Microsoft Licensing & Costs Still Hamper Virtualization

Gartner has weighed in on Microsoft's changes to the Vista Enterprise Centralized Desktop (VECD) and the research firm likes them. But it's still only a small step needed for software licensing to catch up with the capabilities of virtualization. With the changes to Microsoft VECD, Virtual Machines (VMs) can be occasionally deployed to someone's home machine, i.e. a remote worker, for $23 per year, and VMs can be run on non-corporate owned machines for $110 per year, such as in the case of a consultant or contractor. In essence you now have some new portability options to run VMs on other machines, decoupling them from a given piece of hardware. That's something VMs technically can do very easily, its just that the licensing mechanisms are beginning to loosen up and catch up with what the technology can do.

Here's Gartner's take on the matter:

These changes create licensing-compliant frameworks for PC virtualization usage scenarios that were previously challenging or cost-prohibitive to implement. In explicitly citing the use of employee-owned and contractor-owned notebooks for work, Microsoft is legitimizing a usage model that has interested many Gartner clients since 2005. Such deployments will remain relatively expensive (over a three-year lifetime of use, licensing for a corporate Windows VM on a non-company-owned machine will be $330) but they will allow the license to be moved after it has been installed for at least 90 days - which will be useful for licensing consultants and temporary workers.

This option is highly significant in the evolution of Windows client operating system (OS) licensing: For the first time, enterprises can deploy a corporate Windows OS that is not permanently tied to a single physical device. We expect that, over time, Microsoft will continue to increase the flexibility of license and devices. By offering this option through VECD, which is only available to Software Assurance customers, Microsoft also signals a continued commitment to its strategy of gradually enabling new virtualization usage models.

Gartner predicted this change in early 2006. We view it as an initial step in a longer-term process of decoupling Windows OS licenses from PC hardware.

A good first step in the right direction? Sure, the changes to VECD give corporations more options for VMs running on home and consultant computers. But at a cost.

For example, if 15% of employees at a 10,000 employee company work remotely, it will cost IT an additional $34,500 in licensing costs. Sure it's only $23 but that adds up fast for a large corporation. Or take the contractor scenario. It's not unusual for a corporation to have a large SAP, PeopleSoft or other project implementation. Lets say you need 200 SAP consultants for one year. That's an additional $22k in licensing costs for those consultants to use your licensed Microsoft software in a VM scenario. These new licensing scenarios bring some flexibility but also bring additional costs above and beyond the normal software licenses.

Clearly Microsoft is being cautious here as changes in licensing options directly impact current and future software revenue streams. But by not fully addressing the scenarios corporations wish to deploy end user software using virtualization technology, corporations are being forced to "get around" these scenarios, essentially doing it anyway and just waiting for Microsoft licensing to catch up with what businesses are likely already doing. I say that, knowing Microsoft has its own license policing mechanisms and regularly call customers on the carpet. Received those Microsoft IRS-style license audit letters are a real thrill for IT managers.

The bottom line is Microsoft is making changes to support virtualization and virtualized desktops. But Microsoft can't be seen as holding back virtualization or making it cost prohibitive for IT organizations to move in this direction. I agree with Gartner; the VECD licensing changes are a step in the right direction, but more reforms are needed and I expect we'll see Microsoft making the changes customers demand. The question is, at what cost?

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