Microsoft's yen for EA renewals drives Windows 8 push

With some IT shops hesitant to renew their Microsoft enterprise licensing agreements, Microsoft is redoubling efforts to get Windows XP users over to Windows 7 and 8.

LOS ANGELES--Some folks were surprised that Microsoft started talking up Windows 8 last month and again this week at its Worldwide Partner Conference here. But the company has a good reason to harp on products more than a year out: It needs to keep businesses signing up for Enterprise Agreements.

Many customers are loathe to re-up these pricey, three-year volume licenses without proof that major new software will be available in that timeframe. By showing off the upcoming Windows 8 client -- as well as breaking its silence on Windows 8 Server this week -- Microsoft has signaled that these business customers will get what they pay for.

Some IT shops remain skeptical that Microsoft will follow through on that promise, given the company's track record.

"Microsoft must be concerned that the OS cash cow will erode quickly. Getting EAs rolled over would be one way of maintaining life support. And there's no doubt the costs of an EA are getting tough to justify," said a managing director of an IT consulting firm, who declined to be identified.

Some analysts also believe this is an urgent matter Microsoft needs to address sooner rather than later. Paul DeGroot, principal analyst with Pica Communications, said many recession-battered companies have resisted renewing their agreements.

Since EAs typically run for three years, DeGroot said, roughly 33% come up for renewal every year, with the largest number of renewals occurring in Microsoft's fourth quarter, which ended June 30. DeGroot estimates that EAs accounted for over $8 billion in revenues for Microsoft's 2011 fiscal year.

"If EAs are in trouble, Microsoft is in trouble," DeGroot said.

One CTO at a large New York financial services company said earlier this year, he had advised against renewing because the cost was out of whack with the upgrades and new products he sees coming down the pike. "Sometimes it makes more sense financially not to renew or not to renew all of the EA," he said.

DeGroot said customers should scrutinize their agreements carefully because, depending on Microsoft's release schedule, they may end up paying for software they'll never see.

At the conference here this week, corporate vice president Tami Reller tried to juice migrations, stressing that Windows XP's days are numbered. That venerable -- but still popular client OS -- will be "out of support" in 2014. "It’s got 1,000 days to go," she said.

After that date, ongoing standard support and maintenance "will not be part of the Windows XP experience and that can introduce material risk to customers," Reller told several thousand Microsoft partners.

Reller said a quarter of all desktops are "fully deployed on Windows 7."  And while that is inarguably a big number, it is also true that Windows 7 has been broadly available since October 2009 and there is a ton of Windows XP still running with many users unprepared to budge.

After the Vista debacle, Microsoft really wants customers to get back on the full upgrade track. The new Windows Intune 2.0 , now in beta, adds new software distribution capabilities that can ease automated software upgrades to products such as Windows 7.

On the other hand, some IT professionals are satisfied with the terms and conditions of their EAs, saying they have received enough upgrades and new products over the course of their contract to make it worthwhile. Despite Microsoft's Windows 8 drum beating this week, they feel no need to rush into a Windows 8 upgrade, nor to Windows 7 for that matter.

"We just renewed our (enterprise) agreement and there wasn't any reluctance to do so. We aren't in any rush to upgrade, as we have a lot of XP. We started looking at Windows 7 but put it on hold because a lot of our resources were taken up with an internal project," said David Driggers, system center administrator with Energen Corp., in Birmingham, Ala. Driggers added he has a three-year EA covering a wide range of Microsoft products -- including desktop and server system-level products, as well as applications.

Some analysts said they doubt Microsoft's message about less than 1,000 days of tech support left for Windows XP, in concert with promoting the joys and wonder of Windows 8, will inspire many users to reup their EAs, noting that desktop operating systems are only one element of most EAs.

"You don't typically buy an EA for the client OS," said Al Gillen, an analyst at IDC. "Microsoft has created an environment where they must deliver regular upgrades because that is a perceived value around SA (Software Assurance) relationships. But I can't see people rushing to Windows 8 to specifically offset any softness in their EA deals."

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