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Microsoft is learinig from Oracle

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Date: Thu, 10 May 2001 07:28:08 -0700
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Microsoft is expected to announce changes to the way it licenses its software to large companies today, including the possibility of more emphasis on agreements that expire after a few years.

In a research note issued earlier this week, UBS Warburg analyst Don Young said Microsoft has recently proposed deals with business customers providing three-year subscription licenses that require companies to renew at the end of the deal's term. Microsoft has also offered to buy back existing perpetual licenses, the vendor's usual method of selling to large companies, in which customers own the software they purchase forever.

The changes are expected to primarily affect Microsoft's enterprise-agreement licenses, in which companies pay for software up front, then receive any upgrades to those products released during the agreement's term. After the agreements expire, many companies are happy to keep running what's installed for several years.

But Microsoft is looking for ways to uncouple its license agreements from new PC sales, which generate upgrades but aren't growing as quickly anymore. Selling more subscription licenses to products such as Windows and Office would be a step in that direction. Less clear is how Microsoft can achieve its revenue goals without alienating customers with what effectively would be price increases. - Aaron Ricadela

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