Microsoft announced it will launch the Open Value Subscription Program March 3 in the U.S. and Canada. The subscription will allow small and medium-sized businesses (SMBs) with fewer than 250 users to essentially rent Microsoft software -- paying for a Microsoft software license that covers a set period of time.
When that term expires, customers can choose to extend the subscription, end it or pay an additional fee to make the license permanent. Microsoft partners will be able to sell the subscriptions through their current volume licensing distributors.
"There will be no additional hurdles to navigate or hoops to jump through to offer this to your clients," wrote Eric Ligman, a senior manager for Microsoft's Small Business Community Engagement, on the company's Small Business Community Blog.
Microsoft software license subscriptions will reduce the money customers have to pay up front and help retain SMB customers who are considering open source software as a cheaper alternative, according to Ron Herardian, co-founder and managing partner of Global System Services Corp. (GSS) in Mountain View, Calif.
"It's easier for a lot of businesses to rationalize it as an operating cost," he said. "It makes it easier for a business to add a workstation or deploy a product."
But GSS makes most of its money through services, so the subscription program won't have a major effect on its business, Herardian said. The same holds true at GreenPages Technology Solutions, a Microsoft partner in Kittery, Maine, where software license sales make up just 20% of the company's revenue, according to communications director Elizabeth Edwards.
"The cash flow's going to be a little different, because they're going to be spreading the payments out," said Robert O'Shaughnessy, GreenPages' senior software licensing specialist.
O'Shaughnessy said GreenPages does not favor one Microsoft software licensing program over another and lets each customer choose what is best for its business.
Both up-front purchases and subscriptions have advantages, he said: When a customer buys a traditional license, the money goes into the accounting books immediately, and when a customer chooses a subscription-based model, it creates a guaranteed revenue stream for a specific time period.
Another benefit of selling Microsoft software licensing subscriptions is that when customers save money up front, they may be more inclined to buy additional software, hardware and services offered by a solution provider, Edwards said.
Microsoft partners who focus on reselling software will most benefit from the subscription program, Herardian said.
"It's going to make sense for them from a business perspective," he said. "They're going to make money in perpetuity on these leases."
Microsoft partners can learn more about the Open Value Subscription Program at one of four Live Meeting sessions between Jan. 10 and 29. Registration is open on the Microsoft Partner Readiness training Web site.
Microsoft selling software license subscriptions "reflects what is happening in the rest of the industry," Herardian said. "This isn't a new idea. … They're not behind the eight-ball, but they're certainly behind the curve. Software's been moving toward a subscription model for a long time, and it makes a lot of sense."