Microsoft Licensing: Confusing Decisions Lie Ahead.

If you are like a typical business, the bulk of your computer software comes from Microsoft. Like it or not, Microsoft controls 90 percent of the desktop operating system and office suite markets; 85 percent market share of Internet browsers; 75 percent market share of Windows language tools; and so on.

Thus, when Microsoft changes the way it sells software, most of us are affected. Microsoft is moving from selling by the box to selling by subscription, called Software Assurance. In the past, if you had any qualifying version of MS software, you could purchase a current version as an upgrade, which was less expensive than a new version. In effect, Software Assurance is an ongoing maintenance contract. However, there is no assurance of phone support built into the cost. Before Feb. 28, you must make some decisions about your software.

TAKE STOCK

What versions of each software do you own? How--well, there is no polite way of putting this--how legal are your licenses? Microsoft requires all retail software versions to be activated, and once you've done it, you can't use the software on another machine.

Previously, Microsoft offered businesses with more than five users or installations, a less expensive option than single package purchases called Microsoft Open License. Typically you'd receive a CD-ROM and license that allowed you to load the software on multiple machines.

If you have Windows 2000 and Office XP, then you should merely purchase Software Assurance before Feb. 28. This ensures that you will receive any new versions of Microsoft software over the next two years. Software Assurance costs will increase 25 percent to 35 percent after Feb. 28.

Between now and Feb. 28, if you purchase multi-user software under a plan called Upgrade Advantage, you'll receive your software's current version and will be automatically grandfathered into Software Assurance licensing. You also will receive the right to obtain any new version that Microsoft releases for the next two years. According to Microsoft, purchasing Upgrade Advantage now will cost 50 percent to 60 percent less than purchasing Software Assurance later.

LICENSE AND SOFTWARE ASSURANCE

After March 1, you will need to purchase your software under License and Software Assurance. And any plan you sign up for must be renewed biennially. Following is a sample of costs for upgrading from Office 97 to Office XP from Microsoft's Open License Web site. Pricing is for reference only and may change:

* If you purchase Upgrade Advantage for $226 per seat before Feb. 28, you'll automatically be enrolled in Software Assurance through Aug. 15, 2003.

* If you purchased an upgrade at $181 per seat before Sept. 30, you can purchase Software Assurance by Feb. 28 for $218 per seat. You are assured that you will receive updates through Dec. 15, 2003, at a total price of $399 per seat.

* If you don't upgrade or purchase Upgrade Advantage, you can purchase License and Software Assurance under a new authorization number for $595 per seat by Feb. 28. Your Software Assurance coverage will be good until Dec. 15, 2003.

HOW TO DECIDE

I recently purchased an Open License version of Small Business Server 2000 to upgrade our office network. In hindsight, I could have purchased Upgrade Advantage for a bit more than what I paid for my Open License. With Upgrade Advantage, I would have received the same server software that I currently have as well as the assurance that any upgrades in the next two years would be sent to me automatically. Although, I may not want to upgrade again within two years, and Small Business Server may not be on a track to be updated, after crunching the numbers, I am going to recommend that my firm purchase Software Assurance to avoid facing higher costs after Feb. 28.

If you're considering sticking with Windows 95, consider this: As of Dec. 31, Microsoft DOS, Windows 3.11 and 95 are considered legacy products and are entering a non-supported phase. Windows 98 and NT 4 will do the same June 30, 2003.

HELP IS OUT THERE

Still confused? You're not alone! For more help determining which pricing and path is best for you, I highly recommend contacting your favorite software vendors who are trained in business pricing.

Susan E. Bradley, CPA, CITP, MCP, is a partner in the Fresno-based firm of Tamiyasu, Smith, Horn and Braun. She is a member of CalCPA's Technology Committee and can be reached at [e-mail].