Microsoft Leans on SAM as Licensing Grows More Complex

Published: August 2, 2006

by Alex Woodie

"You should pay for what you use, and use what you pay for," were the words Microsoft server chief Bob Muglia used during a keynote at the Microsoft Management Summit 2006 in San Diego in May. That statement sounds simple enough, but of course it's rife with complications. Microsoft is finding that out as it ramps up its Software Asset Management (SAM) program to bring customers in-line with the terms of their licenses, and possibly reaps more revenue along the way.

For years, Microsoft has been railing against software piracy and occasionally policing its customer base. The company says it uses data mining to find volume license customers that could be out of compliance with the terms of their agreements, and relies on partners in its global Software Asset Management (SAM) program to do the bulk of the field work.

Microsoft provides its SAM partners with "customer scripts" they can follow during their contact with Microsoft customers. These scripts, viewable on Microsoft's Web site, start with the initial conversation ("Hi, my name is with . I noticed here by our records that you recently acquired licenses for software."). Microsoft also offers scripts for the first follow-up, taking inventory, matching software with licenses, reviewing policies, establishing a software asset management plan, and following up.

Customers that participate in the SAM program can expect several benefits after connecting their systems to Microsoft tools that can detect all the Microsoft products on a network. Chief among these benefits is customers might find they qualify for a bigger discount on Microsoft products, or that they are paying for too many licenses. On the other hand, there's also the chance they might be under-licensed, and owe Microsoft money. Participating in a SAM program also mitigates the customers' legal risk and could help them avoid being sued, Microsoft says matter-of-factly.

Recent reports of heavy handed tactics on the part of Microsoft's SAM partners have called into the question Microsoft's motivation that the SAM program is about benefiting customers. According to reports, customer contacts with Microsoft SAM partners start innocently enough, with politely worded e-mails and letters, but soon disintegrate into threats to call IT managers' bosses if they don't cooperate with the assessment. To some customers, the episodes seem more like a mandatory audit than a voluntary assessment.

The SAM situation was made worse recently when the worldwide director of Microsoft's SAM program, Juan Fernando Rivera, revealed that SAM partners are paid in part based on the amount of license revenue they collect, and that the SAM program has certain goals, although he denied they were quotas. Microsoft customers in England have also been watching the activity closely as Microsoft makes its SAM Toolkit available there this month.

This isn't the first time that Microsoft has found itself in hot water over attempts to assess its customers' software usage. In 2002, the company sent letters to 500 schools in 32 states asking them to participate in a software assessment. Some of the school representatives responded angrily, claiming they didn't have enough time or resources to perform the assessments. Microsoft has sought to simplify its volume licensing program to boost compliance, but the program is still too complex for some.

Microsoft isn't the only software vendor to request customers participate in software usage assessments. Most for-profit software companies undertake outreach programs such as SAM. But of course, Microsoft is the largest such vendor, which makes any actions it takes much more visible.

Microsoft is moving on several fronts to address the issue of customer licensing and assessments in an increasingly complex world. In May, the company announced the acquisition of Assetmetrix, a Canadian developer of software that helps users monitor their software licenses. Microsoft said it would incorporate the Assetmetrix tools into a future release of Configuration Manager 2007, the next release of the Systems Management Server (SMS) product, which will also have close ties to a new System Center Service Desk product--all part of Microsoft's Dynamic Systems Initiative.

On Monday, Microsoft announced it is co-sponsoring with several tier-one IT vendors a draft specification called Service Modeling Language (SML) that is designed to shine a light on computer and applications usage. While it doesn't address licensing specifically, the XMLvariant's capability to "construct a complete picture of the IT environment" could have an invaluable impact on license management. Currently, there is no standard way to track software usage and maintenance information, although it has created an after-market of providers such as the SAM Toolkit, Microsoft's SAM partners, and third-party providers of maintenance contract renewal services, such as MaintenanceNet.

The addition of multi-core processors and virtual machines has made the issue of licensing a bit murky over the last few years, but it's only going to get cloudier as software as a service (SaaS) and Web service-based delivery mechanisms become more popular and are inter-mixed with traditional processor- or user-based licensing schemes.

Change is in the wind. Microsoft recently altered how it prices its ERP software, and IBM last week addressed some of the middleware pricing murkiness with the introduction of a new performance-based pricing scheme for software, the Processor Value Unit, or PVU, and at least one person (namely our editor-in-chief, Timothy Prickett-Morgan) has even suggested that memory-based pricing may be the answer.

Whichever method wins out, one thing is for certain: Software licensing will continue to be an uncertain business for the foreseeable future.