Tamer is in the process of upgrading to Windows 2000 from Windows 95 and 98. She purchased all the licenses before the new plan came along and is rolling out the new stuff as she buys new machines, turning over about 25 percent of the machines per year. She is a fan of Windows products in general, she says, but saw no reason to sign up for the subscription plan simply to hedge her costs on a future upgrade. "With our timetable, it made no sense to go with the new plan," she says. "The price to us was going to be $3 million, and we had four months to pay [before the deadline]. We told Microsoft to go pound sand."

Larry Shutzberg, CIO of Rock-Tenn, an Atlanta-based packaging maker, is hoping to go even longer until his next upgrade: four to six years. Shutzberg skipped an entire generation of Microsoft's desktop software suite, Office, sticking with Office 95 until finally moving to Office 2000 in 2001. Even then, he saw no significant feature improvements that warranted the move. He did it, he says, because his customers did it and started sending Rock-Tenn Office 2000 documents that his businesspeople couldn't open with Office 95. "There have never been real business drivers to upgrade," says Shutzberg. "The only drivers have been compatibility issues."

Shutzberg says it would have cost Rock-Tenn $2 million to sign up for the new licensing plan for its Microsoft infrastructure, which includes 2,500 desktops. "That's cost prohibitive," he says. "That's why we're going cold turkey on Office 2000. Office 11 [the next version of the productivity suite] is nice, but not to the tune of $2 million. I love their products, but I can't stand that my hands are tied behind my back."

He admits, however, that he and his colleagues had a hand in tying the knot. "They got us used to paying low amounts for this stuff, and we all went along," he says. "Now they want more, and we don't want to pay. I used to have Lotus 1-2-3, but Microsoft cost less so I bought it. Now I look around for competitors, and I don't see any. With their predatory pricing, they've killed everyone who could've offered us an alternative."

Open Source as License 6.0 Killer

Well, not everyone. Microsoft may have killed off its traditional competition, but it has been unable to eliminate a pesky threat that is immune from pricing pressure: open-source software. The movement that began as a hobbyist effort to create a free alternative to the Unix operating system has grown to become a threat to all pieces of Microsoft's business: the server, the desktop, the Web. Viable and free, open-source alternatives now exist for the products that constitute at least 70 percent of Microsoft's revenue: a desktop and server operating system in Linux, an office productivity suite in OpenOffice.org's OpenOffice, and an e-mail client and server in Ximian's Evolution product. After long dismissing Linux, top Microsoft executives now acknowledge the threat. "Linux is absolutely a competitor to Windows - no question," says Jim Allchin, group vice president for platforms at Microsoft.