Microsoft drops software rental

Microsoft has scrapped plans for subscription-based licensing of consumer products following the end of a 12-month trial in several countries including New Zealand.

Microsoft has scrapped plans for subscription-based licensing of consumer products following the end of a 12-month trial in several countries including New Zealand.

Research from other countries running the pilot suggested that those who bought the subscription versions of Office XP were confused and didn’t realise the software would be disabled at the end of a year, says Microsoft NZ desktop applications marketing manager Todd Hunter. He says about 1500 people participated in the trial in New Zealand. The pilot also ran in Australia, where 15,000 took part, Brazil and France.

The subscription for Office XP Pro was priced at $440 including GST as opposed to $1600 for the perpetual-licence version. The Office XP for Small Business subscription was $303 including GST. Office XP for Small Business is usually only available for manufacturers to install and can’t be bought separately. Normal full-licence products were also available.

Under the subscription licence the purchaser was entitled to new versions released during the year, although Microsoft didn’t release any. Hunter says statistics compiled overseas showed that eight out of 10 of the people who purchased the subscription versions didn’t realise they’d bought a subscription. He says there was some anecdotal research in New Zealand backing this.

“I think we’ve learned that the market isn’t ready for this type of service. There’s value in it but we need to do some thinking around how we market and position it. When we initially launched it was promoted around the fact that you’d know in advance what your software costs are, you wouldn’t have to pay an up-front lump sum and you can write it off as a tax expense, not as capital.

“People think of software as a CD in their computer which they can use forever and a day. They’re not used to having to reactivate the product after 12 months.”

Hunter says Microsoft was proactive in contacting people about it before the subscriptions expired. He says the company didn’t receive complaints from people realising their software was about to expire.

Kavio Avilash, who works for the Noel Leeming in Albany, says staff explained to customers the difference between the full licence and subscription versions and most people chose full licences. He says they perceived it to be better value or customers already had Office and wanted an upgrade. Noel Leeming only sold a few subscription packages, he says.

Now that the pilot is over Microsoft is offering anyone who took part a free copy of the full licence version of the software. Hunter says Microsoft doesn’t have records of all those who took part, and they should call 0800 676 334.

He says the pilot was part of ongoing strategy to find new ways for people to buy and use software. “We’ll always will be trialling new things.”

Lawyer Craig Horrocks who complained unsucessfully this year to the Commerce Commission that Microsoft's is anti-competitive based around its business subscription licence Software Assurance, describes Microsoft's consumer pilot as part of "the magnificent experiment".

"I'm not surprised that it didn't work but you have to admire Microsoft for again betting the company," he says.

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