MS goes prepaid

By Candice Jones for Microsoft

Johannesburg, 02 Jul 2007

Microsoft will this month begin selling its Office 2007 Professional suit using prepaid licensing. The company says the system is intended to increase penetration of licensed software in the lower income markets.

The prepaid software solution has also been launched in Romania.

"Currently, the IT industry serves around one billion people across the world, which means that an additional five billion do not have access to computers. We are aiming to allow the next billion in the economic pyramid to have access to PCs with affordable preloaded software," says Cyril Belikoff, information worker executive at Microsoft SA.

Belikoff says the Office 2007 Prepaid Edition will only ship with new PCs through the OEM channel and will function in a similar way to the prepaid cellphone industry. "New PCs will have an Office-ready image installed and customers can choose to either buy a full version activation key or a prepaid starter kit."

At present, Office 2007 Professional retails at just under R6 000 and at around R3 000 pre-loaded on computers.

Microsoft says the starter kit is estimated to cost around R199 and will allow customers to activate Office for six months; the first three months free and the second paid for. An additional three-month activation "top-up" will cost the customer an additional R199. "The prepaid Edition has no limited functionality, except the time limit," says Belikoff.

"SA has high prepaid cellphone penetration and people understand the concept."

He adds that the system will be rolled out to various countries around the world, but it will have to be realigned to the way people are willing to access software depending on the country.

From three to many

The South African arm of the company piloted the programme with three local partners: PC Zone, Matrix Warehouse and Chaos Computers.

Belikoff says the pilot pinpointed the possibility that the pay-as-you-go system will curb the use of pirated software. Microsoft has started the roll-out to the rest of the 2 000-plus partner system builders in SA.

The project was also piloted in Romania and Mexico, but the company has decided not to launch in Mexico. "Romania and SA have a good understanding of the prepaid system and it will take a bit more education for the same to be true in Mexico," says Belikoff.

BMI-TechKnowledge research manager Roy Blume says the idea is good in principle, "but whether it will be successful, only time will tell".

Blume says the idea is attractive, because it will allow the customer a new flexibility of choice. "They can choose to test out the software for six months, as opposed to being forced into buying the pre-loaded software."

He says the company should consider making the "top-up" activation codes more accessible to customers. "As long as customers can only buy the prepaid card at vendors, they have to make a trip every few months to get it." He adds that people will always be encouraged to find the path of least resistance.

Blume believes the people Microsoft is targeting are a segment of the market that in general will be more likely to buy second-hand PCs. "If they expand the prepaid option to allow for an image on a second-hand computer, customers will be more likely to pay for those three months."