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Microsoft Licensing 6.0 Updates

Laura DiDioSenior AnalystThe Yankee Group

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Agenda

Overview

Latest Survey Data

Updated Licensing 6.0 Terms and Conditions

Preparing to Negotiate

Negotiating to Win

Conclusions and Recommendations

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OverviewMicrosoft Licensing 6.0 launched August 1, 2002

It includes a subscription license 3-year lease

option

Licensing 6.0 cancelled many economical software

“bundles” in favor of expensive a la carte single

package items

Enterprises that upgrade frequently – every two to

three years get the best deals

Upgrade Advantage is now Software Assurance: a

20% to 30% pricing premium

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Has your business yet migrated to the Microsoft Licensing 6.0 Plan?

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Yes No

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Licensing 6.0 Cost Increases

11

1

28

22

17

7 7 6 0

0

5

10

15

20

25

30

Decreasedby 5 to 20%

Decreasedby more than

20%

Remainedthe same

Increased by5 to 20%

Increased by20 to 30%

Increased by30 to 50%

Increased bymore than

50%

Costsdoubled

Costs tripled

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If your business has not yet upgraded to the Licensing 6.0 plan, please indicate the reason

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60

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45

Our business lacksthe necessary fund...

We just recently re-signed our existi...

We do not sufficientlyunderstand the...

We have significantissues of softwar...

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Microsoft Licensing 6.0 Changes

Microsoft has made sweeping contractual changes to Volume License and Services

Intellectual Property Indemnity now covers trade secret and trademark

Liability cap removed for gorss negligence & willful acts

Product Warranty lengthened to 1 year from 90 days

Audit notification increased from 15 to 30 days

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Preparing to Negotiate

Know what’s on your network!!!

Perform a detailed asset management

and inventory

Address licensing non-compliance issues

Review existing contracts

Prepare a Vendor “Report Card”

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Negotiating to Win Understand ALL Terms and Conditions

Set specific goals (I.e., discounts and extras)

Assemble the right team

Negotiate on Neutral Territory

Get competitive bids

Take your time

Report suspicious or unethical sales tactics

Be Prepared to walk away

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Conclusions & Recommendations

Economy+inertia=buyers market!

Software vendors are targeting small and

mid-sized enterprises – leverage this.

Multinational enterprise customers

should use Master Business Agreements

and determine which country offers most

favorable licensing conditions.

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Delivering an Effective End-user Environment

Steve KleynhansVice President, End-User Platforms

© 2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com.

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Business and Technology Scenario Hyper-collaborative environment

puts new emphasis on end-user platforms

Constituencies are changing

Technology no longer driven by corporations

Pervasive technologies challenge traditional IT management tactics

Ongoing economic turmoil forces renewed focus on cost effectiveness

The relationship between IT and the businesses it serves is being reshaped. ITO’s must embrace change. Servicing end users

effectively is a key requirement.

PC market turmoil

Performanceneeds? Device

chaosWireless

Licensingchanges

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Critical IssuesUnderstanding market

pressures and technology advances as well as their impacts on planning and management processes

Establishing best practices for end-user management, including vendor selection and configuration policies

Adapting for mobility and pervasive computing

End-user computing will continue to fund more than its share of IT budget cuts through 2003 — falling PC prices will help,

but better process is required

Cos

t E

ffec

tiven

ess

Adaptability

Current Environment

Typical CorporateDirection

Pure Technology

Focus

ManagedEnd-user

Infrastructure

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Limitless HardwareMoore’s law continues

unimpeded

• But that doesn’t

necessarily mean

“performance”

Processors are becoming more tuned to particular needs

Shifting away from

processors to platforms

0

1981 2001199619911986

10

100

1,000

10,000

1

100,000

Price Performance

IBM PC

386

486

Pentium

P2

P3

P4

2,000

5,000

4,000

3,000

6,000

1,000

Price Performance

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The 64-bit Desktop QuestionProvides access to larger

memory (>4GB)

