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Replying to Vijay's "Who understands Microsoft Licensing?" blog - why I think he is right and wrong

Nothing like a blog entry on licensing to stir the people into action. Vijay posted a "small" post - Who understands Microsoft Licensing?. I'm now going to respond to both the main blog post and also some of the comments. I highly recommend you read the entry, the comments (some are included below, also for comment) and the linked blogs, especially the entry by Adam at Sorting out the complexity of Microsoft Volume Licensing as well as the others

My conclusion to this question is that hardly anyone understands Microsoft Licensing. I’ve been to quite a few Microsoft Partner events and when the above question above is asked there is usually a very low number of businesses who say they understand it. This feedback is given time and time again but nothing really changes. The solution isn’t explaining it over and over again or writing Licensing Reseller Handbooks. If you can't explain something to a customer in a very succint way, then it’s just a waste of time and if as an organisation you have to employ an army of people and distributors to support this, then something is fundamentally wrong.

Most people who don't understand licensing don't spend the time required to actually try - I mean, I've been on 1 course, maybe fired off 20-30 e-mails over the last 7 years, yet I answer almost every licensing question I am asked. I'm no super hero, I've just put in the same level of effort to understand licensing as I did when I moved from Unix to Windows. I decided it was a technical problem I needed to understand and solve. Sometimes it still trips me up, but so does hardware and software, so no different there.

Explaining licensing to a customer should be succinct, but the details of how it works will take longer - this is no different to anything else you sell. Explaining to a customer what you do to install a SBS server, the reasons for it, how it works etc would take several books worth to do. Saying you need to buy software to facilitate these aspects of your solution should be simple, even if it includes stating some of the benefits they could or should use and when extra payments might be required.

One aspect of Microsoft Licensing that just annoys me so much is the CAL (Client Access License) and something which Linux doesn’t have. A customer having made an investment in a server based solution then has to pay just to connect additional devices and users. I think this is punitive and leaves a lot of resentment with customers. I don’t know what fraction of Microsoft’s revenue is based on CALs but I think it is fundamentally bad. Why can’t someone at Microsoft be more imaginative and creative with licensing and put an end to all the bearaucratic structures they have built around licensing and which they know still don’t work properly. Ultimately you can’t serve your customer in the way you wish. Microsoft doesn’t have just one type of CAL is has about three which I know of, User CAL, Device CAL and Core CAL.

So let me get this right, skip the CAL to reduce the cost of a solution when a user wants to expand... Oh, so all expansion should be free, so why not make the software free for additional users and the services you provide? No, so just you have a right to charge for the extra business benefit your customer is paying for? No, OK, so lets stick to the CAL. We used to have much simpler licensing, and then it was more restrictive - perhaps we should just charge £100K per server and you can load anything from a long list on it and not pay for CALs? Well, not really.. perhaps we need to charge differently if it is devices or users. For most products the cost is lower for devices. Why, you may ask, is this not the case for SBS - 1) to simplify and 2) because in many cases it is 1 user, 1 device. Core CAL is a way to buy CALs for several products that people often want to buy together, in 1 block and with a lower price - surely you would advocate 1 CAL to cover a common set of products rather than requiring 3 or 4 CALs to be bought? Isn't this the very simplification you were seeking?

The sad thing is that nothing will change and I’ll attend more events where Microsoft Executives will ask us all whether we understand Licensing and they’ll get the same answer and nothing will change.

As the comments below stated - IF people would attend the training, then the problem goes away, however licensing is NOT enough of a problem to stop people delivering a solution, so they don't.

I believe Microsoft Licensing is a major reason holding back IT infrastructure investment in SMEs.

Hmm, nope, most people and businesses want more. They have to do a cost justification and understand the Return on their investment (ROI). If it will not do enough for the business, then it is not right for them. If it will, then it becomes a business process to make the money available. What is more, software costs is often a small percentage of the cost of a solution. Remember you have hardware, software, services, support, lost opportunity cost while the work is done and taken up. If that small software license cost is holding them back, then all the other parts of the business have cut their costs significantly over the last few days and weeks

It’s another reason why Software as a Service has a bright future in my opinion.

This is partially true, but is about how a solution is delivered, not how it is charged. You still pay a CAL like fee and a proportion of the other costs (hardware, server software, client software, services, support etc)

The choice to CIOs, in say Mid Market companies, is do I spend the money on Microsoft CALs and get that extra functionality or save that money and deploy Linux and maybe get 80% of what I was going to get? I know this is a bold statement but I feel strongly about this and what I see as Microsoft holding me back as a Partner delivering Microsoft Solutions.

