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Complexity and confusion drive Microsoft's licensing

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Microsoft's licensing is tying customers in knots, with organizations spending needless amounts to ensure they remain compliant.

That's according to Directions on Microsoft. The analyst firm blames a growing number of MS products and the fact that individual product groups are picking what licenses to use and setting price in response to the competition and a desire to drive new revenue.

"Consistency, simplicity, and ease of compliance often take a back seat," Directions analysts Rob Horwitz and Paul DeGroot wrote in the online summary of their report, Five reasons why Microsoft licensing is hard (and likely to remain that way).

The duo noted that weak enforcement and auditing tools have seen customers buy "all you can eat" volume licenses such as Enterprise Agreements to stay compliant.

Directions highlighted virtualization as an example of growing price and "scary" complexity.

In September 2008, Microsoft changed a condition in its licensing so that certain server software and enterprise connectors had to be assigned to a specific server for at least 90 days before they could be re-assigned to another server.

But this change did not apply to all products. Notable exceptions included standard editions of certain servers, such SQL Server, and the Windows operating system itself.

This creates a potential problem if you're using virtualization as a migration tool, such as putting Windows 2000 or 2003 servers on virtual machines for application compatibility while you upgrade your physical servers to Windows Server 2008.

Furthermore, much has been made of the fact that Microsoft's Hyper-V hypervisor is free, but it comes with hidden costs and complexity.

Directions notes that the price of Microsoft's Configuration Management Server - formerly Systems Management Server, a tool that provides patching and management - has increased greatly in recent years as new capabilities have been added.

An SMS 2003 management license was priced at $40, compared to $157 for basic management of a single operating system environment and $431 for more complex management tasks for a single operating system environment.

Mother of all transitions

Configuration Management comes as part of the System Center Server Management Suite Enterprise Edition, with performance-monitoring, backup, and virtual machine management tools. But that covers only four virtual machines, and is priced at $783.

And, while the Datacenter edition covers an unlimited number of operating system environments, it's priced just $490 per processor. So if you're doing virtualization on a four-processor machine, you'll spend nearly $2,000.

According to Directions, Microsoft executives are unwilling and unable to fix the situation. Unwilling because money is flowing in - why break the model? Unable because of the potential revenue hit and because a major change would unleash "a tsunami of transition issues [of] unanticipated, or unintended consequences."

The last significant change to Microsoft's licensing saw the company introduce Software Assurance. A plan to have customers subscribe to software on the promise of future upgrades, this proved exceptionally unpopular among customers as prices increased and Microsoft failed to deliver upgrades as expected under the new system.

In response to Directions, Microsoft pointed out that it has made some efforts to simplify licensing in recent years. This included cutting the number of license models from 74 to nine and significantly shortening the length of contracts, while amaking them much easier to understand.

"We continue to look for ways to make the purchasing experience simpler for customers, including our current multi-year investment to ultimately shift the customer experience to one purchasing platform and a single agreement for any type of offer," the company said in a statement. ®

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