• Improves performance of some

applications

Provides greater bandwidth

to and from memory

• Impacts the most serious

bottleneck in processors today

Provides more complexity

for instructions

However…

Intel has yet to weigh in on mainstream large memory issue

Other techniques exist for extending addressing

Code (and memory requirements) can bloat

64 bit can be wasteful and actually reduce perf with some loads

Mainstream desktops will not shift to 64-bit before 2007, however for niche applications it is worth exploring

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Persistent Security No longer just a network issue

• The entry points are in continual flux

Security will be layered throughout all

systems

• Encryption/authentication at every transition

point

Security takes on new importance in

an era of corporate accountability

“Palladium” and Intel’s LaGrande

target this issue but are a long way

from production

Security certification will become more important for establishing business relationships than operational certification was in the

1990s

Client Security Points

1011010110

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Understanding “Productivity”User productivity requires new

means to handle information.

Corporate productivity is not the same as user productivity but they are related.

Making users more productive isn’t enough. New technology enables new processes but requires understanding the entire end-user environment.

The real productivity improvements necessary for continued economic growth will require more than “baby step” refinements in

technology

Productivity Enablers• Continuous learning• Information access• Interaction models• Integration (data,

platforms, process, apps)

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Office XP and Office 2003Continued refinement of user

interface, functions, and intelligence along with improved reliability

Office XP as a development platform• Office Web Components

• Workflow Designer

• Smart Tags

Redefining the role of Office from document creation to document collaboration

Office XP is an incremental step that foreshadows future capabilities, but upgrades are tied to timing

Next Up … Office 2003

Focus on XML

Broadens links to Web services

Increased support for new knowledge worker initiatives

Bridges gap between creation and consumption

Focus on XML

Broadens links to Web services

Increased support for new knowledge worker initiatives

Bridges gap between creation and consumption

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The Tablet PC: The Next Big Thing? Most distinct change since notebook

Strong concept but questionable implementation — heavy push by Microsoft

Traditional and new vendor entries

Focus is on new interaction/usage models

Need 2-3 years to achieve optimized user ergonomics

Eventually, rich ink features will make it into all computers

Eventually, tablets will be commonplace, but they are currently niche products; they will appeal mostly to non-PC users

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How to Manage TCOMany factors are out of ITO control

Reducing costs is easy if value isn’t a concern

TCO is a balancing act and needs to be regularly reviewed in light of corporate priorities

The Cost Levers

Service level

Standardization

Automation

Application architecture

Centralization

Procurement practices

Service level

Standardization

Automation

Application architecture

Centralization

Procurement practices

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The Well Managed UserStandardized common

operating environments are

the most powerful tools

Improves all aspects of TCO,

but does require discipline

Works best with a predictable

refresh

Lock-down vs. supporting the

build

Core BuildCore Build

Non-Build ItemsNon-Build Items

Hot Fix LayerHot Fix Layer

LayeredLayeredBuildsBuilds

LayeredLayeredBuildsBuilds

LocalizedLocalizedBuildsBuilds

LocalizedLocalizedBuildsBuilds

Client support ratios have improved from 1 FTE per 100 clients to 1 FTE per 125 clients — a $200 annual savings!

HardwareHardware

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Three vs. Four Year Cost Comparison3 Year Desktop w/Monitor

Time Estimate $/hour Cost Lifecycle

Depreciated Cost

PC Purchase NA NA $950.00 3 $316.67PC Install 0.65 $65 $42.25 3 $14.08PC HW Break/Fix Contract 0 $0 $180.00 3 $60.00PC Software Support (e.g. Drivers, ) 1.5 $65 $97.50 3 $32.50PC Disposal Labor 0.75 $65 $48.75 3 $16.25PC Disposal Fees NA NA $25.00 3 $8.33Annual Hard Cost per PC $447.83Lost End User Productivity (Soft Costs)3.67 $65 $238.55 1 $238.55Total Soft and Hard Costs $686.38