The choice for ALL CIOs and owner managers is will the solution I intend on buying do the most for my business against the price they pay. Again, this has to include all the costs, not just the software costs. If CIOs thought they could deliver the value to the business without paying for CALs, they would - they don't just buy MS because the love MS, they buy it because it works the their business. Saving a few pounds on CALs, while paying potentially the same or much more for services and support and then not having it delivering the same business value is often a very false economy. If that "missing" 20% (I think it is often much more than a 20% gap, but that is another blog) means the solution delivers less to the business, then the minute cost saving may turn into a major cost.

Posted by vijay on Monday, September 10th, 2007 » Who understands Microsoft Licensing?

I have only shown some of the comments - you need to go to the blog entry to see them all, however some are amazing - I have commented on a couple of items below

  • Paulie Says:

    I couldn’t agree more.

    It really hits home when you attend a licensing event and as soon as a few interesting scenario based questions get asked the experts start to get confused too. At that point I just switch off, if someone who makes their living out of it can’t understand it, I definitely don’t have the time.

    I don’t attend the licensing events anymore, waste of time.

Never good to hear this - the specialist should not get confused with most scenarios - often it is a case of you / your customer picking an option that works for them, rather than there being just one answer.

  • Susanne Says:

    I second and third you both and as we all work with licensing in some way it’s important to understand it better. As I pointed out in a recent blog post, Partners just don’t understand.

    However, as I also pointed out, it DOES get less complex when you work more with licensing.

    At the Group, I would say that 50% understood licensing and the rest weren’t sure. There are many people who understand it and have made a good business model around it. In the same way there are people who excel in CRM and there are others who don’t.

    The problem is that licensing is everywhere. My colleague Cat put together on half an A4 side of paper the advantages of Open licensing (because most understand the basic principals of OEM and FPP) so I can always send that over to you.

    In addition (I’ll finish in a mo!), the reason why our clients talk to us is because we’re experts at something they don’t understand. In the same way, don’t assume you have to understand it all, get someone like my team (other companies available of course!) to do that part of your job for you i.e. give us the situation and we’ll give you the bottom line.

  • vijay Says:

    So, everything is okay and it’s just that I haven’t put enough effort into understanding it? I’m not sure how you would describe Microsoft Licensing? Of course I can read the Licensing Reseller Handbook and other material and understand Open Value Licensing, but when it comes to specific customer scenarios like what are the desktop requirements for this it becomes unclear. Can the customer desktop have OEM licenses as a prerequisite for OVL? One Authorised disti says “yes” and the Licensing Reseller Handbook says no unless you have SA within 90 days or an existing SA agreement. Now, I’m quite prepared to accept I’ve misunderstood this but something as simple as this is unclear.

    Why should we accept the status quo? How many things are we trying to take on board at the moment, Vista, Office 2007, Server 2008, Exchange 2007, Software plus a Service?

Vijay, nope, we should not expect things to improve, but neither should we expect unrealistic things. Expecting a europe or worldwide legal document to sit on 1 side of A4 is unrealistic. You can get a summary of each license type on much less than 1 page per type. There is a 2 pager on all the VL (Open, Subscription, Select) benefits and options though

  • Gareth Brown Says:

    I’ve been working with Microsoft products since MS DOS 3 - product licensing is more complicated today. Whilst licensing is never fully appreciated by end users, as a Microsoft partner it is important for me to understand the licensing fundamentals. With the explosion in the number of variables now covered by licensing (virtualization developments, multi core processors and hosted solutions for example) am I going to understand everything? I doubt it, but as a MLSE (and the support of the many resources) I know enough to enable me to deliver best advice to my customers and provide licensing support as a service to my customers.

    Your thoughts on CALS are interesting but I don’t agree. In my opinion the CAL is the future, allowing services to be hosted and delivered to subscribers, you need access to CRM just get a CRM CAL and log in, when you’re done you give it up. Isn’t that software as a service?

  • Vlad Mazek Says:

    I think you misinterpret the Licensing Competency.

    Licensing competency is not a requirement for selling licensing or an award for understanding it. It is a recognition of a company that has a proven skill in delivering COMPLEX licensing solutions and SOFTWARE ASSET MANAGEMENT products and services to the table.

