Microsoft's licensing mess

If you've been selling a product for more than 10 years and you've shipped hundreds of millions of units, you'd think your customers would know what they're buying. For Microsoft, that's not the case.

The culprit is the hopelessly confusing, practically Byzantine Windows licensing structure, which consists of a maze of terms and conditions that define (and ultimately restrict) what you can do with Microsoft Windows in your home or business. Worse still, the license terms are only partially aligned with the activation and validation tools that are supposed to ensure that your copy of Windows is “genuine.” If you fill a room with 10 PCs, each running an apparently identical version of Windows, there's no easy way to tell what kind of license restrictions apply to each one - or, indeed, whether any or all of those PCs are properly licensed.

The result? Mass confusion. The most damning piece of evidence is a document prepared by Microsoft for its partners in the distribution channel, which contains this remarkable admission:

The Windows Desktop operating system is the only product on the Volume License SKU list that is UPGRADE only. The full versions of all other products, including Windows Server products, are available through Volume License. This is not a new policy, but we have recently become aware that it has caused confusion with many customers. Microsoft’s Windows Desktop OS policies have been in effect for over 10 years and the policies are written in the Volume License Agreements. However, we have found that nearly 44% of Volume License customers believe that Volume License rights include the full OS and 40% of Volume License customers report they have acquired naked or unlicensed PCs, putting themselves at risk of non-compliance with their Volume License Agreement.

When 44% of your customers believe that they've legitimately bought and paid for something and you think they still owe you more money, you have a big problem.

The technical solutions designed to ensure license compliance aren’t exactly foolproof. For that matter, they’re not even easy to understand. Even Windows experts are confused. In the last nine months, I’ve read authoritative-sounding articles offering advice on Windows licensing written by two well-known Windows experts. In each case, the information they presented was flat-out wrong. They make the same mistake that all those corporate customers make, assuming that clearing the activation hurdle makes you legal. The reality is that a properly licensed copy of Windows can fail activation or validation, and an improperly licensed copy can sail through with flying colors. (And that doesn’t even consider Microsoft’s acknowledgment that bugs and poorly written code can cause the activation and validation processes to falsely identify legitimate installations as “non-genuine” copies.)

I’ve identified at least five problems with Windows licensing that Microsoft needs to deal with:

1. The license agreement is not understandable on its face. The new license agreement for Windows Vista is dramatically easier to read than its predecessors, but it’s still infested with jargon and gobbledygook, which is why practically no one reads it. Why can’t there be a one-page summary written in language that anyone can understand?

2. Multiple license types cause confusion. If you buy an OEM license, your license can be upgraded but can’t be transferred to a different machine. If your copy of Windows was an upgrade under the Volume License program, it can’t be transferred to another PC even within your organization. Retail copies, on the other hand, including the Windows Anytime Upgrade flavor sold online, can be transferred to a new PC as long as they’re removed from the original PC. The trouble is, Microsoft provides no easy way to tell which type of license you own. Why can’t Microsoft provide a simple tool that generates a license report showing your version, product ID, and whether the license can be transferred to another PC?

3. Multiple versions of media and product keys cause unneeded headaches. This problem is especially bad with Windows XP, where you need to find exactly the right type of Windows media to reinstall Windows. If you have a Dell system and a Dell product key, for example, you can’t use a retail copy of Windows to reinstall. Windows Vista appears to have simplified this process, with a single set of installation media for all retail and OEM copies (enterprise customers still get separate media). But there are still silly restrictions on the product keys that require customers to jump through hoops to reinstall an upgrade copy on a system that is properly licensed for that copy.

4. Record-keeping requirements are burdensome. If you have a large shop, you need to keep a paper trail for every PC and be prepared to prove that each one is properly licensed. In the UK, midrange companies with around 350 licenses are especially vulnerable to surprise inspections under the Software Audit and Asset Management program.

5. There’s no way to deactivate a Windows PC’s license. Even though you can legally transfer a retail Windows license from one PC to another, doing so is almost certain to fail activation, forcing you to contact a Microsoft representative over the phone and activate manually. Wouldn’t it make more sense if you could deactivate a system as easily as you can activate it? Doing so could tell Microsoft’s activation servers to remove the record for the current system and would allow activation on a new PC.

Do you have any comments or complaints about the Windows licensing process that I missed? Hit the Talkback button and let me know.