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

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

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

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

On another front, Microsoft’s Windows stranglehold in the OS market is
potentially threatened by the emergence of Linux-based alternatives. San
Diego-based, 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, 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
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
. ” 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

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.”

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