Microsoft customers expecting to move to the next version of Windows as part of their new licensing agreements could find that they have paid for upgrades that they do not initially receive.

The software giant's schedule calls for the next release of Windows, codenamed Longhorn, to appear in the second half of 2004.

But Microsoft now wants to add more capabilities to the release, potentially delaying the shipping date beyond the scope of current licensing contracts.

According to Giga Information Group analyst Rob Enderle, Microsoft's decision to make Longhorn a more significant release could cause a one- or two-year hold up.

Such a long wait could disappoint users who have recently signed up to the Redmond giant's controversial Software Assurance licensing agreement, which Enderle said gives these companies rights to new products that are released during their two- or three-year contract.

"If no products are released, these folks are going to be really upset," he said.

On its website, Microsoft promises that its new licensing scheme will take "the guesswork out of budgeting for software upgrades".

But users such as Steven Bradley, IT manager at a barristers firm, and Nicholas Stewart QC told vnunet.com that they have been asked to pay "large amounts of cash" up front, without receiving any benefits.

Customers signed up to the licence upgrades may be entitled to use any new software released during the period of the agreement but there are no guarantees that any releases will be forthcoming, explained Sue Page, group licensing manager at Microsoft UK.

"It is the right to utilise new versions that customers have signed up to," she said. "Microsoft was always very clear about this."

Speaking at the Gartner technology conference, Microsoft chief executive Steve Ballmer promised that the company would make some changes to its licensing terms.

He acknowledged that mistakes had been made when it introduced the new system of locked-in upgrades and fixed payments, and confirmed that changes would be introduced which did not increase costs for users.

David Roberts, chief executive of IT user group The Infrastructure Forum, suggested that Microsoft had lost track of what users wanted out of upgrades, and that it needed to be as open about future releases as possible.

"Ideally product releases would be synchronised with other major releases to allow a complete refresh in one hit," he said.

Software Assurance is sold at the start of a new licensing agreement, giving customers the right to install new versions of any software covered in the agreement during the period of the licence. It replaced Microsoft's previous scheme for discount upgrades.

The changes planned for Longhorn may persuade Microsoft to release an interim version of Windows to appease customers banking on a free upgrade, according to Enderle.

However, the analyst pointed out that announcing Longhorn too early might hold back Windows XP sales and that Microsoft may well be cagey about its schedule.

"There is substantial pressure to have an interim release and [for Microsoft] to deny the existence of that release at this time," he said.

Microsoft stressed that it had no plans for an interim product. "There are no plans to release a version of Windows before the next major release, which is codenamed Longhorn," said Microsoft spokesman Jim Cullinan.

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