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Microsoft's Feature-Cutting Strategy For R2, Longhorn Raises Concern: Page 2 of 5

Analysts said Microsoft has been largely successful in meeting promises extended to its Software Assurance customers: It shipped Office 2003, Windows Server 2003 and Exchange 2003 upgrades in the promised time frames. But under criticism for not getting the Yukon edition of SQL Server and the next Visual Studio out the door in 2004, Microsoft has resorted to cutting features out of planned products to guarantee on-time delivery.

Partners said such tactics could backfire and further frustrate Software Assurance renewals, especially if much-anticipated features end up on the cutting floor after customers sign their deals with Microsoft.

"I thought when Microsoft first decided to discontinue upgrade pricing and replace it with prepaid subscriptions that they were making a big mistake," said Jeff Sherman, president of Warever Computing, Los Angeles. "The only way of convincing anyone to spend money up front is to make them think that there's going to be some real value there. Now that Microsoft has shown it can't deliver on those promises, I think there's going to be almost no renewals of [Software Assurance]."

Observers said customers are likely more incensed about the decision to cut WinFS out of Longhorn than the changes made to Windows Server 2003 R2, since RMS is an add-on they can use today with the server.

In addition to R2, currently due in the second half of 2005, Microsoft plans to release Windows Server 2003 64-Bit Edition, Visual Studio 2005, SQL Server 2005, System Center 2005 and upgrades for BizTalk, Commerce Server and Host Integration Server in 2005, a spokesperson for the vendor said.