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Microsoft Licensing 6.0 Updates

Laura DiDio Senior Analyst The 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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Overview



Microsoft 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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80 70 60 50 40 30 20 10 0

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

28 72 Yes No

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Licensing 6.0 Cost Increases

30 25 28 20 22 15 17 10 11 5 0 1 7 7 6 0 Decreased by 5 to 20% Decreased by more than 20% Remained the same Increased by Increased by Increased by Increased by 5 to 20% 20 to 30% 30 to 50% more than 50% Costs doubled Costs tripled

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If your business has not yet upgraded to the Licensing 6.0 plan, please indicate the reason 45 40 35 30 25 20 15 10 5 0 25 Our business lacks the necessary fund...

42 28 6 We just recently re signed our existi...

We do not sufficiently understand the...

We have significant issues 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

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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.

Delivering an Effective End-user Environment

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Steve Kleynhans Vice 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

Wireless Licensing changes

Constituencies are changing

Performance needs?

Device chaos PC market turmoil



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.

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Critical Issues



Understanding market pressures and technology advances as well as their impacts on planning and management processes Typical Corporate Direction Managed End-user Infrastructure



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



Adapting for mobility and pervasive computing Current Environment Pure Technology Focus

Adaptability

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

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Limitless Hardware



6,000

Moore’s law continues unimpeded

•

But that doesn’t necessarily mean “performance”

5,000 4,000



Processors are becoming more tuned to particular needs

3,000



Shifting away from processors to platforms

2,000 1,000

IBM PC P2 386 Pentium 486 P3 P4

100,000 10,000 1,000 100 10 0 1981 1986 1991 1996 2001 1

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The 64-bit Desktop Question

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Provides access to larger memory (>4GB)

•

Improves performance of some applications

However…

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Intel has yet to weigh in on mainstream large memory issue



Provides greater bandwidth to and from memory

•

Impacts the most serious bottleneck in processors today



Other techniques exist for extending addressing



Code (and memory requirements) can bloat

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Provides more complexity for instructions



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 10110



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

Client Security Points Security certification will become more important for establishing business relationships than operational certification was in the 1990s

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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.

• • • •

Productivity Enablers

Continuous learning Information access Interaction models Integration (data, platforms, process, apps)

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

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Office XP and Office 2003

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Continued 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

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

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

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The Tablet PC: The Next Big Thing?



Most distinct change since notebook

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Strong concept but questionable implementation — heavy push by Microsoft

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Traditional and new vendor entries

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Focus is on new interaction/usage models

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Need 2-3 years to achieve optimized user ergonomics

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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 TCO

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Many factors are out of ITO control

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Reducing costs is easy if value isn’t a concern HW and SW 32% Support 51%

The Cost Levers



Service level



Standardization



Automation



Application architecture

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Centralization



Procurement practices Maintenance 4% Procurement 5% Plan, Design, Test 8%

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

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The Well Managed User

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Standardized common operating environments are the most powerful tools

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Improves all aspects of TCO, but does require discipline

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Works best with a predictable refresh



Lock-down vs. supporting the build Non-Build Items Hot Fix Layer Localized Builds Localized Builds Layered Builds Layered Builds

Core Build Hardware

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

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Three vs. Four Year Cost Comparison

3 Year Desktop w/Monitor

PC Purchase PC Install PC HW Break/Fix Contract PC Software Support (e.g. Drivers, ) PC Disposal Labor

Time Estimate

NA 0.65

0 1.5

0.75

PC Disposal Fees

Annual Hard Cost per PC

NA Lost End User Productivity (Soft Costs)3.67

Total Soft and Hard Costs $/hour

NA $65 $0 $65 $65 NA $65

4 Year Desktop w/Monitor

PC Purchase PC Install PC HW Break/Fix Contract

Time Estimate

NA 0.65

0 PC HW Break Fix Labor (e.g. Failures,) 0.45

PC Software Support (e.g. Drivers, ) PC Disposal Labor 2.5

0.75

PC Disposal Fees

Annual Cost per PC

Lost End User Productivity (Soft Costs)

Total Soft and Hard Costs

NA 5.5

$/hour

NA $65 $0 $65 $65 $65 NA $65

Cost

$950.00

$42.25

$180.00

$97.50

$48.75

$25.00

$238.55

Cost

$950.00

$42.25

$180.00

$29.25

$162.50

$48.75

$25.00

$357.50

Lifecycle

3 3 3 3 3 3 1

Lifecycle

4 4 4 4 4 4 4 1

Depreciated Cost

$316.67

$14.08

$60.00

$32.50

$16.25

$8.33

$447.83

$238.55

$686.38

Depreciated Cost

$237.50

$10.56

$45.00

$7.31

$40.63

$12.19

$6.25

$359.44

$357.50

$716.94

500 450 400 350 300 250 200 150 100 50 0

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

PC Disposal Fees PC Disposal Labor PC Softw are Support (e.g.

Drivers, ) PC HW Break/Fix Contract PC HW Break/Fix Contract PC Install PC Purchase

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Is Thin Client Really Cheaper?

$3,000,000

Thin Client vs. Fat Client Cost Comparison

Heavy Applications Moderate Applications Lightweight Applications $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Server HW WTS Fat Client Server Admin WTS Fat Client Client HW WTS Fat Client Client Administration

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

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Going Mobile

  

More 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

Personal Area

Bluetooth

Pervasive Area Wide Area Local Area HomePNA IrDA Personal Workspace Office

Ethernet WLAN 802.11

Remote Office

DSL Cable

“Everywhere”

WAP ISDN GPRS Dial-Up Ardis Metricom Mobitex CDPD GSM TDMA 3G

Companies must support “anytime, anywhere” computing

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Making Mobile Work

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Enterprises must support multiple device types for enterprise users, and even more for consumers

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

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Manage user expectations on mobility carefully

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

Apps Email Personal Information Manager Picking the Right Starting Point Business Impact: Rapid technology change and vendor immaturity will force continued investment in mobile applications during the next 2-3 years

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How Much Will It Cost/Save?

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Typical project investment

• • •

Quick start: $25K-$50K Beyond pilot: $250K-$500K Full scale: $1M+

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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

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Identify key opportunities/projects Assess apps for mobile potential Leverage existing expertise

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Define realistic goals — set realistic expectations Get business case approval from mgmt.

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Make security a central theme

Realistic Expectations Are Key ?

?

?

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

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Integration Approach and Strategy

Bottom Line



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

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Functionality should be highly targeted to mobile user functions/needs

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Keep it simple and focused on user context

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Deploy tactically, but look toward strategic needs

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

Transformation Steps

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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