Microsoft hitting UK plc with £1bn 'Windows tax'

Microsoft's new licensing policies will cost UK companies over £1bn - and the company should face a government investigation over the issue.

That's the view of one of the UK's leading user groups, The Infrastructure Forum (tif).

In a letter to The Rt. Hon. Patricia Hewitt MP, Secretary of State for Trade and Industry, tif has asked the British government to look into what it describes as Microsoft's 'Windows tax'.

According to tif, whose 98 member organisations include 22 of the FTSE top 50 and have an annual IT spend of £18bn, Microsoft is imposing a pricing policy on its customers which could see tif. members alone paying around £880m extra a year over a typical four-year investment cycle.

tif believes that the company's new pricing policy, which will come into force with the launch of XP, amounts to an abuse of its dominant position under the terms of the 1998 Competition Act.

David Roberts, chief executive of tif, said in a statement: "This new pricing policy is a slap in the face of every Microsoft customer. For our members and all UK businesses, there are no immediate alternatives to using Microsoft software and the company knows this.

"At a time of economic downturn, Microsoft is telling its customers to dip further into their pockets. But for what? Microsoft has added a few bells and whistles to its new software, but research amongst our members reveals that these have not been requested and are not wanted."

In the past, Microsoft users have enjoyed a discount when upgrading or buying new software. But under the revised scheme, they are forced to pay for their licences under a three-year subscription model on top of a one-off upfront fee. They still get a small discount when new software is released.

tif has lobbied Microsoft over the new pricing structure but claims that Microsoft said it has no intention of reconsidering its position.

Microsoft has hit back, claiming that its new policies are designed to remove complexity from its volume licensing agreements, and are based on customer feedback.

The company also says that only 20 per cent of its users will end up paying more for their licences, with 30 per cent enjoying a reduction in fees.

But tif's members remain unconvinced. At a meeting on 19 September, many of them reported that they are seriously looking into migrating away from Microsoft products and delaying new purchases if Microsoft persists with its plans.

Tif's members have over 2.2m desktop PCs and laptops and a further 52,000 Microsoft related servers between them. Many have already called a halt to new Microsoft projects.

Roberts added: "Research amongst tif. members reveals that the new pricing structure will result in a jump of almost 100 per cent in the cost of owning Microsoft licences."