RealTime IT News

Microsoft Puts More Feet on the Street

With a little more than a month before its controversial new software licensing program kicks in, Microsoft Corp. Monday said it would buff up its sales force over the next fiscal year.

The Redmond, Wash., company said it would add 450 salespersons, marking the 2003 fiscal year the greatest expansion of its sales force in more than a decade. The company also plans to shift 115 workers into different sales areas.

In addition to the sales-force expansion, Microsoft said it would continue its shift from selling individual products to focusing on 12 vertical industries, from financial services to automotive manufacturing.

"They expect us to come to the table with tailored solutions," Kevin Johnson, a senior vice president for Microsoft Americas, said in a statement. "When our sales professionals engage with customers, they must have an incredibly strong understanding of the challenges and opportunities customers face and of how technology-based solutions can make customers more agile."

Microsoft's technical specialists will fall into one of three baskets: server, developer and knowledge worker.

The moves come as Microsoft deals with a possible summer of customer discontent over its new enterprise software licensing policy, dubbed the Software Assurance Program. The policy, due to take effect on July 31, will revamp how customers buy software such as the Windows operating system (OS) and Microsoft's Office suite.

Microsoft announced the policy in May 2001, and then delayed its planned February 2002 implementation until July 31. Microsoft has said the new policy, which would move enterprise customers into more of a subscription pricing plan with automatic upgrades, would simplify the software licensing, eliminating confusion. According to the company, half of all enterprise customers would see no change in their cost, 30 percent would see a decrease, and 20 percent would pay slightly more.

Many customers complained that Microsoft was eliminating confusion by eliminating choices, such as the version upgrade program, which allowed customers to upgrade software in the same family at a discounted rate.

"It got to where a lot of folks were saying I don't need these upgrades," said Alvin Park, a research director at Gartner.

In April, according to research by Gartner Group, only 35 percent of customers had signed up for the program. Park said he found customers' confused about whether Software Assurance would help them.

"There's no one answer that fits everyone," he said. "It's not a question of whether everyone should sign up for it or not sign up for it. It depends on their software focus."

Meanwhile, Microsoft's rivals have seen an opening to chip away at the software giant's dominance. Last month, Sun Microsystems unveiled StarOffice 6.0, a suite of office software priced below Microsoft's popular Office software. Gartner analyst Michael Silver estimated StarOffice has the potential to grab as much as 10 percent of Microsoft's Office market share.

On another front, Microsoft's Windows stranglehold in the OS market is potentially threatened by the emergence of Linux-based alternatives. San Diego-based Lindows.com, maker of a Linux OS that runs Windows programs, has waged a very public fight with Microsoft, which has failed to shut down the startup through a lawsuit alleging trademark infringement. Last week, Lindows.com struck a deal with Microtel Computer Systems and WalMart to make and market low-cost computers running LindowsOS. Today, it followed up with the announcement of a flat-fee licensing program for original equipment manufacturers to bundle LindowsOS on as many machines as they want for $500.

For Microsoft, Software Assurance offers a guard against the boom-and-bust revenue generation inherent to software companies. Already, the company has settled an investigation by the Securities and Exchange Commission (SEC) into allegation it hoarded revenues in order to smooth out its revenue stream.

Microsoft CEO Steve Ballmer has defended Software Assurance as a way to replace the haphazard system for enterprises upgrading their software.

"I've got plenty of customers who tell me, 'This is going to cost me more money.' And then, when I actually look at their purchase history, I can prove to 'em it's going to cost 'em less," he recently told Computer World. " And I have customers who say that 'It's going to cost me more money,' and I look at their purchase history, and you know what? It is going to cost them somewhat more. But at least it's a rational and predictable framework."

After initial procrastination, Park said hundreds of his clients have contacted him for help figuring out whether Software Assurance is the right fit. "Some people are now scrambling," he said. "I'm seeing a significant increase in the May, June timeframe."