Why Does Microsoft Licensing Have to be so Complex? – What Current Licensing Says About the Future

By Jack Micklovich, SoftwareONE

Microsoft technology is an integral part of our lives, and although you may not even realize it, Microsoft is a household name. However, this did not happen overnight – it has taken many years to get to this point. Whether you are an IT professional, businessman, or homemaker, you have, at some point, been exposed to Microsoft applications, regardless of your profession.

Publishers develop software products for a variety of applications. This is how they make money, stay in business, and flourish. Microsoft, for one, develops thousands of products for business and personal use ranging anywhere from operating systems, servers, and databases to desktops and collaborative software. Software is unique, however, in that when you buy it, you really don’t “own” it; rather, you obtain the “rights” to use it in order to protect their intellectual property.

Basic Licensing Terms

Software is viewed as having three essential components: physical (what is actually installed), financial (the associated costs), and contractual (terms of use). Nowadays, before installation of the software is even allowed, Microsoft requires the user to consent to a variety of terms and conditions. In simpler times, this was referred to as End User License Agreement (EULA) or more commonly known as that little box you check after diligently reading the lengthy, yet compelling terms of use. It is still in use, when software is purchased in limited quantities. But, as licensing programs have expanded, Microsoft has evolved these rights: the couple hundred page document titled Product Use Rights (PUR). Thus, license complexity increased. This document further defines usage rights for software products including, but not limited to, Transferability, Downgrade Rights, Roaming Rights and Secondary Use Rights.

One of the major ways Microsoft generates revenue is through enhancing their products. On average, Microsoft releases new versions every three years, requiring customers to remain up-to-date by purchasing said upgrade. Software Assurance (SA) is a provision that gives customers the right to deploy the upgrade upon immediate availability. The rights to this updated software are paid for up-front, affording Microsoft the ability to obtain that revenue sooner and “committing” the customer to a continuing business relationship.

However, suppose you don’t want to obtain upgrades this way? The more ways Microsoft offers their products, the wider range of appeal it has for its customer base. Hence, the explosion of different types of licensing programs. Most large publishers offer volume licensing programs designed to provide a range of options for customers as well as offer cost savings and incentives. Here are a few volume licensing agreements offered by Microsoft:

  • Enterprise Agreements
  • Select Agreements
  • Campus Agreement
  • School Agreements

These programs offer a variety of ways customers can purchase their software as well as how they want to handle upgrades, giving them flexibility to suit their business needs.

Technology

Computing technology is growing exponentially. The storage capability and processing power of today’s computers used to take up entire rooms in the not too distant past. Software Asset Management (SAM) began to make companies realize that software was actually more complex than the hardware, with software driving much of the computing requirements.

But over the years, computing technology has likewise grown significantly with the advent of high speed processors, multiple processors, processor “cores”, and virtualization. Combine that with a vigorously growing mobile workforce, high-speed internet connectivity, hosted solutions, and virtualization, technology supplemented new ways for Microsoft to generate additional revenue – capacity-based licensing. Besides, having the software product installed on a computer, the licensing is also tied to the computing capacity of that machine – the number of processors and/or cores. This takes us back to the PUR document that spells this out. Simply installing this product on a different computer with a different processor configuration can put you in license breach.

So Many Business Models

Publisher licensing models will never get easier; if anything, they will become even more complex. As consumers demand new software products to increase their productivity and competitive advantage, publishers will continually devise new ways to sell and license their products. Client Access Licenses (CAL), for example, give the user the rights to make a connection to another computer such as a database server. Microsoft has a broad range of CALs depending on the type of server software available in an environment and how those connections are being made. CALs also come with SA, upgrades, and other services, ultimately adding to licensing complexity.

The Impact

Companies need to focus resources on their business needs in order for them to remain competitive and profitable. With the increasing demands of license compliance and publisher audits, many companies are ill-equipped to deal with these issues.

Since Microsoft sells their products through distributers and large account resellers (LARs), they are generally equipped to handle transactions for the different volume licensing programs Microsoft offers. But, which options are best suited for your business needs? Potential cost savings can be significant and companies need to make informed SAM and volume licensing decisions. LARs who have the necessary skills and resources can also specialize and serve as a “trusted advisor” to sort out the extensive number of licensing models, programs and options that these companies must decide on. Expertise is needed to optimize what to buy and how to buy it, including navigating the business processes around it. SAM is all about maximizing your software investment.