    Just selling the version of Windows, Office or Server which has the features that can solve the customers problem is not a call for a competency, it’s your darn job, and sorry - if you can’t figure it out you’re not worth more than the retail store clerk picking out the shiniest of the boxes and handing them to the customer saying “Dunno, think this will do it.”

    I don’t meant to be blunt, but we sell complex solutions. And if those complexities, in each area, can be reduced to a single page of easy to read and comprehend action items then I challenge there is no need for you to be in business as an SMB advisor at the premium rate you charge (as opposed to a retail store clerk).

    It’s either easy or you’re valuable. Pick one. In life you don’t get compensated for stating the obvious facts that everyone else knows.


  • AdamV Says:
    September 12th, 2007 at 9:53 am

    Yes, licensing can be complex. But then so can an enterprise-class document management system (for example).
    You can use a simple file share to keep documents in, which is easy, but you do not have the richness or flexibility of a DMS and miss out on the benefits to the business of such a system. So it is with licensing. As Susanne points out, if you just want to keep it simple then you can buy full box products from a number of distributors (or the customer can easily buy them from an online retailer). If you want to get access to more benefits or to valuable cost savings, then one of the more complex solutions is probably more appropriate.

    Taking your example of the 3 types of CAL. If MS only sold user CALs, some clients would lose out because they would have to buy more of the. Likewaise Device CALs (especially given the explosion of mobile devices). Core CALs would be seen by many as a rip off since it includes the right to use products they don’t need or are not ready to deploy. The reason there are three versions is because each is appropriate to a particular scenario. You might just as well say that Cisco should only sell one model of switch or router; any more is just complicated muddying of the waters.

    Fundamentally, one size simply does not fit all. The particular firewall configuration you create for one client will not be suitable for another with different needs. Does the manufacturer’s configuration manual tell you which options to choose? Probably not, it tells you how to change the setting, which options do what, but it is down to your experience to match the need to a solution and then implement it.

    I am an MLSE, having just taken the last of the exams to move up from my MLSS thanks to Susanne prompting that these exams were about to be retired and replaced with a new scheme. (see http://tinyurl.com/353kjc)

    I know I won’t use some of that knowledge for a long time, if ever (Academic Select? Not really my target market).However, taking these online tests does mean that I know what options exist, what questions to ask my clients and how to present to them the most promising choices for them to decide between. It is my job to understand my clients’ needs and to fit solutions to those - whether that be technical or licensing. This may mean I have to discuss business management topics such as why they might want to own a licence or ‘rent’ one through subscription. I don’t see this as much different from conversations about their risk stance to help me guide them to choices about security products. I need to understand their needs, aspirations and motivations to do the job properly.

    In many ways licensing and software asset management of MS products has become easier due to the removal of all the various upgrades from older, different or competing products. This can mean that customers who are in difficulties are faced with a larger bill, but they also take some of the work and risk out of the situation.

    I feel the current license plans do feel a bit like there are too many choices, but fundamentally there are three tracks (NB: this is slightly simplified):
    1) low entry level, no planning, just pay as you go, some admin required to keep track of what you have - Open
    2) entry level and price depending on size of business and commitment (needs forecast), less admin - Select
    3) Decide to use MS products across the whole firm, must be big enough. Even less admin. - Enterprise.

    Within those you have a choice of buying the product or renting it (subscription). In some cases you buy the product with an upfront payment, in others you spread the cost over the term of the agrement.
    You can choose to take Software Assurance (or choose a plan where it is required, not optional). This has separate benefits associated with it (HUP, EPP etc).

    So yes, when you combine those together that’s a lot of choices. The naming of the schemes does not help as much as it might (is Open Value better “value”, inherently?), but is getting better so it is more obvious how they line up against each other.

    As for CALs, I have to say I think they make sense. Without them the core server offerings would be hugely more expensive. Smaller businesses would not be able to benefit from using the same class of software as theie much bigger competitors. I know, some of the products still do have a ticket price on the server component which is a barrier to entry, but for Windows Server, Exchange and SQL for example, it’s not a very biased model.
    If I buy CALs I only pay for what I use. I can easily budget for business growth - when I get another person I need a workstation, Office perhaps, and a couple of CALs. I can attribute those overheads directly to the department using them, and even charge them internally if that’s the way I manage IT as a cost centre. The only thing I need to worry about then is scaling the back-end to meet the technical requirements.

    At the end of the day, some people do understand licensing. Some clients appreciate this knowledge and will choose those partners who have it. You might do well to become one of them or to parner with one. There are even ‘licensing gurus for hire’ who represent a low-risk to you as they often do not even sell the licenses, merely advise both client and supplier. Typically their work involves the broader topic of Software Asset Management as this is the real management consultancy opportunity lies.

