Microsoft price hike isn't just about cashing in on mobile

Credit: Microsoft Sweden via Flickr

In reaction to Microsoft's plan to hike its User Client Access License fees, the former head of Google Enterprise Dave Girouard tweeted: "Last gasp of a dying model: 15% hike in MSFT Cal pricing."

He was right.

The 15 percent hike in the license fees, which will come into affect Dec. 1, isn't about bringing in new revenue for Microsoft, or simply a reaction to the BYOD trend. At least one analyst believes it's another step in Microsoft's transition to the kind of subscription model that most other vendors use.

CALs "probably are dying, but it will be a slow death," said Paul DeGroot of Pica Communications, who helps companies figure out Microsoft licensing. "Microsoft wants to move customers off the current perpetual licensing to an all-subscription model."

Client Access Licenses, or CALs, are at the core of how Microsoft charges for its enterprise server software, like Exchange. The software itself is relatively inexpensive. But Microsoft then charges an additional fee -- the CALs -- for each user or device who accesses that server. Once the company has bought the CALs, they keep those rights forever -- or at least until the next upgrade.

That's the part that DeGroot thinks will eventually go away.

That's ultimately good news for businesses, even if it does mean a bit of a price hike. "A lot of customers have been wishing death to CALs since the day they were invented," DeGroot said. "They're almost impossible to track."

Customers that are on Device CALs – where they pay per device for access to a server running Microsoft software – will likely find that the User CAL is a simpler model and still cheaper with the price hike. With the Device CAL, a person who uses their laptop and smartphone to access Exchange mail would need six Device CALs: one Windows Device CAL and one Exchange Device CAL for each of their devices, including work PC, laptop, and phone.

With the User CALs, that person would only need two licenses: one Windows User CAL and one Exchange User CAL. Before the price hike, businesses were probably realizing that the User CAL was simpler and less expensive, given the likelihood of many people to use multiple devices including phones, tablets, and work PCs to access email. The price hike helps Microsoft continue to earn revenue for the proliferation of devices.

But it also takes Microsoft one step closer to the subscription model that most software vendors use today. "Most other vendors only license users, such as named users or concurrent users," DeGroot said.

Microsoft has already been making moves in this direction. With Office 2013, users will have the option to pay an annual subscription rather than a license. As PCWorld notes, the pricing seems designed to encourage people to go for the subscription, which offers more features and perks, like additional SkyDrive storage and free Skype calls.

DeGroot expects that subscription pricing will replace many or all CALs in the next five to 10 years.

"In that sense, Google is stating that Microsoft is headed where Google is now. Aside from its specialty search devices, Google already only licenses users, for Google Apps, for example. That's where Microsoft wants to go," he said.

From CIO: 8 Free Online Courses to Grow Your Tech Skills
View Comments
Join the discussion
Be the first to comment on this article. Our Commenting Policies