Navigating the complex array of Microsoft licensing policies, procedures, and programs is a financial and legal necessity for any organization using Microsoft software. A company that thoroughly understands Microsoft licensing and how it is changing can stay in compliance without paying for more licenses than it needs, and can budget intelligently for future software purchases. Recent changes, such as per-user licensing, Terminal Server changes, and new support options, make it more critical than ever that Microsoft business customers, salespeople, and service partners understand the company’s volume licensing programs so they can analyze their impact and plan accordingly.

This report offers an overview of Microsoft software licensing for executives who plan and manage IT systems, salespeople and service partners who sell them, and line-of-business managers who approve departmental IT budgets. It pulls together key material on all the major aspects of Microsoft product licensing into one easy-to-digest package, and is suitable for those just getting started as well as those who want to fill gaps in their existing knowledge of licensing.

Scope of This Report

This report focuses exclusively on production use—use in day-to-day operations—of Microsoft software by for-profit corporations. It does not deal with customers such as third-party software developers and application service providers (ASPs) who redistribute or resell access to Microsoft software. It also does not cover special licensing terms Microsoft offers to nonprofit organizations, educational institutions, or governments. Microsoft has separate licensing rules and programs for ISVs, ASPs, academic, nonprofit, and government customers. Nevertheless, many of the concepts discussed in this report also apply to these audiences.

This report also limits discussion to elements of the Microsoft product line most commonly used by corporate customers and available for purchase through Microsoft's volume licensing programs. Included in the discussions are Office, Windows XP, Windows Server, and 18 server applications, including SQL Server, Exchange, Terminal Server, Systems Management Server, SharePoint Portal Server, and BizTalk Server. Products used by business customers but not covered in this report include Axapta,, Great Plains, Navision, and Solomon products. These products are offered by the Microsoft Business Solutions group and, for a variety of reasons, are not available through volume licensing programs.

What’s Ahead

This report includes the following chapters:

How Microsoft Licenses Its Products. This chapter helps customers answer the question: "What types and quantities of licenses do I need to buy to be in full compliance?" We examine each of the major product categories—desktop applications, desktop OSs, server OSs, and server applications—and summarize how Microsoft charges for these products. We also cover licensing of special services, such as Terminal Services and Rights Management Services, that ship with other Microsoft servers or can be downloaded separately, but present new licensing requirements.

Volume Licensing Programs. This chapter helps customers answer the question: "What is the most advantageous way to buy the licenses I need?" We describe the Open, Select, and Enterprise Agreement volume licensing programs and explain their advantages, which go well beyond price discounts. We enumerate the differences among the programs and the factors companies need to consider when deciding which program or programs to use.

The Software Assurance Upgrade Program. This chapter helps customers answer the question: "Does it make sense for my organization to pay an annual maintenance fee that confers the right to upgrade, or should we purchase product upgrades as they are needed?" We explain what upgrade rights Microsoft's Software Assurance program confers, which products it applies to, how it affects overall volume discount levels, and other benefits of Software Assurance, such as product support and training credits. Finally, we lay out criteria customers can use to decide whether to buy Software Assurance.

The Future of Microsoft Licensing. This chapter summarizes trends (such as a push for software subscriptions or annuity payments) that could determine the near-term direction of Microsoft licensing and analyzes their potential impact on customer procurement and IT management.