A by-product of Microsoft's overhaul of Longhorn is that the company's operating system development road map now aligns more closely with its software maintenance model, which presents users with licensing options that could help end monolithic upgrades.

The Longhorn revamp means the client operating system's marquee features eventually will be available as individual components and as part of Longhorn's single integrated operating system. The components could boost Microsoft's controversial Software Assurance, a maintenance program for volume licensing contracts. They also could help the programme shed its bad reputation by supplying what it needs most: a ready stable of software updates.

That could make Software Assurance more attractive to users, especially after some felt cheated out of upgrades during their first round of contracts. In addition, many users could get what they want: smaller upgrades that are easier to deploy and cause less disruption on their networks.

"Modularity is important, not only for rolling out new versions of software but also maintaining old ones," says Fred Wettling, infrastructure architect for Bechtel, a San Francisco global engineering, construction and project management firm. "We can't afford to do forklift upgrades anymore. It is costing us millions."

Key will be how Microsoft chooses to license Longhorn components. One thing is certain: Users of the Indigo, Avalon and WinFS subsystems of Longhorn will need a Longhorn licence regardless of where those components run, according to Sunny Charlebois, product manager in the worldwide licensing and pricing group at Microsoft.

That requirement could drive users to re-evaluate Software Assurance, with which the promise of a steady flow of updates would replace the anxiety of hoping for a monolithic upgrade before contracts expire.

Charlebois says Software Assurance is winning converts, including 20 per cent to 30 per cent of customers with expiring maintenance agreements called Upgrade Advantage who committed to Software Assurance in the last few months.

If the Longhorn roll-out goes as planned, Windows XP users would have the ability to absorb Indigo and Avalon on that platform, then contemplate an evolutionary upgrade to Longhorn sometime in 2006.

IDC said XP users represent 51 per cent of Windows desktops. Then in 2007 or beyond, they could decide on rolling out the WinFS storage subsystem for the client and Longhorn Server, completing a timeline that is an incremental upgrade rather than one giant leap. And it would finally align software development with three-year Software Assurance contracts, which could provide regular software upgrades, the original hallmark of the model.

"The flaw in Software Assurance has been Microsoft's delays in getting new software out," says Dwight Davis, an analyst with Summit Strategies. Microsoft tried to address that on the server operating side earlier this year, announcing that major upgrades would come every four years with an update release two years after each major upgrade. It made the change so companies could do "longer-term planning and budgeting."

But the plan seemed linked to generating interest in Software Assurance, especially after Microsoft said next summer's "update" release for Windows Server 2003, known as R2, would be made available for no charge through Software Assurance but would require purchase of a new server licence for everyone else.

"I can't say if the R2 model is relevant [to Longhorn]," Charlebois says. "What customers asked us for was when to expect updates so we felt it important to set expectations for Longhorn."

Today, licensed users without Software Assurance get feature packs and other add-ons, such as digital rights management technology, but Microsoft plans to substantially reduce those and instead integrate them into update and major releases.

Despite the ongoing backlash against Software Assurance, experts say the table is being set. "As the model evolves to align the product road map with volume licensing, it begins to favour those that have it over those that do not," says Joe Wilcox, an analyst with Jupiter Research. "Microsoft's problem now is that the [operating system] is not a growth market. It's a maintenance market that has to look at customer satisfaction."

What would be satisfying, users say, is Microsoft figuring out the licensing. "Instead of Microsoft making technology changes, they should focus more on the business side and the impact on cash flow," says Steve Linstead, programme manager for Johnson Controls, a supplier of automotive parts and building controls. "If they charge proportionately leading up to full price [payment], you get cash flow on the business side and a better implementation path on the technology side. But if you pay now for what Longhorn is supposed to be and you only get part of it, that will be a problem."

Experts say Microsoft must eliminate that kind of confusion. "Right now things with Longhorn are vague because there is not a current precedent with the way Microsoft products are sold," says Paul DeGroot, an analyst with independent research firm Directions on Microsoft. "I could have four to five years without licensing costs and have Indigo, Avalon and XP. That is the assumption now. Microsoft owes its volume-licensing customers an explanation on how things will work. What is the value in Software Assurance vs. not having it at all."