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Report: Microsoft's Licensing Too Hard for Customers

Microsoft doesn't mind making its customers jump through hoops when it comes to licensing its software.

At least that's the view of Directions on Microsoft, a research firm specializing in both the arcane and mundane aspects of working with the software giant. On Wednesday, the group unveiled a high-level summary of Microsoft's licensing practices titled, "5 Reasons Why Microsoft Licensing is Hard (and Likely to Remain that Way)."

The report's authors are Rob Horwitz and Paul DeGroot of Directions on Microsoft. They admitted that the software giant's licensing policies are a bit obscure.

"In many cases, Microsoft has made the process so complicated that it is virtually impossible to understand compliance issues," said DeGroot, research vice president at Directions on Microsoft, in a telephone interview. "Microsoft's licensing policies do not reflect the real world and how technology is changing. At the end of the day, many customers simply throw up their hands and write a check not knowing if they made the right choice."

The real world, according to a brief by Directions on Microsoft, includes migration to the Internet, virtualization, multicore processors, mobile devices and cloud computing.

DeGroot points to Microsoft’s licensing of virtual machines as an example. He said that while Microsoft licensing follows physical machines by assignment, licensing for virtual machines is not "discoverable."

He explained that Microsoft has a "90-day rule" that says you can't move many of its products to a different physical server more than once every 90 days.

"There's no way for IT to automatically track licensing on virtual machines because it can't tell when the license, which is just a piece of paper, was assigned to the physical machine," DeGroot said. "Customers must either buy more expensive licenses that have more flexibility or track everything manually, which makes the process either very expensive or impractical."

Microsoft's competitor in the virtual world, VMware, provides such a program for its offerings, according to DeGroot. He said Microsoft competes in the virtual space by giving away Hyper-V for free. However, it then comes back with some very expensive asset management tools to track compliance and other issues with virtual machines.

According to the Directions on Microsoft brief, in addition to not staying abreast of technology trends, Microsoft's licensing policies suffer from offering a broad set of products (complexity in licensing is unavoidable), a decentralized decision-making process (individual business units dictate pricing and policy), limited enforcement and compliance tools (drives customers to "all-you-can-eat" licensing programs), and a lack of incentive for Microsoft to change licensing policies (customers are still buying).

"There is a lot of financial engineering going on with licensing policies at Microsoft, with each business unit deciding how a product will be licensed and sold," DeGroot said. "I've been studying Microsoft licensing policies for eight or nine years and it is virtually impossible for me to make a statement on any general principles that apply to Microsoft licensing."

Microsoft does have a Worldwide Licensing and Pricing (WWLP) unit that, according to DeGroot, deploys about 12 licensing models to various programs.

"The problem is there are so many many exceptions to the rules and un-discernable rules, that it has had very little impact on the complexity of licensing," DeGroot said. "The WWLP is basically herding cats."

DeGroot added that purchasing Microsoft's Software Assurance program is almost always a gamble because there is no guarantee customers will receive an upgrade during the program's time frame. The exception to that is the Vista-to-Windows 7 migration happening this year. However, after Oct. 22 (when Windows 7 hits the market), Software Assurance will go back into the gamble mode, according to DeGroot.

Customers need to take a good look at a product's road map, the features included in any upgrade and at their own IT road map to determine whether Software Assurance makes sense for them, he added.

DeGroot summarized Microsoft's licensing position as painless for the corporation because it is working well. Microsoft has little incentive to make it easier for customers.

"I see them [Microsoft] talking about simplifying licensing," DeGroot said. "That's what they say, but what they do is make it more complicated."

For those not willing to take such obscurity at face value, Directions on Microsoft offers a "boot camp" on Microsoft licensing, which is described here.

Microsoft issued a statement on its licensing practices, which read in part: "Microsoft has made significant strides over the past few years in balancing customer choice with flexibility including simplifying agreements and reducing the number of programs." The statement emphasized that Microsoft had reduced the number of its licensing models from 74 to nine.

About the Author

Herb Torrens is an award-winning freelance writer based in Southern California. He managed the MCSP program for a leading computer telephony integrator for more than five years and has worked with numerous solution providers including HP/Compaq, Nortel, and Microsoft in all forms of media.

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