Microsoft Puts OnLive On Notice

One of the most promising Windows desktop apps for the Apple iPad is in bad trouble -- the Microsoft licensing kind.

Earlier this year, cloud gaming company OnLive Inc. released an iPad app called OnLive Desktop that allowed remote display of a limited-functionality version of Windows 7 running in the Palo Alto, Calif.-based company's datacenter.

The version of Windows 7 served up by the datacenter-app combo includes a keyboard button in the taskbar, fully functional versions of Word, Excel and PowerPoint, and an eye-popping 1-gigabit-per-second Internet connection (data only moves from the Internet to OnLive's datacenter rather than from the Internet to the iPad).

A freebie released in January got a lot of reviews, but a late February update with pay options seems to have gotten Microsoft's attention, and probably prompted numerous angry calls to Microsoft from its many hosting partners and virtual desktop vendor partners.

OnLive offered OnLive Desktop Plus for $4.99 a month, which included Windows 7, the Office apps and the super-fast data pipe; and promised a Pro version coming soon for $9.99 a month that would add 25 times more storage and the ability to customize the desktop with additional PC applications. Also announced was an OnLive Enterprise version that would allow some IT control of the environment.

Noting the lack of pop-up prompts in his review of the app and service last month, The New York Times' David Pogue quipped that it was "the least annoying version of Windows you've ever used."

While users may not be annoyed by the OnLive version of Windows, Microsoft is. On Thursday morning, Joe Matz, Microsoft corporate vice president of worldwide pricing and licensing, suggested very strongly in a blog entry that OnLive is off the reservation.

"We are actively engaged with OnLive with the hope of bringing them into a properly licensed scenario, and we are committed to seeing this issue is resolved," Matz wrote.

Much of Matz's post was dedicated to spelling out how Windows can only be provided by hosting partners either through a virtual desktop infrastructure scheme that involves customers already having licenses or by having limited desktop functionality served through Windows Server and the Remote Desktop Protocol.

"It is important to note that SPLA does not support delivery of Windows 7 as a hosted client or provide the ability to access Office as a service through Windows 7. Office may only be provided as a service if it is hosted on Windows Server and Remote Desktop Services," said Matz, substituting a shot across OnLive's bow for one straight through the hull.

Simon Bramfitt, who has been providing analysis of the OnLive-Microsoft licensing situation on his blog, speculates that OnLive may have been trying to create this fight all along, and that the party in trouble could be Microsoft -- not because it will lose to OnLive but because it's losing the argument in the market.

"You have to acknowledge that it is long past time for Microsoft to address the shortcomings within its current licensing policy with regard to VDI," Bramfitt commented on Matz' post. "The increasing adoption of mobile technologies coupled with the consumerization of IT and bring your own device programs is increasingly blurring the boundaries between corporate devices and personal devices. Microsoft's licensing policies in this regard have failed to keep up with these trends and needs to be addressed promptly."

What was refreshing about using the OnLive Desktop was that it provided a Microsoft experience in a straightforward way -- no convoluted licensing agreement with Microsoft, no setting anything up with the IT department. It was just click, pay and start using. That's what users are coming to expect from technology, but it's now clear that it wasn't Microsoft's intention to have its software used that way -- at least in this case.

If Bramfitt's speculation about OnLive intentionally picking a fight is right, the company has picked a big one. Bramfitt notes that the Office apps compete directly with Microsoft's Office 365 franchise, as well as with some of Microsoft's most powerful partners.

The fight actually goes much deeper than that. By packaging Windows 7, Word, Excel, PowerPoint, Flash video and a wicked-fast data pipe, it's suddenly a threat to the whole concept of a Windows-based tablet. Sure, some users will want the new tiled tablet experience of Windows 8. But for many others, getting a pretty complete Windows 7 experience and an iPad will be Windows enough.

For strategic reasons, I'd be surprised if Microsoft allows OnLive Desktop to license Windows 7 and Office for very long.

Posted by Scott Bekker on March 08, 2012