Microsoft Enterprise Bundling Draws Fire

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October 08, 1998 (3:51 PM EDT)

By Andy Patrizio,

Microsoft's new licensing program for enterprise customers is drawing protest from the software-industry groups, who say it bears a strong resemblance to controversial licensing agreements of the past.

The Software Publisher's Association (SPA) and the Project to Promote Competition & Innovation in the Digital Age (ProComp) have criticized the program, which is for customers with 1,000 or more desktops and the ability to commit to purchasing a set number of additional desktops over a three-year period.

For those customers, Microsoft is now bundling Windows 95 and NT with Office suite and Back Office into a single package, all for one price.

The policy aids Microsoft in pushing out its competitors in the back-office software market by locking customers into a three-year contract and selling the entire package of client and server applications along with the operating system, according to Ken Wasch, president of the SPA.

"We don't believe the owner of the dominant operating system should be able to leverage into other markets by using the operating system," he said. " Microsoft is using a tactic that has worked before, which is to give it away for free and tie it to a product [customers] need. If they want to sell Back Office, great, [but] don't tie it to the OS."

Naturally, Microsoft (company profile) disagrees. "Our licensing to customers is pro-competitive and pro-customer," said Greg Shaw, a spokesman for the company. "Customers have lots of choice in their licenses with Microsoft." Only 5 percent of Microsoft's enterprise customers have chosen the agreement Wasch is objecting to, he added.

The SPA said in June that Microsoft is engaging in practices to win the back-office software market using many of the same tactics it used to win the desktop. Those tactics are a mix of technology and contractual tricks like the enterprise-licensing program, said Wasch.

"Admittedly no one has to take the deal, but it's a way to lock up customers for a long period of time," he said. "And anyone trying to sell against Back Office is going to be told 'Why should I buy from you when I got Back Office for free?' " said Wasch.