use just a fraction of the functions in Microsoft products, analysts say, ignoring what critics call "feature bloat."
"It's hard to imagine many more features in a word processor that's going to be more appealing to an enterprise customer," said Michael Gartenberg, research director for Jupiter Research.
Copyright 2002. Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
