Hey, Wanna Buy a Subscription?

Beginning in early March, small and medium-sized businesses (SMB)  will have a new option for licensing Microsoft software through resellers – via subscription.

Dubbed the Open Value Subscription, the plan will enable SMBs to license the software they use on a “lease-like” basis, according to a posting New Years’ Day on the Microsoft Small Business Community Blog. However, as the post points out, it is not a lease, although it has some of the financial benefits of one.

“This option provides the up-front cost-saving benefits of a lease-type model … where they can pay to use the software for a set period of time with the flexibility to increase or decrease in size as their business size does year over year,” said the post by Eric Ligman, Microsoft’s U.S. senior manager for small business community engagement. “At the end of the initial term, clients have the options to continue the subscription, buy out the subscription to own the licenses, or to end the subscription,” he added.

To quell concerns among its partners that Microsoft may be making yet another move to take over their markets, Ligman also said that the plan does nothing to change the current sales model. An SMB buys the subscription from its preferred reseller, the reseller buys the subscription from its preferred distributor, and the distributor gets the subscription from Microsoft. The flow of payments works similarly, Ligman said in a later post.

Translation: for partners, the status quo is maintained – at least for now. That may change over the longer term, however, as Microsoft moves into high gear with its developing “software-plus-services” business model, according to one analyst. That may eventually route payments directly to Microsoft, cutting out the middle man.

“The whole software-as-a-service [concept] is more about the licensing than about the delivery method,” said Rob Enderle, principal analyst at the research firm The Enderle Group. However, Microsoft has to be careful and tread lightly with its partners, many of whom already feel threatened by the company entering their established markets.

“If they move too quickly, they anger the channel, so Microsoft is moving very carefully,” Enderle added. In his view, that’s part of the reason why Microsoft’s business-oriented software-plus-services offerings to date have mostly been targeted at small and mid-sized businesses. “It’s small business first because [that market] is the most exposed.”

At the same time, established business models are changing and Microsoft needs to keep up. “If they don’t move when the market moves, you’re left behind,” Enderle said.