Analysts warn on Microsoft licensing changes

For end users of the consumer-oriented Windows Millennium Edition volume deals will end on 1 March and on 30 June for Windows 95 and Windows 98.

As of 1 March, Windows ME will be available only through reseller deals, retail outlets and when preloaded by PC sellers.

The worldwide licensing programs affected include Microsoft's Select program for midsize and large companies, the Open program for five licenses or more and the Enterprise program for companies with 500 or more users. The programs have allowed customers to receive discounts based on the number of products bought.

A Microsoft spokesman said the company was giving customers "sufficient notice" to enter into any volume licensing agreements for their future Windows ME, Windows 95 and Windows 98 requirements.

He said: "The licensing changes announced follow the increasing adoption of Windows 2000 Professional by our volume licensing customers and an associated significant decline in demand for volume licences for previous versions of Windows."

However, analysts disagree. Dan Kusnetzky, analyst at IDC, said the tactic is "fraught with peril" and could cause many clients to become fed up with the company. He said: "The discontinuation of these programs is a thinly disguised ploy by Microsoft to boost revenue by driving clients to buy volume licenses for the more expensive Windows 2000 Professional product."

The Meta Group also recently published a report indicating that Windows 2000 client migration will cost $700 to $800 per user in a medium-complexity environment. The Windows 2000 version upgrade with downgrade rights to Windows 98 also costs about 25 per cent more than the price of a Windows 98 version upgrade, according to Meta.