Microsoft Software Licensing Remains Complex as Windows 7 Launch Nears

Microsoft still has a variety of issues with its software licensing structure, according to a new research note by two analysts at Directions on Microsoft. Previous attempts at restructuring the often-complicated licensing for Microsoft products has resulted in benefits to the enterprise, particularly with new technologies such as virtualization. Windows 7 has the potential to introduce new licensing issues upon its general release on Oct. 22.

Microsoft licensing is likely to remain "unwieldy" in the near future, although solutions to licensing issues do exist, according to a new research note by two analysts linked to Directions on Microsoft, an independent organization that tracks the company.

The Sept. 8 research note by Rob Horwitz, CEO and founder of Directions on Microsoft, and Paul DeGroot, the organization's research vice president, breaks down five reasons why Microsoft licensing is supposedly difficult:

1. A Variety of Products and Markets
The sheer size of the Microsoft product portfolio, coupled with the company's global reach and multiple markets, means a "one-size-fits-all product packaging, licensing and pricing approach couldn't possibly work."

2. Decentralized Decision Making
The different product groups within Microsoft decide their licenses and pricing, often independent of the company's central licensing division. Each of these product groups operates with an eye toward its own competitive profile and revenue generation.

3. New Technology
Technological innovations such as multicore processors and cloud computing can force Microsoft to adjust its licensing structure, which in turn can complicate life for customers as new rules and exceptions are introduced.

4. Limited Enforcement and Compliance Tools
"Most Microsoft products do not include features to help medium and large organizations match product use to license purchases or comply with license usage rules," Horwitz and DeGroot write. "Customers are responsible for building the complex infrastructure and processes necessary to police themselves." This can lead to excessive purchases of licenses or inadvertently signing up for programs such as Enterprise Agreements.

5. Lack of Inventive
According to the research note authors, "Microsoft executives don't see current licensing policies as a problem ... and the executives are reluctant to tinker with such a complex system." The sheer amount of effort and cost involved in restructuring licensing policies also acts as a drag on the potential for system reform.

Directions on Microsoft offers boot camps a number of times per year, designed to help IT administrators, corporate negotiators and procurement specialists drill down into Microsoft licensing concepts, terminology and models-as well as deal with situations such as licensing products under virtualized scenarios.

Historically, Microsoft's adjusting of its licensing structure has made it easier for the enterprise to incorporate new technologies into its IT infrastructure, according to a report by Forrester Research issued earlier in 2009.

For example, Microsoft updated its Windows licensing for desktop virtualization at the start of 2009, opening its Vista Enterprise Centralized Desktop (VECD) license to cover desktop virtualization for non-corporate PCs. This freed outsourcers and contractors to connect to a hosted desktop environment, at a cost of $110 per device per year-below the list price of $199.95 for Vista Home Basic and XP Home, and $319.95 for Vista Ultimate, any of which would otherwise need to be purchased if the VECD hadn't been adjusted.

According to the Forrester report, that adjustment in the licensing opened up contractors to using their own PCs at a company's office, or employees to using their own PCs at work.

"While just one year ago, Microsoft handcuffed many organizations that attempted to legally license Windows Client in a virtualized world, they have made steady improvements to pave the way for new computing models," Forrester analyst Natalie Lambert wrote in the April 9 report. "Specifically, models that move away from a standard, physical corporate PC."

However, the upcoming release of Windows 7 could unleash a new round of licensing entanglements, per Horwitz and DeGroot's own research note. Microsoft needs its new operating system to be a hit within the corporate world in order to reverse a declining revenue trend. Most recently, Redmond offered IT administrators and other professionals a free 90-day trial version of Windows 7 Enterprise in an attempt to disseminate the platform throughout offices on the eve of its general release on Oct. 22.