Microsoft loses showdown in Houston.

["Hamaker, Chuck" <cahamake@email.uncc.edu>]

USA TODAY Jan 22, 2003   Page 1B 
Microsoft loses showdown in Houston.  City goes with upstart SimDesk in
David vs. Goliath struggle over computing power               
By Byron Acohido 
http://www.usatoday.com/usatonline/20030122/4798893s.htm

HOUSTON -- The people who run this city recently heard a familiar pitch
from Microsoft: Sign up for a multiyear, $12 million software licensing
plan or face an audit exposing the city's use of software it hadn't paid
for.

Microsoft warned that the city could be slapped with stiff fines for using
any Microsoft software for which it could not produce receipts.Scores of
other businesses and public agencies, facing a similar dilemma, have
agreed to the new licensing deals -- a linchpin of Microsoft's growth
strategy.

The nation's fourth-largest city rebuffed the offer and has embraced an
obscure competitor called SimDesk. SimDesk delivers software over the
Internet at a fraction of the cost of Microsoft's Office, .... Houston is
giving SimDesk to tens of thousands of residents and businesses, free. And
it has begun using SimDesk as an Office substitute on at least half the
city's 13,000 PCs. .... the first copies of SimDesk were loaded on 470
computers in 37 branches of the Houston library.  .. ....Chicago, the
nation's No. 3 city, recently launched a pilot program putting SimDesk on
150 PCs in 18 community centers. And about 50 public agencies in 27 states
are checking out the technology. ... Microsoft set fall 2001 as a deadline
for customers to sign up. Those who did would pay $239 to $380 per copy
for Office XP, the latest version. Those who passed would pay $479 a copy
when they did upgrade.

Microsoft says the plan cuts software costs and improves service. That's
especially true for companies that upgrade every three years -- typically
bigger companies. But research firms Gartner and Yankee say the plan will
raise costs for companies that upgrade less often, usually medium and
smaller ones.  .... Microsoft also sent letters to 500 school districts in
30 states giving them 60 days to produce receipts accounting for every
copy of Microsoft software being used. Failure to do so could result in an
audit and penalties, the letters warned. In the same envelope came a sales
brochure about the new licenses.

Microsoft says it prohibits audit threats and did not consider such
letters threats. Sales reps are encouraged to make customers aware of
options, the company says. But 6% of 1,400 worldwide corporations surveyed
in 2002 said they had been threatened with an audit if they didn't sign up
for a new license, says researchers Yankee and Sunbelt Software. Another
26% said Microsoft alluded to the possibility.

Customers proved so recalcitrant that Microsoft was forced to push back
the sign-up deadline three times, finally to August 2002, after which
quarterly revenue shot up a robust 26% from the year before as customers
signed up. ...

While not an audit, Haines(Microsoft sales rep) produced data purporting
to show the city owed Microsoft $1.1 million for software he said was
being used illegally by city workers, Lewis says.

Like many companies and organizations, Houston had haphazardly acquired
software over the years. Each city department had several ways to acquire,
deploy and track it.  ...

By Microsoft's count, another big department, the (Houston Public)
library, looked to be short 450 Office licenses. But Houston rounded up
documentation covering all of those copies, including 111 donated by
Microsoft Chairman Bill Gates' charity foundation. ...

SimDesk's future is far from certain. Distribution to Houston residents
and businesses is planned next month. Chicago is seeking grants to extend
SimDesk to libraries and schools. Proposals for similar rollouts exist in
Denver and New York ...

Gartner (research firm) tech analyst Mark Margevicius sees Houston and
Chicago as aberrations. He says big tech buyers won't switch to SimDesk
because it is so unproven. Gartner says other fledgling Office rivals, the
free OpenOffice and StarOffice, backed by Sun Microsystems, have a better
chance against Microsoft.

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