Understanding the Cost of Windows XP and Office Licensing
January 15, 2002
Info-Tech Research Group analyzes the costs associated with upgrading to the new Windows and Office XP Products from Microsoft
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Understanding the Cost of Windows and Office XP Licensing |
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Now that Microsoft has announced their XP pricing, companies can calculate how much it will cost them to upgrade (or at least that's what Microsoft hopes). In reality, there are so many options to choose from that many customers and distributors are confused. Here's what you need to know to estimate the costs of upgrading to Office XP and Windows XP.
The Path to XP Microsoft is letting licensed users of most previous versions of Office and Windows upgrade to XP. If you have the "97 version" of almost any application or operating system product, you can upgrade to XP at a reduced cost (see Microsoft's Web site for a complete list of Upgrade Advantage and Software Assurance Software Assurance is a new program where the customer gains the right to use the current version of the software and any new versions that are released during the license period (usually 2 years). This allows for easier budgeting of license costs over a longer period of time. Upgrade Advantage is a transitional program to let customers upgrade their "97 version" software to XP and Software Assurance at a reduced cost. Upgrade Scenarios: Full New Windows and Offices Licenses and Software Assurance Users of Windows and Office 95 must buy new retail versions of Office XP and Windows XP and / or buy Software Assurance licenses for Windows and Office. This corresponds to the first column of pricing in the table below, with a total cost of $1,135.29 in the first year. Because this option includes Software Assurance in the first year, you need to repurchase Software Assurance every two years. Remember that most computers can't make a direct upgrade from Windows 95 to XP because of the hardware requirements. Microsoft recommends a 300 MHz processor with 128 MB RAM, and 1.5 GB of free hard disk space. However, many people report that XP runs very slowly in this type of system, so you may need to purchase entirely new systems that are faster than 300 MHz, have more than 128 MB RAM, and more than 1.5 GB of hard drive space to install XP (see this article from Tom's Hardware Guide for more information).Upgrade Scenarios: Upgrade Advantage and Software Assurance Users of Office 97, Office 2000, Windows 98, and Windows 2000 can upgrade to XP using the Upgrade Advantage offering. This corresponds to the second column with an initial cost of $435.79 in the first year. Just like the first scenario, you need to repurchase Software Assurance to receive upgrades every two years. Upgrade Scenarios: Full New Windows and Offices Licenses Every Three Years without Software Assurance An alternative to both these options is to buy New Office Windows Licenses every few years (we'll assume three) and not purchase Software Assurance. This corresponds to the third column with costs of $763.07 in the first year. This cost is repeated every time you buy the new licenses, so in this example it happens every three years. The chart below uses basic pricing from Amazon.com's licensing center for the minimum order size for each product listed.95 Migration to New Office and Windows XP Licenses and Software 97/2000 Migration using Upgrade Advantage for Office and Windows and Software Assurance 95/97/2000 Migration to New Office and Windows Licenses Without Software Assurance Year 1 1135.29 435.79 763.07 Year 2
Year 3 372.11 372.11 Year 4 763.07 Year 5 372.11 372.11 Year 6
Year 7 372.11 372.11 763.07 Year 8
Year 9 372.11 372.11 Year 10 763.07 Average Yearly Cost Over 5 Yrs 375.90 236.00 305.23
Average Yearly Cost Over 10 Years 262.37 192.42 305.23
Year 1 Microsoft SKUs 269-05577, E85-00437, E85-00086 269-04180, B23-00478 269-04683, E85-00086
Following Years Microsoft SKUs 269-05923, E85-00435 269-05823, E85-00435 Assuming same pricing as 269-04683, E85-00086 This chart shows that there is a high initial cost of upgrading to Software Assurance licensing. However, the ongoing costs are much less, with the average yearly cost after 5 years of only $192.42 (with Upgrade Advantage), which is significantly less than the $305.23 average yearly cost of buying new licenses every three years. Two More Things to Remember When calculating the average cost per year, remember that the timespan you're using for the calculation is extremely important to determining the least expensive alternative. In this case, if you look at only the first three years, the alternative of buying new licenses without Software Assurance is the least expensive alternative, because the total costs of $763.07 are less than the alternatives (either $1,135.29 + $372.11 or $435.79 + $372.11). Over the long term, the other two alternatives are less expensive. However, if your company has a fixed period for calculating return on investment (e.g. 3 years), this will skew the results away from the Software Assurance alternative. Another related item is the issue of software patches and upgrades. Because Microsoft is moving away from upgrades and towards Software Assurance, it may be more difficult or expensive in the future to get free patches to faulty software if you don't have Software Assurance. If you have mission-critical systems running on Microsoft software that can't wait three years to upgrade to the next version, you should take a serious look at purchasing Software Assurance. The Bottom Line Microsoft is trying to move customers to its Web-based software delivery model, and make a quick buck at the same time. Although you can save some money in the short term by not upgrading to Software Assurance licensing, in the long term it will cost you more. Want to Know More? Amazon.com has a new software licensing center where you can get estimates of what it would cost you for different licensing packages. Info-Tech Advisor has an article about "Microsoft's New Upgrade Strategy." McLean Report has an article about "Building a Business Case for Upgrading to Windows XP." Forbes Magazine has a "Windows XP ROI Calculator." |
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