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5 Reasons Why Microsoft Licensing Is Hard (and Likely to Remain that Way)

Tuesday, 08 September 2009
Written by Rob Horwitz and Paul DeGroot

Organizations are finding it more challenging than ever to determine which Microsoft licenses to buy, how to buy them, and how to withstand an audit. Constantly changing rules, numerous exceptions, expanding choices, and limited documentation all make Microsoft licensing rival tax law in complexity. It took many years to get this complicated, and it isn’t likely to change any time soon. Here’s why:

1. Many products and markets.

Microsoft offers a broader set of products than any other software vendor, sells in virtually every country, and deals with customers of all sizes. A one-size-fits-all product packaging, licensing, and pricing approach couldn’t possibly work; complexity is simply unavoidable.

2. Decentralized decision making.

Although Microsoft has a central licensing division that, among other things, designs and administers licensing programs such as Open and Select, numerous Microsoft product groups decide independently what types of licenses are required for a product and how they are priced. Each product group cares most about responding to its competitors, maximizing its revenues, and addressing specific customer requests. Consistency, simplicity, and ease of compliance often take a back seat.

3. New technologies.

Developments such as the Internet, multicore processors, virtualization, mobile devices, and cloud computing have all forced Microsoft to adjust licensing rules. Each adjustment triggers many transition complications for existing customers and may introduce obscure new rules or exceptions designed to generate new revenue from emerging trends.

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. Customers are responsible for building the complex infrastructure and processes necessary police themselves. Weak enforcement tools can lead customers to buy more licenses than they need or sign up for “all-you-can-eat” license programs, such as Enterprise Agreements.

5. Lack of incentive.

Microsoft executives don’t see current licensing policies as a problem—customers are still buying—and the executives are reluctant to tinker with such a complex system. Any major restructuring of licensing policies could raise a tsunami of transition issues with great risk of costly, unanticipated, or unintended consequences for both customers and Microsoft. Furthermore, Microsoft would likely face at least a short-term hit to revenues to mitigate transition costs for customers.

About the authors: Rob Horwitz and Paul DeGroot have each studied Microsoft licensing for over a decade and bring a wealth of knowledge on how Microsoft licenses its products to thousands of corporate customers of all sizes each year. Their popular Microsoft Licensing Boot Camps are held throughout the year in the United States where attendees can learn face to face key licensing strategies and how to get the best deals from Microsoft. Registration is now open for the next licensing boot camp in Chicago this fall. Visit more information.

About Directions on Microsoft: Directions on Microsoft is the only independent organization in the world devoted exclusively to tracking Microsoft. Directions has studied Microsoft since 1992. Its team of Microsoft experts provides clear, concise, and actionable analysis of shifts in Microsoft strategy, Microsoft product and technology roadmaps, delivery schedules, organizational changes, marketing initiatives, and licensing and other policies, so you can quickly assess how they impact your business. Thousands of companies worldwide—including corporate purchasers of Microsoft products, system integrators, software vendors, hardware manufacturers, network operators, venture capitalists, and financial analysts—trust Directions on Microsoft for accurate and unbiased Microsoft research and analysis to guide their strategic decisions. Directions on Microsoft, 135 Lake Street South, Suite 155, Kirkland, WA 98033 +1 425 739 4669

First published September 8, 2009

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