Microsoft software licensing changes: What they mean for your business

Software Assurance will be a big factor in negotiating new contracts
Written by Tim Ferguson, Contributor

Software Assurance will be a big factor in negotiating new contracts

Changes to Microsoft's software pricing and licensing could have a big impact on IT departments. This is according to analysts at Forrester Research, who have identified five changes that could affect CIOs who are planning new purchases or simply trying to comply with their existing contracts.

Forrester's Five New Microsoft Licensing Twists That Every IT Buyer Should Know report said that while most of the changes are positive for customers, they've also created question marks around the value of upgrades and have complicated licensing decisions. To find out what you need to be aware of when embarking on licence negotiations with Microsoft, see below.

Microsoft Office 2010 price increase

With the price for Microsoft Office 2010 increasing compared to Office 2007, Forrester says organisations will need to think carefully about whether to purchase Software Assurance for Office as part of any new licence agreement with Microsoft.

Software Assurance is a service package companies can buy alongside licence agreements which provides additional upgrade rights and deployment services for the technology it's attached to.

Companies already on Software Assurance for Office will get the new version at no extra cost as part of their existing subscription.

Microsoft's business division chief, Stephen Elop, at the launch of Office 2010

The arrival of Office 2010 has raised questions about the value of Software Assurance for businesses
(Photo credit: Microsoft)

Organisations running Office 2007 without Software Assurance will be able to upgrade at an additional cost but for those running earlier versions of Office there is no upgrade option, meaning they will have to start new licence agreements if they want to use Office 2010.

For businesses thinking about adding Software Assurance to any licence agreement for Office 2010, Forrester questions the value of the upgrade rights, especially as businesses don't know if there will be any features on the next version of Office that they'll find useful.

An example of how features can change is the scrapping of the Enterprise and Small Business editions for Office 2010 with features from these versions moving to the Standard and Professional Plus versions.

Customers with Software Assurance for the previous versions of Standard and Professional Plus receive these additional features - such as OneNote and Office Web Apps - at no extra cost when they upgrade to Office 2010. However those currently running the versions of Office being phased out will have to pay extra to upgrade to the new versions to retain that functionality whether or not they have Software Assurance on those products.

Forrester admits some companies may benefit from adding Software Assurance to new agreements for internal budgeting reasons or to provide access to Roaming Use Rights, which allow users to access the version of Microsoft Office running on their work PC via a range of external devices.

Forrester advises companies to carefully consider whether they need Software Assurance when setting up new licence agreements. If they decide they need Software Assurance software buyers should work with Microsoft to negotiate a price to a level where it makes financial sense.

Using Microsoft Office outside the office

The next potential area of confusion is a set of new licensing options for accessing virtual versions of Office via devices other than the user's work PC.

Microsoft recently clarified these policies by saying every primary user of a PC will receive rights to use Office Web Apps with Office 2010 from 1 July 2010.

However this change only covers versions of Office Web Apps hosted by the businesses themselves using Microsoft's SharePoint Foundation Server or SharePoint Server 2010. This is because there isn't a business licence for versions of Office Web Apps hosted by Microsoft itself...

For companies with Software Assurance, each user also gets Office Roaming Use Rights meaning they can remotely access applications via streaming or virtualisation technology. This extends access beyond the main office PC to mobile devices, home PCs and even airport kiosks.

Previously, Office was licensed on a per-device basis but Forrester says the changes in technology are pushing Microsoft towards a per-user model - as seen with the online version of Exchange and the Business Productivity Online Suite.

Forrester says companies may want to include Software Assurance with their licence agreements in order to get the Roaming Use Rights but that software buyers should investigate alternatives for remote access - such as Citrix GoToMyPC or Symantec pcAnywhere.

Although this won't necessarily mean they end up using alternative technology, Forrester suggests it will be useful for software buyers to know about to use as a bargaining tool when negotiating with Microsoft.

Desktop virtualisation changes

Microsoft recently changed its Windows virtualisation licensing policies so that from 1 July 2010, customers with Software Assurance on their Windows operating system won't have to pay an additional subscription to use it on a virtual desktop infrastructure. They previously had to pay for a separate licence to do this.

For customers without Software Assurance, there's the Windows Virtual Desktop Access (VDA) programme. Before any potential volume licensing discount, each VDA licence will cost around $100 per device per year.

Primary users of Windows covered by Software Assurance will have extended device roaming rights so they can access their hosted desktop from outside the business. VDA licence customers will also receive these benefits.

Software Assurance has clearly become more important when businesses are planning their desktop virtualisation strategy according to Forrester. They therefore need to understand how Software Assurance will impact their desktop virtualisation strategy before committing to an agreement with Microsoft.

Screenshot of Office Web Apps on Skydrive

Currently businesses can only run Office Web Apps on their own infrastructure as a business licence for a fully web-based version is not yet available
(Screenshot: Microsoft)

Select licensing to be replaced by Select Plus

One of the ways in which large organisations can license Microsoft software is the Select licensing model which is a flexible pay-as-you-go model based on the projected use of a pool of products over three years. In contrast Enterprise Agreements are based on the number of devices and are fixed over three years.

The Select Plus licensing scheme was introduced in November 2008 and has so far been offered alongside the Select programme. Select Plus differs from Select in that the licences bought through the programme have no expiration date and customers can choose to apply Software Assurance to a selection of products rather than all of those covered by the licence agreement. Users can also spread their payments for Software Assurance, if they choose to take up that option.

But the Select programme will no longer be offered after 1 July 2011 and so customers looking to renew their agreements will need to choose whether to renew existing Select agreements or move to Select Plus.

Forrester advises organisations to establish a Select Plus contract if they negotiate with Microsoft before 1 July 2011. The reason for this is to make sure they have a means to add licences to their volume licensing agreement after their Select programmes come to an end.

The end of the Software Assurance grace period

The final issue software buyers need to be aware of is that there is no longer a Software Assurance 30-day grace period during which it can be renewed without penalty following the end of a volume licensing agreement.

As Software Assurance now effectively ends at the same time as the licence agreement, businesses will need to make sure they've agreed a new licensing agreement before the end of the existing agreement so they continue to be covered by Software Assurance.

If licence contract negotiations go beyond the period covered by Software Assurance, Forrester advises that software buyers will need to persuade their Microsoft salespeople to add a discretionary grace period by indicating that not doing so could put contract negotiations at risk.

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