Office XP Subscription Licenses Face Delay

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April 05, 2001 (9:27 AM EDT)

Microsoft Corp. has hit a speed bump in its plans to test subscription licenses.

While Office XP, the company's new productivity software, should hit shelves May 31, retailers probably won't have the special subscription version that Microsoft (stock: MSFT) promised last fall.

And the product—an early test of whether the software market will bear alternative licensing—may not reach the United States at all.

At the November Comdex trade show, Microsoft said it planned to introduce a version of Office XP that would give home users the option to pay a discounted fee to use the software for a year.

When the license expired, according to the plan, customers could either let the software pass into a read-only mode, or re-up their subscription, gaining access to any upgrades released in the interim.

But Microsoft's packaging for Office XP, disclosed this week, makes no mention of the product.

Microsoft says it's simply delayed.

"You need time to introduce a new product, especially one that needs an infrastructure around it," said Lisa Gurry, a Microsoft Office product manager.

Gurry said the vendor is still finalizing the countries in which it will sell subscription-based Office licenses, declining to say whether the United States will be one of them.

The vendor needs to train retailers on the product and prepare for customers renewing subscriptions by phone or online. Ideally, Microsoft will have answers by May 31, she said.

Microsoft, Redmond, Wash., needs to begin testing alternative licensing schemes for its desktop products because customers are more reluctant to upgrade as frequently as in the past. Slowing growth of PC sales doesn't help.

During Microsoft's second quarter, ending Dec. 31, sales of desktop software, mostly Office, dipped about 2 percent to $2.49 billion, about 38 percent of total revenue.

The Office XP subscription software that Microsoft is developing would aim for consumers—among the slowest market segments to buy new software.

"Some consumers would rather pay $30 a month than $300 up front," CEO Steve Ballmer said at Comdex. He also called the Office subscription product "a full retail launch."

The company's plans now appear less ambitious.

"It's certainly something that's a bit of an unknown," said Gurry.

Office XP will ship in four editions, with upgrades priced from $239 to $549. Microsoft won't say how much an annual subscription would cost, but Gurry said, "it would have to be considerably less" than the upgrade price to be successful.

Even small businesses with five or more PCs, according to Microsoft, would save by purchasing a Microsoft Open License agreement, rather than buying the subscription version.