The BackOffice name will officially disappear at the end of Sept. 2001 when Microsoft discontinues its BackOffice suite of server software for small organizations, although a related suite, Small Business Server, will live on. Microsoft will also replace the BackOffice Client Access License (CAL), an all-in-one license to access its most popular server applications, with a new "Core CAL" that no longer includes licenses to access SQL Server, but adds a SharePoint Portal Server license.

BackOffice Server’s Shortcomings

BackOffice Server (BOS) is a bundle of Microsoft’s most popular server applications, and the current version includes one copy each of Exchange 2000, SQL Server 2000, Windows 2000 Server, Host Integration Server 2000, Systems Management Server 2.0, and Internet Security and Acceleration Server 2000, plus the licenses for each server. It also includes single copies of FrontPage 2000 and Outlook 2000, various management and configuration wizards, shared modem and fax utilities, and five BackOffice CALs, which allow up to five users to access all of the bundled servers. BOS's estimated retail price is US$3,999, a substantial discount from the approximate US$9,000 estimated retail price of the individual server components.

BOS met with limited demand, however, as it was aimed at workgroups, branch offices, or smaller firms, which seldom need their own copies of products such as Host Integration Server and Systems Management Server. BOS also had a single install routine that was more complicated and time consuming than installations of single server applications. A failure during the installation could require that it be repeated from the beginning.

With BOS 2000, Microsoft allowed customers to install its server components on up to three computers, but that was not enough for some customers, who wanted to improve performance by running each server component on a dedicated computer. In addition, since only one copy of Windows 2000 Server is included with BOS 2000, customers who wanted to install the other server components on multiple machines had to buy additional copies of Windows 2000 server at approximately US$700 a pop.

Finally, Microsoft has another product, Small Business Server (SBS), which contains most of the same server products at half the price of BOS (although Microsoft imposes limits, such as single-server installation, a maximum of 50 clients, and no domain connectivity, that reduce the appeal of SBS). Microsoft has not announced any changes to or plans to eliminate SBS.

The BOS Upgrade Path

What BOS customers can do after Oct. 1, 2001, depends on how they license BOS. In general, BOS licenses will be converted to licenses for the individual server components.

Owners of BackOffice 4.5 will have no further upgrade path, however, unless they have purchased Upgrade Advantage (UA) by Sept. 28, 2001. UA allows them to upgrade to the latest version of the product during their UA agreement. BOS 4.5 and BOS 2000 customers with UA will be automatically converted to the new Software Assurance (SA) program that, like UA, allows customers to upgrade to the latest version during its term.

Owners of BOS 2000 who do not have UA will be able to purchase SA on the individual components of BOS during the SA transition period, which runs until Feb. 28, 2002. After that time, they will have to purchase full product licenses if they elect to upgrade any components not covered by SA.

One particularly attractive upgrade open to BOS customers is the option to upgrade their HIS and Internet Security and Acceleration (ISA) licenses to four per-processor licenses (with the proviso that all processors must run on one physical computer). Thus, an organization with BOS 2000, which costs US$3,999, will be able to convert its license for ISA Server to four ISA Server per-processor licenses, which otherwise would have cost US$1,499 each, and their license for Host Integration Server (HIS) to four HIS per-processor licenses, which would have cost US$2,499 each. Although unlikely to be attractive to traditional BOS customers, who don’t employ many four-processor servers, larger customers may take advantage of the transition to save some money.

Core CAL Replaces BackOffice CAL

Although BOS was not an outstanding success, many companies purchased the BackOffice CALs because they were an easy way to manage CALs for a large number of desktop computers. A company with a large number of PCs that needed to access multiple Microsoft application servers could buy the BackOffice CALs for those clients rather than purchasing CALs for each server application individually. The BackOffice CAL, at US$232, was about 23% cheaper, and easier to manage, than purchasing CALs individually for Windows 2000 Server, Exchange, Systems Management Server (SMS), and SQL Server, for example. However, if only three of those server products were needed, the BackOffice CAL no longer offered a cost savings. Nevertheless, this bundling strategy reduced the likelihood that customers would drop a Microsoft server application for a non-Microsoft alternative.

Recognizing that benefit, on Oct.1 Microsoft will replace the BackOffice CAL with the new "Core" CAL, which includes CALs for Windows 2000 Server, Exchange, SMS, and SharePoint Portal Server.

SQL Server, Microsoft’s most expensive CAL (with an entry volume license price of US$146), was part of the BackOffice CAL, but it is not included in the Core CAL. Thus, SQL Server customers who license SQL Server on a per-seat basis will be required to purchase CALs separately from the Core CAL. (However, valid BackOffice CALs for SQL Server will still be valid, even after Oct. 1.)

Core CAL Impact on Customers

To calculate exactly what the change will mean financially, customers will need to wade through a variety of calculations.

Core CAL buyers won’t get the same discount that they did with the BackOffice CAL. Microsoft says the Core CAL will cost only 5% less than the sum of the individual CAL prices, and its main purpose is to ease license administration rather than to save customers money.

Although the discount is less, the Core CAL will actually cost less (US$215.65) than the BackOffice CAL (US$232)—that's because the Core CAL replaces the SQL Server CAL with the cheaper SharePoint Portal Server CAL.

However, to ensure that the CAL matches any servers the customer owns (a server’s CAL must be the same version as the server itself, e.g., Exchange 2000 requires that users have an Exchange 2000 CAL), Microsoft will require purchasers of the Core CAL to purchase Software Assurance as well. This ensures that they will always have a license to match any server product they own.

SA adds 29% per year to the price of desktop products purchased in a volume agreement, and that will bump the initial price of a Core CAL to US$278. So, over three years, customers will need to budget more than US$400 for the Core CAL.

SQL Server users who used the BackOffice CAL will be hurt the most. They’ll now need to purchase SQL CALs separately, adding another US$146 (or less, depending on their volume level) to the initial cost of the Core CAL. The change could encourage many of these customers to switch to per-processor licensing for SQL Server, which requires no CALs. That trend is already underway anyway, as many customers move away from client-server SQL applications to three-tiered Web-based models that work better with per-processor licensing.

However, many customers may find the new bundle attractive if they don’t make extensive use of SQL Server and are considering SharePoint Portal Server as a corporate intranet portal.

Core CAL Impact on Microsoft

From Microsoft’s point of view, the Core CAL appears to be revenue neutral or a revenue builder. Requiring SA raises the price significantly above the BackOffice CAL, and SQL Server CALs sold outside of a CAL bundle will generate additional revenue.

With SA, customers will also be more inclined to use the most recent versions of Microsoft server software, since they will already have paid for the CALs, the most costly portion of many server application upgrades. Keeping customers current reduces Microsoft’s support costs and ensures a steadier revenue stream from the SA program.

The Core CAL will also boost usage of SharePoint Portal Server, particularly in large organizations considering a corporate portal, since they will already own the CALs they need to access the portal. Microsoft partners and channels will take advantage of similar revenue opportunities, such as additional revenue from selling SQL Server CALs, for example.

Resources

Customers should consult their reseller before Sept. 28 to get exact pricing information and upgrade options.

Features and pricing for Microsoft servers are listed at www.microsoft.com/servers/.

The BackOffice Server announcement and Core CAL are described in a licensing brief at www.microsoft.com/business/downloads/licensing/Backoffice_Core_cal.doc.

Software Assurance and other Microsoft licensing programs are described at www.microsoft.com/business/licensing/.