4 Year Desktop w/Monitor Time

Estimate $/hour Cost LifecycleDepreciated

Cost

PC Purchase NA NA $950.00 4 $237.50PC Install 0.65 $65 $42.25 4 $10.56PC HW Break/Fix Contract 0 $0 $180.00 4 $45.00PC HW Break Fix Labor (e.g. Failures,) 0.45 $65 $29.25 4 $7.31PC Software Support (e.g. Drivers, ) 2.5 $65 $162.50 4 $40.63PC Disposal Labor 0.75 $65 $48.75 4 $12.19PC Disposal Fees NA NA $25.00 4 $6.25Annual Cost per PC $359.44Lost End User Productivity (Soft Costs) 5.5 $65 $357.50 1 $357.50Total Soft and Hard Costs $716.94

IT should plan for a 3-4 year lifecycle but allow for flexibility to accommodate unplanned upgrades.

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Is Thin Client Really Cheaper?

Thin-client architecture (e.g., WTS/Citrix Metaframe) should augment, not replace, the fat-client environment

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

WTS FatClient

WTS FatClient

WTS FatClient

Thin Client vs. Fat Client Cost Comparison

Server HW Server Admin Client HW Client Administration

Heavy Applications

ModerateApplications

LightweightApplications

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Going MobileMore workers are increasingly

mobile in their jobs• Occasional vs. constant

• Local vs. wide area• 75% of info workers will be mobile at

least 25% of the time (2005)

• 40%-50% of corporate users will use notebooks (2006)

Corporate impact: Content, application architectures, infrastructure, operational support

“Mobilizing” is much more than just outfitting a user with a notebook

HomePNA

Ethernet

WLAN802.11

IrDA

WAP

CDPD

GSM

TDMA

Ardis

Metricom

Mobitex

Dial-Up

DSL

Cable

GPRS

3G

PersonalArea

Local Area

Wide Area

Pervasive Area

“Everywhere”

Remote Office

Office

PersonalWorkspace

ISDNBluetooth

Companies must support “anytime, anywhere” computing

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Business Impact: Rapid technology change and vendor immaturity will force continued investment in mobile applications

during the next 2-3 years

Making Mobile Work Enterprises must support multiple

device types for enterprise users, and even more for consumers

Hardware standardization is imperative, but a single standard is not enough

Manage user expectations on mobility carefully

Leverage best practices in managing laptops for other pervasive devices as well

Personal Information Manager

Email

Apps

Man

agem

ent

Picking the Right Starting Point

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How Much Will It Cost/Save?Typical project investment• Quick start: $25K-$50K

• Beyond pilot: $250K-$500K

• Full scale: $1M+

ROI• Small project should be “learning”

investment

• Midsize should have 18- to 24-month ROI

• Large project may have 3+ year ROI

• Expect 15%-100%+ paybacks

Tactical vs. strategic• Targeted LOB vs. enterprise

Evolving and rapidly changing technology means continuous evaluation and investment for the next 5-7 years

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6 Steps to Pervasive Deployment Identify key

opportunities/projects

Assess apps for mobile potential

Leverage existing expertise

Define realistic goals — set realistic expectations

Get business case approval from mgmt.

Make security a central theme

Deploying a pervasive app to a mobile workforce requires a lot of effort and buy-in from the organization

Realistic Expectations Are Key

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Business Impact: Central project coordination and oversight are critical success factors for mobile/wireless success

Integration Approach and Strategy

Mobile deployments must be evaluated for their ROI, not their “coolness” factor

Functionality should be highly targeted to mobile user functions/needs

Keep it simple and focused on user context

Deploy tactically, but look toward strategic needs

Bottom Line

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An Effective End-user Environment

New platform technologies provide the opportunity to improve user and corporate productivity if appropriately managed and implemented.

Pushing PC life cycles from three to four years provides some benefit (~$50-$100), but that must be balanced against added costs of a four-year life cycle (e.g., extra break fix, slower performance, image management, migration headaches).

Pervasive technology will grow to affect all parts of the business in the next 3-5 years. Pervasive deployments must be evaluated for their ROI, not their “coolness” factor.

Business Impact: End-user computing will continue to fund more than its share of IT budget cuts — falling PC prices will

help, but better process is required

Transformation Steps