2002 Review: Software - Driving licences

Continuing IDGNet's review of 2002 over the holiday season, Andrea Malcolm looks at software licensing. Forget about the US Department of Justice antitrust case, she says. It was licensing that emerged as the straw most likely to break Microsoft's back in 2002.

Forget about the US Department of Justice antitrust case. It was software licensing that emerged as the straw most likely to break Microsoft’s back in 2002.

Microsoft finally ushered in its new licensing regime on August 1 this year. Negative reactions had forced the company to twice delay the official start of the new licensing programme, which unofficially kicked off in October 2001. On a visit to Sydney a couple of months back Microsoft CEO Steve Ballmer admitted the company had made a hash of introducing it to customers.

Andrea Malcolm looks back over the rocky road to Software Assurance, the moves by other software vendors to change their licensing plans and the parallel rise of Linux as an alternative operating system to Windows.

May 2001

Microsoft announces its intention to change its licensing regime, saying the current array of plans was confusing. It proposes a new scheme called Software Assurance — part of the company’s Licensing 6.0 plan — which requires customers to pay for their software licences plus a 29% maintenance fee two years in advance and renew this every two years. Under the plan customers receive all upgrades released by Microsoft.

The cut-over date is set for October 1 but this is met with widespread protest from customers, who say the new scheme will cost more and hasn’t not been factored into IT budgets for the year.

June 2001

A group of Dutch systems administrators sends Microsoft an open letter complaining about an unreasonable increase in cost. The Netwerk Gebruikersgroep Nederland (NGN) says the cost of Microsoft software under the new policy will increase for 86% of its members.

Its figures are disputed by local software licensing consultancy Accordo Group, which says businesses that upgrade every three-and-a-half years or more will benefit from the changes. Consultant Vicky McCullough says New Zealand has the highest penetration of Microsoft’s Upgrade Advantage and Enterprise Advantage licences per capita in the world, and these customers will be better off. Those who upgrade less frequently will face an increase, she accepts.

July 2001

Microsoft extends the deadline for organisations to enrol in Software Assurance to February 28, 2002.

October 2001

Feeling the heat of customer complaints, Microsoft extends the deadline for the second time to July 31, 2002.

March 2002

Microsoft customer Clendon Feeney, a law firm in Auckland, files a complaint with the Commerce Commission alleging anti-competitive behaviour. The complaint asks the commission to investigate Microsoft on the grounds that its conduct demonstrates a major market problem, it disregards New Zealand law (the Fair Trading Act and Commerce Act) and that the case is important to the national interest in competition in trade.

Lawyer Craig Horrocks, who spearheads the complaint, says the firm faces large cost increases under the new regime and will look at adopting open source software instead.

April 2002

In an informal Gartner survey of American Microsoft customers only about a third of those polled say they have renewed the terms of their Windows and Office licences under the new plan. Matters for Microsoft are complicated by the fact that as customer dissatisfaction simmers, the open source operating system Linux enjoys an ever-rising profile. IT departments who feel they are forced up against the financial wall by the proposed licensing changes investigate Linux.

June 2002

The Commerce Commission decides not to investigate Clendon Feeney’s complaint, saying Microsoft has not breached the Commerce Act and its behaviour is not anti-competitive.

Horrocks says he hopes he has at least raised awareness of the cost increases and some of the implications of Microsoft’s decision to cancel upgrades.

July 2002

There is a flurry of software audits worldwide as companies work out their Microsoft licensing inventories.

Customers have until July 31 to either sign up to Software Assurance or Upgrade Advantage (which provides two years of software updates and automatically enrolls them in Software Assurance) or lose their licence upgrade rights. To qualify for either, all licences must be up to date.

Gartner warns Microsoft enterprise customers to review their software licensing contracts or risk paying high prices down the road. Some customers, such as cooking and baking equipment manufacturer Moffat, use tools such as AssetMetrix, a Canadian PC inventory service, to ease the audit pain.

The Norwegian government says it won’t renew its two-year software licensing programme with Microsoft.

August 2002

Air New Zealand grabs the spotlight at Linuxworld in San Francisco when it announces it will replace 150 Microsoft NT servers with the open source operating system running on an IBM mainframe. Air New Zealand acting information chief Andrew Care says like most organisations the airline had had issues with Microsoft’s licensing fees and began looking at Linux about a year ago.

September 2002

At a CIO conference in Auckland, Accordo Group’s McCullough says most enterprise software companies have equally stringent licensing regimes. She cites Oracle, IBM and Novell.

September 2002

On the consumer side, Microsoft scraps plans for subscription-based licensing after a 12-month trial in New Zealand, Australia, South America and France show customers are confused by the concept.

October 2002

Microsoft CEO Steve Ballmer jets into Australia to appease twitchy customers (namely Telstra) and makes conciliatory noises about the introduction of Software Assurance to customers, saying the company handled it badly.

However, he says Microsoft won’t offer discounts to corporate customers just because they are considering replacing Windows with Linux.

Hot on the heels of Ballmer’s visit, IBM flies in its worldwide Linux sales director, who spent six hours with Westpac.

November 2002

In the US Microsoft says it plans to offer smaller companies a more lenient licensing plan intended to stem deflections to Linux or other open source software.


Licensing upheavals weren’t restricted to Microsoft. Computer Associates, Oracle and IBM also announced fundamental changes to their licensing programmes.


At the beginning of the year Oracle announced flat-fee pricing for its e-business suite. However, it applies only to companies standardising on the suite, spending at least $US250,000 and buying Oracle licences for no less than 20% of users. This meant no one in New Zealand.

Oracle faces a licensing furor when in April US analysts Meta Group issues a statement saying that named user licence holders are being forced to buy more licences or convert to the more expensive processor-based licensing scheme. However, New Zealand dairy company Fonterra, which negotiates directly with Oracle in the US, says it has seen no evidence of such behaviour from Oracle and the Institute of Geological and Nuclear Sciences says it has saved several thousand dollars by switching from user to processor licensing.

The controversy centres around Oracle’s definition of multiplexing, which usually involves the use of a web server or other applications that use a shared pool of connections to the database. Meta says it appears Oracle is attempting to expand the definition of multiplexing to include batch feeds from non-Oracle applications into Oracle databases. Oracle New Zealand says if multiple devices are connected to an Oracle database all devices need to be licensed.


Borland hits the news at the start of 2002 due to clauses in the company’s licensing giving it the right to enter customer premises to check for pirated software.

In January Borland boss Dale Fuller responds to widespread criticism through an open letter saying the clause was standard for enterprise licences but shouldn’t have been included in individual licences.

Computer Associates

CA makes available a subscription pricing model and CEO Sanjay Kumar predicts that every major enterprise software vendor will adopt a month-by-month licence subscription module over the next five to seven years.


IBM decide to change the licensing for its Lotus products from per-machine to per-processor.

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Tags licensing

More about Air New ZealandAndrew Corporation (Australia)AssetMetrixBorland AustraliaCA TechnologiesDepartment of JusticeGartnerIBM AustraliaLinuxMeta GroupMicrosoftNovellOracleTelstra CorporationUS Department of JusticeWestpacWestpac

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