    Of course, many businesses do not have the first clue about licensing, so they do not value this knowledge in a supplier. They don’t want to expend the effort on the conversation nor answering the questions which get to the information to determine the right solution. These are the customers who buy everything OEM, or FPP. These ‘low hanging fruit’ are ripe for the picking.
    Until they realise that they have been missing out on an opprtunity to reduce their cost, their admin and their risk and you failed to point it out to them. At this point your credibility takes a knock, and is no different to a situation where you propose a short-sighted technical solution, or one which does not scale, or breaks down too often with inadequate support behind it.

    The wrong product sold today may end up costing you the customer. You’d better hope they don’t find out about ‘proper’ license programmes from someone else.



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Posted Thu, Sep 13 2007 12:07 PM by David Overton


Adam Vero wrote re: Replying to Vijay's "Who understands Microsoft Licensing?" blog - why I think he is right and wrong
on Sat, Sep 15 2007 2:26 PM

Well, the apathy is deafening on this and your other post about licensing ( http://tinyurl.com/39eenv ).

Maybe this reflects the fundamental problem - licensing is not interesting to lots of people. It's one of those "somebody else's problem" subjects.

Partners don't want to spend time on it as they might be able to make just as much money selling the easier solutions (OEM and FPP) as they will do on a volume programme.

Customers (who also read your blog) don't want to know about the complexities, they just want a good deal.

As always, though, nothing will change for the better without feedback.

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

Pingback from  The Schlog  » Blog Archive   » I’m not the only one yammering about Microsoft licensing

BJ wrote re: Replying to Vijay's "Who understands Microsoft Licensing?" blog - why I think he is right and wrong
on Thu, Oct 11 2007 3:36 PM

David thanks for the blog. I have been dealing with technology and Microsoft Licensing since DOS 1.X. Before that I was dealing with CPM and TRS DOS. I currently handle all of the Microsoft software licensing and am apart of the negotiation team for one of the top 10corporations’ in the world. Even after all of these years I still have a problem with the idea of a CAL. I pay for the Server NOS, and the desktop OS, I pay for the routers, switches, hubs, and the cables that connect them, but with all that being said the NOS is no good to me unless I pay for an invisible (no code) CAL. Starting in 2007 as if that wasn't bad enough they have now introduced yet another CAL (Enterprise CAL). The licensing tactics that Microsoft has introduced in the last 18 months are unparalleled in the history of Microsoft.  SA use to be a good deal. Between 1990 and 2001 Microsoft delivered 7 major operating systems.  This meant a new OS every 1.6 years. The corporation that I work for has always purchased the Enterprise Servers (Windows, SharePoint, Exchange, etc.) at 3-4 times the cost of the standard server. Microsoft could have doubled the SA cost on my servers and it would have cost much less than adding the enterprise CAL's. In the past I received all of the features and of the Enterprise Servers through SA (software assurance) but no longer. Another point of clarification would be for all of those corporations that have purchased their OS with their hardware (lease or purchase) in the past will no longer be able to continue to acquire the enterprise OS (Vista Enterprise) without putting it under SA. With Windows XP Professional customers could purcahse via OEM, but it is not even an option with Vista Enterprise. It is amazing that the end user who wants to purchase Vista Ultimate (which offers everything that Enterprise has PLUS the media software) with a computer using OEM software can. Microsoft has classified Ultimate as home software while Enterprise is for the medium to large enterprise customer.  It seems to me that the loyal corporate customer who has the largest spend with Microsoft is taking it on the chin.



David Overton wrote re: Replying to Vijay's "Who understands Microsoft Licensing?" blog - why I think he is right and wrong
on Thu, Oct 11 2007 8:52 PM


gosh.  So you don't have to buy some of the "larger" CALs, so there is no strong arm tactic, just more options.

You can still get the equivalent of XP Pro in the Vista world, it is Vista Business - just as before, you HAVE to get the OEM version 1st.  Once again, you can get SA to get extra features, just now the list of extra features has increased with Vista .. why is that a bad thing, surely it is more value for money.  Vista Enterprise is just the name for Vista Business + SA.

Every customer still has the option as to whether to buy SA or not.  If you don't want the Enterprise CAL, don't buy it - you can still buy CALs for products that you use.  All Microsoft has done is give you more choices :-)



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