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Licensing with Microsoft could be easier, but the need for everyone to make money and provide options is also key

I saw Vijay's posting on MS licensing and I have to admit I was quite amazed.  1st off it was a huge rant, it seemed to fail to understand the basics of how businesses make money and finally there was not a good suggestion on how to make it better, except to remove the ways to pay.  I will do a reply to the blog later, but first I thought I would offer some insight on licensing.


Why does Microsoft sell licenses

Microsoft uses licensing to get paid for our products.  Customers buy the license if they see the value in the products.  If the customer does not see the value, they would not buy.  People who say Microsoft should give it away or reduce the price seem to not understand the basic economics of supply and demand - every business, while it may have many goals, ultimately has a responsibility to the investors and this is nearly always to make money.  Even when I was treasurer for a charity we needed to make money - it was probably the biggest problem we had, followed by how we deliver the services the charity delivers.

What about license types

Microsoft has lots of license types, why?  Well, 1st off since we have an estimates 600-800 million customers, we need some standardisation, both from a simplicity point of view and from a legal and time point of view.  Our contracts are discussed by many lawyers, we need them to work, to protect our intellectual property, the Microsoft staff and the 3rd parties working with Microsoft.  We also need the contracts to not be in breech of any legal requirements, so, for example, we need to ensure we can not compete with desktop OEM providers or control how they operate.  We also can't customise every license, so we provide flexibility and options without having to involve lawyers - this is probably where most complexity comes from.  Finally we have volume discounts and benefits.

  • OEM - installed when the system is sold and in the desktop space, Microsoft can't offer anything that competes with this because of the DOJ ruling, so it is a must have for any other licensing option.
  • FPP - a box you buy in a shop - has to "look" nice and again, not compete with OEM.
  • Volume licensing - gets cheaper with the more licenses you buy and also offers many options, including reduced pricing for not for profit and academic institutions.  Has two components:
    • License only - This is a bit like buying a box, but without the bulk of the box - you get the right to load on many machines with one license key and disk.  This is a much easier management scenario
    • License and Software Assurance - This includes the benefits of above, but is then enhanced with many additional benefits, such as the right to load upgrades to the software, home usage rights, employee purchase, training and deployment assistance and much more.  This license requires a payment each year for the term of the contract

Server vs Processor vs CAL vs subscription licensing

This sometimes fools people - there can be 2 or 3 ways to count the number of licenses you need. They are:

  • Per Server - you buy once license per server you are going to put a product on.  10 servers, 10 licenses, no matter how powerful the server is.
  • Per processor - you buy a license per CPU in the server.  1 server with 4 CPUs, that is 4 licenses
  • Per user or device using CALs - you work out which is more cost effective for you - to pay for every user of the system, or to pay for every device that touches the systems.  In general, per user is normally cost effective, but if, as I was asked the other day, 200 users work on 10 terminals, per device would make more sense.
  • Subscription /SPLA - Pay per month or per year based on the number of users - this number can go both up and down
  • Specials, such as internet connector license

Having said all that, sometimes to buy a piece of software you might need 2 or 3 licenses.  For example:

  • Windows Server - you need a per server license for the server and CALs for the users/devices and if you have it connected to the internet, you might need an internet connector license
  • SQL Server - you can either buy per processor, or per server and CALs for the users/devices
  • Office, you just need the desktop software license


So why can the contracts be complex?

People want to be allowed to do all sorts of things with out products and to allow this, this needs to be written into the license.  Examples include cold stand-by servers, clustering, fail-over, shared and protected IP.  Finally there are anti-piracy bits in there to protect Microsoft itself.


However, I have cut many, many contracts and I have managed it all quite easily.  It takes a bit of thought, but it is NOT that complex.  What is more, we have partner experts and Microsoft itself that can help you.  After all, how much time do you spend getting to know a product inside out, or to improve other skills you have - if licensing is holding you or your customers back, perhaps a days training is a worthy investment.


If you want to go on the excellent license training, have a look at the partner learning centre to book yourself on licensing 101 or other courses:


that is it for now, but more to follow.  Obviously, comments are very welcome!!





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Posted Thu, Sep 13 2007 9:06 AM by David Overton


The Schlog » Blog Archive » I’m not the only one yammering about Microsoft licensing wrote The Schlog » Blog Archive » I’m not the only one yammering about Microsoft licensing
on Sat, Sep 15 2007 2:29 PM

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