by Shane O'Neill

CIO Alert: Five New Microsoft Licensing Tweaks

Jul 14, 2010
Microsoft OfficeOffice SuitesOperating Systems

With mobility and virtualization pushing deeper into the enterprise, Microsoft has had to make changes to its software licensing schemes. Forrester outlines five of the most relevant ones and advises CIOs how to navigate (and negotiate) these tricky waters.

As if Microsoft software licensing schemes weren’t complex enough, the brain trust in Redmond has cooked up changes to keep up with growing trends such as mobility and virtualization.

Before CIOs can decide on, say, a three-year Enterprise Agreement or a flexible, pay-as-you-go Select Agreement, they’ll need to know how recent changes made to Microsoft’s licensing and pricing schemes impacts them. Microsoft’s changes also throw a spotlight on whether or not Software Assurance is in your best interest.

Although many of the changes are favorable to customers, there are some hidden twists and turns that could lead IT buyers astray if they are not careful, according to a recent report by Forrester Research.

Some of the changes that could have serious implications for IT departments, according to Forrester, range from price increases and repackaging for Office to changes to the rules on remote access and virtualized desktops to upcoming retirement of the Select License program. There’s also the elimination of the SA (Software Assurance) renewal grace period that throws a monkey wrench into a CIO’s timetable for negotiations.

Microsoft’s changes also don’t go far enough to address concerns that Forrester is hearing from hundreds of IT buyers about the mismatch between the cost and value of Office upgrades and the licensing complexity of desktop virtualization, writes Forrester analysts Duncan Jones and Christopher Voce.

Taking on the role of consumer advocate, Forrester lays out five licensing and pricing changes that IT buyers should focus on and try to leverage.

Office Pro Plus Got a Five Percent Price Increase Starting May 1, 2010

New volume licensing customers pay five percent more for Office 2010 than they did for Office 2007, starting May 1, 2010. Companies with SA licenses get the upgrade for free.

This means it’s a good time to weigh the pros and cons of SA for Office purchases. Forrester’s research indicates that many companies (60 percent in a recent survey) are satisfied with older versions of Office and are not planning to upgrade to Office 2010. The real draw of Software Assurance is upgrade rights, so why have it for Office if you’re not upgrading?

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Then again, SA does provide benefits other than upgrade rights, such as training and customer support and some flexibility when deploying virtualization technologies. “Companies have to figure out if these benefits are worth the cost,” says Forrester analyst Chris Voce.

Forrester’s Advice: Question the Value of Upgrade Rights and How it Complicates Office SA Decisions

For many Forrester clients, SA on Office is too expensive. Buyers considering renewing an EA (Enterprise Agreement) or adding SA to an Office 2010 purchase will struggle to see the value in Office upgrade rights when they don’t know what the next version will contain or when they will want to move to it.

Yet Microsoft is bound to be flexible on its SA policy as it is tries to preserve $10 billion a year in revenue from Office, according to Forrester. IT buyers negotiating an Office 2010 purchase should not forsake SA completely, rather they should push Microsoft reps to bring down the price to where it makes financial sense.

New Licensing Options for Virtualized, Mobile Office Deployments

Microsoft’s traditional definition of Office license “per device” has had to change with the times, as smartphones, thin clients and virtualization drive deeper into the corporate network. For instance, workers now access Office files using application streaming or virtualization technologies.

This has led Microsoft to clarify its SA policies. Starting on July 1, 2010, users of a PC with an Office license has rights to Office 2010 Web Apps from PCs or external devices, although companies will need to host the Office Web Apps on either SharePoint Server 2010 or SharePoint Foundation Server 2010.

Additionally, users get Office RUR (Roaming Use Rights) with an active SA license. This allows users to access Office through any streaming or virtualization technology on devices outside the company, such as your home PC, airport kiosk or smartphone.

Forrester’s Advice: Consider SA’s Impact on Office When Assessing Mobile Computing Options

Users will likely retain SA on certain Office licenses to get RUR, Forrester says. But IT buyers should first evaluate alternatives that don’t involve more licenses or SA, such as using the licensed PC as a server for solutions like GoToMyPC, pcAnywhere, or Office Web Apps. “These options may be sufficiently credible to provide some negotiation leverage, even if you don’t actually decide to employ any of them,” writes Forrester report authors Jones and Voce.

Microsoft Shakes Up Windows Virtualization Licensing Policies Again

The changing ways in which virtualization is delivered has driven Microsoft to modify its Windows licensing policies.

With Microsoft’s VECD (Virtual Enterprise Centralized Desktop), users with SA on their Windows client OS will no longer have to buy a separate subscription to access Windows in a VDI (virtual desktop infrastructure) environment. Windows virtual desktop access rights now will be a standard SA benefit.

For thin clients and PCs without SA on Windows, Microsoft offers a new license called Windows VDA (Virtual Desktop Access), which will cost $100 per year per device.

Also, much like with Office licenses, the primary users of PCs with SA on Windows will have device roaming rights that let them access a hosted desktop outside of the company walls.

Forrester’s Advice: Evaluate Your Virtualization Plans Alongside Windows SA Decisions

New virtualization licensing have changed the way CIOs look at SA. Decisions about SA and Windows, says Forrester, are no longer just about upgrade rights and other SA benefits. Rather, they have an impact on overall client and virtualization strategy. Forrester recommends IT managers factor their desktop virtualization plans into their Windows licensing strategy.

Microsoft Will Stop Selling Select Agreements after July 1, 2011

Microsoft will stop signing new Select Licenses on July 1, 2011, replacing them with the enhanced Select Plus program. Customers can choose between Select License and Select Plus until this date. Additionally, Select License customers can migrate to Select Plus during this time and maintain their current price level.

Microsoft’s Select programs are part of its Volume Licensing that allow customers to buy in volume and “pay as they go” for only the software they use. Click here for more on the differences between Select and Select Plus licenses.

Forrester’s Advice: Upgrade to Select Plus as Soon as Possible

Businesses should establish a Select Plus contract the next time they negotiate with Microsoft or a reseller so it is there if they need it, according to Forrester. As of now, firms with expiring Select contracts are under time pressure at the negotiation table; they have no way to buy additional licenses within a volume licensing program after the existing contract ends.

Software Assurance No Longer Has a 30-day Grace Period

Microsoft has removed the 30-day grace period that used to exist at the end of a Select License Agreement or an EA (Enterprise Agreement), during which customers could renew SA without any penalties. When SA expires, a customer’s only option is to re-buy that license again with SA. Customers would often use the grace period to finalize the agreement and tie up loose ends.

Forrester’s Advice: Prepare for this Change but Push for Leniency in Negotiations

With the removal of the grace period, customers will have to adjust their negotiation timing. Forrester recommends that IT buyers plan a timeline that will deliver an approved deal before SA expires and convince Microsoft to provide its own grace period if you feel you may not meet the deadline.

Microsoft sales reps will usually show leniency “if the buyer convinces them that they will get a ‘no deal’ answer if they enforce an impractical, needless deadline,” writes report authors Jones and Voce.

Shane O’Neill is a senior writer at Follow him on Twitter at Follow everything from on Twitter at