Microsoft's licensing mess

Microsoft's licensing mess

Summary: 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. I've identified five problems with Windows licensing. If you think they don't affect you, think again.


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.



Topics: Microsoft, Hardware, Windows

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  • Proof of ownership of the license

    Another issue we ran into is the proof you own the license. The receipt my company received when we bought CALs did not include the price of the CAL. That wasn't good enough when we were audit and we had to have the company track down their records(2 yrs pass the sell) for that information so we could pass the audit.
    • Accounting 101

      I don't really see how that's Microsoft's problem. Every business should know that you need to have receipts for all assets that show the cost and purchase date.

      That IS the point of an audit. A 3rd party verifies the financial status of a company. Can't do that if your company doesn't keep good records.
      • Wrong kind of Audit

        The type of audit is what we in my organization refer to as a fishing audit where some law firm files a law suit and demands a discovery audit of your licenses. The latest twist in this extortion game is the lawyers then claim that you don't own those licenses and must produce proof of owner ship. Possession of the holographic tags isn't enough you must prove that you bought them and that the vendor was legitimate or pay off the scum.
    • Proof of ownership of the license

      I hear you, brother. As soon as we find a viable alternative Microsoft will be off our radar. I venture, I'm not alone. This is what should keep MS up all night. However, like a classic monopolist the rage in their base does not concern them. We are actively testing other OS's and in a few month we will make a choice and by next year, this time we will inform Microsoft we no longer need their products.
  • Be careful what you wish for...

    I agree that it is a mess, but it could be worse. Enterprise licenseing with Symantec is a complete nightmare. They make MS licenseing look like a mid summer nights dream.
    • Intriguing image...

      I could easily believe that Puck was in charge of MS Licensing. In fact, a lot of things about it fall into place if we make that assumption, don't they?
  • -2 Days, +0 Gain in Knowledge

    I've spent the past two days trying to sludge my way through this licencing business. This includes printing out a 6-page document from CDW explaining licencing, and over 20 pages from the MS Partner website JUST to figure out what licenses we might need to switch to Server 2003.

    The message I get is that Microsoft wants every last cent they can get from an organization. I applaud their attempt to simplify network licensing.

    From what I've been able to figure out, it seems as though I'm buying a license for EACH machine as well as EACH user.. If that's the case, then there is no way the execs will ok a migrate to Server 2003.
    • Which is why

      Linux or even FreeBSD is such a spectacular deal. There are no restrictions on how many and if you absolutely must have vendor support you can get it at a price, but the OS and applications are with in reason and without stupid restrictions. The GPL v2.0 is so much easier to read and understand. ]:)
      Linux User 147560
      • Which is why

        Exactly. Since software is the deciding factor we will migrate to Linux. We need to determine which distribution. We have eliminated those distros that are associated with MS. Any favorites?
        • Go here to find all kinds of Linux info

    • Re: -2 Days, +0 Gain in Knowledge

      [i]From what I've been able to figure out, it seems as though I'm buying a license for EACH machine as well as EACH user..[/i]

      So if you have 200 users each machine needs 2001 licenses?


      none none
      • 2001. Sorry. (NT)

        none none
    • It's easy (if you know how)

      The sad thing is that Microsoft's documentation is often contradictory and incomplete, and the vendors don't have a vested interest in saving you money. Microsoft doesn't care if you're confused. Most confused customers overbuy.

      But if you want to bring Windows Server 2003 into your organization, here's what you need.
      One Windows Server 2003 license for each server.
      One Windows Server 2003 CAL for each user or device.

      So if you have 10 servers and 200 users, you buy 10 Windows Server licenses and 200 Windows Server 2003 CALs.

      Al S Cook
      • Hmm, not that easy

        As an example, a copy of Server 2003 Enterprise comes with 25 cals, server 2003 premium comes with 5.

        So the best thing is to determine which versions will be needed and read the literature on that version. I know that for some people knowing how to read is inconvenient but the RTFM statement holds true in everything that we do.
        • Server 2003 Enterprise comes with 25 cals, server 2003 premium comes with 5

          Server 2003 (now 2008) Enterprise comes with 25 CAL?s, server 2003 (now 2008) premium comes with 5...

          And when you purchase Open licensing, or Select licensing it doesn't come with any CAL's at all...

          Always know what you are buying... Consult a knowledgeable sales professional, and reward them with your business, while demanding a fair price (I didn't say the lowest)...

          Caveat emptor... Let the buyer beware...
      • It's easy (you don't know, do you)

        You are forgetting you printers (a stand alone device)
        and than there are your NAS

        You either count the seats OR the devices not both.
        • It''s easy (if you know how)

          Printers and NAS don't need CALs. A CAL is a client access license and these devices don't "access" Windows.
          But your question illustrates an important point: how quickly this gets complicated. In fact, Microsoft defines certain types of access as requiring a CAL, while others don't. If you use Windows as a Web server, for example, anyone who accesses the server as an "anonymous" user doesn't need a CAL.
        • CAL's are for clients...

          Microsoft CAL's are for Client devices, not peripherals...

          Client devices are users PC's, Network enabled phones, Networked PDA's, and laptop/tablet devices.

          Forgive me if I messed any but Printers and NAS devices, projectors, or other peripherals do not require CAL's for windows server...
    • EACH machine as well as EACH user..

      Each machine and each user? Depends on what we are talking about.

      I think you are talking about CAL's or Client Access Licenses. CAL's are either Per User or Per PC/Device. There are some instances where using both can save you money.

      CAL's are purchased on a least needed basis:

      Most companies will pick per-user so they don't need a CAL for each person's smart phone, laptop, and desktop used by one person.

      A company running multiple shifts with different people using the same PC would want to opt for the Per Device CAL's

      Banks are an example where using both saves more money. The executive offices would license per user, and then the branch locations per device if the number of branch users exceeds the number of PC's. Fast food companies are another such example of where mixing Device and User CAL's are of a benefit.

      Cover yourself with the least number of CAL?s needed, and document it.

      To illustrate my example:
      ? If you have 100 employees but 200 devices (desktop and laptop each)? buy 100 User CAL?s
      ? If you have 300 employees but only 100 client devices? buy 100 device CAL's.
      ? If you have 100 executives that each has a network PDA/Phone, a laptop, and Desktop? And you have 100 terminals accessed by 300 part time employees? You would need: 100 User, and 100 Device CAL?s. Not 400 User CAL?s or 400 device CAL?s? This example requires the best documentation?

      I've sold Microsoft licensing for the past 10+ years, and yes it is a mess (but it is better than when I first started).

      Get an experienced, software sale, professional that that you can trust. Sticking with them is your best option. Make sure they have sufficient resources for all your software needs. Going with the lowest bidder is a plan for failure. Also, most small local VAR?s just don?t have the experience or resources when it comes to Software Licensing. Going with a global or national large account reseller will save you time and money in the long run. Our company finds tens of thousands of dollars of unnecessarily purchased licenses, or over purchased licenses because of the scare tactics of other resellers, and anti-piracy laws (see There are also plenty of companies that don't purchase enough or the correct licenses too...
    • Old technology

      What, our friend here is considering moving to a 2003 Microsoft package.

      Ubuntu hadn't been invented 5 years ago, and is now on it's 10th release!

      Do let me come to your company and help migrate you to safe, open, freeware.
      Charles Norrie