Interview: Microsoft's Callinicos on licensing issues

Interview: Microsoft's Callinicos on licensing issues

Brent Callinicos, Microsoft's vice president of worldwide licensing and pricing, spoke with Computerworld US about a variety of issues related to the company's licensing plans and policies. He also talked about Microsoft's Software Assurance program, as well as the Microsoft Capital financing program.

Brent Callinicos, Microsoft's vice president of worldwide licensing and pricing, spoke with Computerworld US about a variety of issues related to the company's licensing plans and policies. He also talked about Microsoft's Software Assurance program, as well as the Microsoft Capital financing program. When can we expect to see something more on Software Assurance -- weeks, months? It's not in weeks. ... I don't want to preannounce anything on Software Assurance before we can actually do an excellent job of delivering it to customers and operationalizing it. ... We're going to make sure we get this right, but it's also not going to be something whereby we do something and we're done. We are committed to enhancing this thing over time.

Some Microsoft products, such as SQL Server and desktop Windows, are on five-year release cycles, but the typical license term is three years. That means some people won't get an upgrade during their contract time frames. Is anything more going to be done to address that? I would say, obviously, two-thirds to 75 percent of our customers view it as a longer relationship. Otherwise, we're not getting those renewal rates.

A Microsoft product manager told me that only about 30 percent of customers had purchased a two-year Upgrade Advantage extension, just before Licensing 6.0 took effect. It's not Software Assurance at any cost to every customer. Not every customer maps to one particular program. Hence the reason why we have programs where Software Assurance is optional. There are certain customers that should not be EA customers. And they should be Select customers, or they should be something else. We're not trying to put a square peg in a round hole. There's different things that have different value to different people for different reasons based on their own internal upgrade cycle. ... We want to make sure, if you want a relationship with Microsoft, you figure out what makes most sense for you. And we're going to have something that works for you.

What's the most common misperception about your licensing policies that you'd you like to dispel? That Software Assurance is about more than just the upgrade. That's why we want to make sure there is a high correlation of happiness of customers or renewals of customers, etc. We want customers to actually understand what they have, to actually try those benefits and see the value they'll get in that. And we want to make sure we're moving that dial. There are numbers of customer case studies where we've seen, as they activate things, their perception changes of the nonupgrade portion. And we want to continue to enhance that value such that people stop thinking about it as just an upgrade.

What sort of pressure are you facing to make changes to your licensing policies as a result of the growing popularity of open-source software, particularly outside the U.S.? Obviously the open-source competition is something that is real, not just overseas vs. here. ... It is becoming a rational conversation around total cost of ownership and things like that. And it's not really related to licensing.

What would you like to see happen during the next year that would make you feel you really made progress? If we change the perception of licensing to being an enabler of buying Microsoft product versus some perceptions, be they real or misplaced, that it's difficult to navigate. I want it to be: Figure out what you want to buy and then the licensing is just a conduit to buy that -- not having licensing viewed as a complex hurdle that you have to get over at Microsoft.

What's up with the Microsoft Capital financing program? It was something I started over in treasury, and we moved it over here because it more naturally fits with the flow. As we drilled into where complexity and dissatisfaction exists on licensing -- offering customers choice and eliminating complexity and offering flexibility -- sometimes that's about the payment stream and the flexibility around that versus just the bits and the bytes and the benefits. Microsoft Capital gives us the ability in a targeted way, and in an almost infinitely flexible way, to address those payment streams for different customers in different ways to meet their needs. ... We can make it seamless for a customer because it's Microsoft that's providing it.

To what degree do companies pay interest when they go through the Microsoft Capital financing plan? They are arm's-length agreements. It depends on the risk profile of the company. It depends on the program. It depends on what we're trying to achieve from it.

Are there cases where no interest is involved, due to the large nature of the contract, and its main purpose is to give a customer a more flexible payment scheme? Sometimes, yes. And sometimes when they roll out a program, it's a "90-day same as cash" [program]. Or, as we're seeing the uptake of a market, there may not be interest involved in it.

How popular has this program been? Have many people taken advantage of it? We didn't go with a shotgun approach. We went more with a rifle approach. In the very targeted ways we've done it -- to address certain places, certain markets, certain customer needs -- we've actually had significant uptake. We were going to scale it in a very logical, prescriptive way. Basically, we've started it at the lower end of the market where cash flow is somewhat of an issue, where people are thinking about overall IT spend. And we have offerings that map to that. With the high enterprise need, it's about some of that flexibility around payment terms. And we're trying to make sure we go where the most customer need is.

We're extremely happy with the success we've had thus far, and it just makes sense to deploy it more places. -- Computerworld (US online)

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