Microsoft to Pay Reparations for Vista, Office Delays

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Microsoft (MSFT) is working on a new reparations strategy, known internally as a customer incentive program, for those customers with volume licensing programs who will be negatively affected by the delay in the release of Windows Vista and Office 2007.

Most enterprises buy volume licensing agreements from Microsoft, along with Software Assurance, which guarantees them the rights to all upgrades for any product covered by the agreement while it is in force.

But even if Microsoft sticks to its current timetable for the delivery of Vista and Office 2007, the delays mean that some customers who bought Software Assurance and who would have qualified for those upgrades if they had shipped as originally expected will not get them before their contracts expire.

As such, the Redmond software maker is going to have to make amends through rebates, incentives and the like, to encourage those Software Assurance customers who have now ended up on the wrong side of the licensing tracks through no fault of their own to renew.

The new incentive program, designed to address any possible fallout from that, is still under development within Microsoft's OEM group and not yet finalized, is expected to be rolled out sometime in the fall of 2006, a Microsoft spokesperson said to eWEEK, but declined to give any further details.

Microsoft also knows all too well the negative impact that can result from any change in licensing terms or in the value customers perceive they get from this.

When the Redmond software maker introduced its new Licensing 6.0 and Software Assurance programs in 2001, they were met with a customer uproar.

The programs were complex and poorly explained, with many analysts predicting customers would end up paying significantly more for their software.

Microsoft CEO Steve Ballmer subsequently admitted that the program was poorly presented and negatively impacted some customers, and the company has subsequently added all sorts of additional offerings and incentives to make it more palatable to customers.

But, in 2004 when the first set of Software assurance contracts were up for renewal, many customers questioned the value they got from the programs and whether they should renew.

However, Allison Watson, the corporate vice president of Microsoft's Worldwide Partner Group — who has insight into the program because it affects partners, even though it has not yet been rolled out to the field — told eWEEK in a recent interview that Microsoft is mindful of the impact the delay in Vista could have on those customers who have volume licenses with it and the partners associated with them.

"We have already identified all of the customers who fall into these buckets and the associated partners. The worldwide field will be empowered with offers and incentives and a commitment to partners to ensure customer satisfaction around these issues.

"So our field and partner channel will be given what I'd call tools and offers to alleviate those particular situations where it [the Vista delay] would be perceived negatively," she said.

Watson did, however, try to downplay the effect of product delays on enterprise customers with volume licensing agreements, and the partners who work with them, saying that for them it's less about when a piece of software shipped and more about how the software is delivered and supported and affects the entire product family and their platform.

Watson also argued that a delay could actually be a good thing for those ISVs and partners that work with Microsoft on the services side.

"Frankly, partners tell me they have more business in services than they can handle. They need time, and they need our help to acquire new people and skills in the marketplace, so in some sense it's a silver lining for services and ISV partners who have more time to test and get code right," she said.

It's also essential to those partners who are resellers of Microsoft software that the company not ship a product until the software is completely ready.

"If the software isn't ready, no matter what day we ship on, if it's not ready, then the margin for the reseller is lost due to customer complaints and unhappiness. So it is far better to wait on that," she said.

Microsoft is also believed to be working on a separate program with OEMs and system builders for a "technical guarantee" for Vista.

A spokesperson for Windows Vista would also only confirm that it is working with Microsoft's OEM partners "on the best way to support customer satisfaction during the holiday buying season, but we have not yet finalized details and have no further details to share at this time."

This program will likely feature coupons providing consumers and businesses who buy systems with Windows XP during the rest of 2006 some kind of upgrade to Vista once that operating system launches in January 2007.

Microsoft officials have declined to comment on the exact timing and particulars of the technical guarantee program.

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