News

Report: Cloud, Mobility Will 'Kill' Microsoft's Licensing Model

• By Kurt Mackie
• June 01, 2011

A recent Forrester Research report suggests Microsoft may soon require its business customers to pay Software Assurance (SA) licensing fees.

The report, entitled "Consider These Five Criteria When Choosing a Microsoft Volume Licensing Program," lists some strategies for IT management to consider when assessing Microsoft's various volume licensing programs. According to the report, Microsoft's possible move to SA licensing fees would be the result of forthcoming developments in mobility and cloud-based server access.

"The twin revolutions of client mobility and cloud servers will kill device-based licensing, which is Microsoft's existing model," the report said.

Microsoft gets about 30 percent of its revenue from its multiyear volume licensing agreements. Not only are they profitable, but the agreements bring in the kind of regular revenue preferred by financial-market analysts that scrutinize Microsoft's performance as a company, according to Forrester's report.

Microsoft's SA licensing option offers a software upgrade benefit, which might be available every three years if Microsoft keeps to its general lifecycle product schedules on a timely basis. But opting for SA is still just a bet for organizations. At the same time, SA represents a 29 percent premium for Microsoft for its Windows and Office products and a 25 percent premium for Microsoft for its Client Access Licenses, according to the report.

Most organizations typically acquire SA coverage automatically when they buy Enterprise Agreement licensing from Microsoft. SA also provides access to training resources and the Microsoft Desktop Optimization Pack.

(For a scathing interpretation of SA and how it potentially doesn't serve Microsoft's customers well, see this commentary by Paul DeGroot of Pica Communications. DeGroot formerly served with the Directions on Microsoft consultancy, specializing in Microsoft licensing issues.)

According to Forrester's report, the five basic criteria to consider when electing to purchase Microsoft's volume licensing are price, upgrade cycles, budget, value and SA benefits. Organizations wanting a better deal will have to have an alternative program in mind before negotiating with Microsoft, according to Forrester, or they'll have to be willing to forgo a purchase. Microsoft's Enterprise Agreement is typically the lowest-priced option for customers with 250 PCs or more that also buy into Microsoft products across their organizations, the report explains.

Organizations planning virtual desktop infrastructure deployments to support mobile employees may find that a Microsoft Enterprise Agreement is the least expense option, according to Forrester. However, the report cautions that each employee-owned device used for business purposes may be counted by Microsoft in the overall licensing cost estimate.