Microsoft Licensing Options

In this post I’m going to talk about Microsoft licensing. I’ll try and cover the various options and why one model may suit you more than another. The information provided by Microsoft licensing “specialists” can be confusing and contradictory. That’s not to say mine wont be, so make sure you seek advise from a trusted independent source.

Why do I need to license?

Because the EULA says so, but also because all (well, most) software is protected by copyright. A software license grants a user the right to use the software in accordance with the EULA. Without a license to use the software, you’re likely breaking copyright law and could be subject to financial penalties or worse.

Software vendors employ auditing companies (e.g. the BSA) to visit customers and ensure they’re correctly licensed. This process is expensive and will see you self-auditing all your software. If it’s shown you’re not correctly licensed (which is almost always the case, even for diligent customers) you have no option but to purchase the licenses – and paying a premium for it too.

What options do I have?

Each Microsoft product has its own licensing intricacies, rather than attempt to cover every Microsoft product, I’ll be taking about the ways in which you can buy licenses. For smaller companies this will be from retail outlets, whilst larger SMB and enterprise organisations will likely be through ongoing agreements.

Original Equipment Manufacturer (OEM)

OEM licensing is hassle free, when you purchase a computer from a retail outlet it usually comes with its Windows operating system already installed and licensed. If you examine the side of the case you’ll likely find a Certificate of Authenticity (COA), a small sticker identifying that the computer has a license. Together with your proof of purchase, you’ll have a licensed operating system.

The software will be pre-installed on the computer and is non-transferable to other devices. If you buy a new computer, you will not be allowed to transfer the license from the old one.

Full Packaged Product (FPP)

FPP (Retail) is new, shrink-wrapped software purchased from a retail outlet. FPP licenses usually come in a box with media and a manual, they’re aimed towards home users or low-volume purchases. Typically purchasing a FPP includes only a single license.

FPP licenses are usually transferable, so if you remove it from one computer you’re entitled to install it on another.

Volume Licensing Programs

This is where it gets more complicated. Microsoft has numerous volume licensing programs which allow for multiple installations under a single purchase.

Volume license programs are usually just the license and a digital download of the software. You receive no physical media, manual or other accompanying bits and pieces. By entering into a volume license agreement purchasing is simplified, can reduce costs and offers increased flexibility.

Unless you’re a Microsoft Partner, when a few additional options become available, Microsoft offer six volume licensing programs. For companies with more than 5 but fewer than 250 computers you can choose from the following volume licensing programs:

  Open Value Open Value Subscription Open License
# Computers 5 to 250
Term 3 Years 2 Years
Payment Options Up front or Annual 2 Years
Software Assurance Included Optional
Can increase licenses Yes No
Can decrease licenses No Yes No
Perpetual licenses Yes Buyout Option Yes
Physical Media Yes No
Downgrade rights Yes
Re-Imaging rights Yes
Cross-language rights Yes
Secondary use rights Academic Only
Training licenses Academic Only

For companies with greater than 250 computers you can choose from the following licensing programs:

  Select Plus Enterprise Agreement EA Subscription
# Computers 250+
Term Never Expires 3 Years
Payment Options Annual
Software Assurance Optional Included
Can increase licenses Yes
Can decrease licenses No Yes
Perpetual licenses Yes No
Physical Media Optional
Downgrade rights Yes
Re-Imaging rights Yes
Cross-language rights Yes
Secondary use rights Yes
Training licenses 20

This should help you to make an informed decision about which volume licensing program suits you best, taking into account whether you prefer capital or revenue expendeture. The comparison of the various Microsoft licensing programs in the above two tables is based on reading through various literature provided by Microsoft rather than third-party sources.

In the next instalment I’ll talk about what happens if you get audited by an organisation such as the BSA, and how you can keep track of your licensing position using Software Asset Management (SAM) solutions.

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Dave Hope

Dave is a Principal Software Analyst for a UK based retirement developer, in his spare time he enjoys digital photography and rock climbing.

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