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Microsoft Moves To Help ASPs

In a move designed to boost the still-nascent ASP industry, Microsoft has updated its Service Provider License Program (SPLA) to reduce software licenses fees and provide more stability in its fixed pricing policy.

The change has the potential to help ASPs in one of two ways: They can either lower their fees to better attract customers or the reduced license fees will help service providers improve their own profit margins.

According to Reed Overfelt, director of hosting and application services at Microsoft, although not highly publicized, the changes have been in effect since November 1 and come as a result of requests from its service provider partners, which Overfelt said includes managed hosting providers (MSP), hosting providers and ASPs.

"This is the third iteration of a program built from the ground up for service providers," Overfelt told ASPnews. The program, which launched in August 2000, had been called the Application Services Agreement. "The goal of nonperpetual licensing is to allow service providers to rent or lease with no capital investment on either a CPU or named user basis, Overfelt said. The changes in the program fall in four categories and cover all Microsoft applications, servers and platform products, Overfelt told ASPnews:

  1. Reduced pricing. Pricing changes will vary across product lines, Overfelt said. For example, the hosted version of Microsoft Exchange will change from $4.39 per user, per month to $3.25 per user, per month. Enterprise SQL Server drops from $999 to $699 per CPU per month.

  2. Fixed prices through 2003. Changes in fees will be made only once a year in one month. Changes, Overfelt said, can't be any higher for the SPLA than the percentage changes in licensing for its other license programs.

  3. Improved user rights and rights protection. Unclear language in Microsoft's earlier licensing agreement subjected service providers to paying for new versions of software whether or not customers were using those newer versions. For example, if a service provider's customers were using Windows NT, the service provider could have been required to pay for Windows 2000 for all its customers even if some stayed with NT.

  4. Improved report structure. Service provider can now use the Microsoft Order Entry Tool, a Web-based tool that is designed to make reporting to Microsoft and integration with internal accounting systems easier.

    Overfelt said the SPLA structure does not include Great Plains software, but he said he expects the accounting software provider to follow a similar strategy.