By Paul DeGroot [bio]
Posted: May 23, 2005

• Chart: New Product Use Rights Categories

The following is the full text of an article published by Directions on Microsoft, an independent research firm focused exclusively on Microsoft strategy & technology. Each month we make one or more key articles available to non-subscribers.

The Need for Rationalization

Product use rights (PUR)—which, in spite of the name, are more properly "product use restrictions"—are summarized in a lengthy (currently 107 pages) document organized around Microsoft's volume licensing "pools," which are used to lump products together for the purpose of giving customers volume discounts based on the number and type of licenses that they buy. Those pools are systems, consisting of the Windows desktop OS; applications, such as Office and other desktop applications; and servers, which consists of Windows Server and server applications. The PUR document has additional sections devoted to online services and developer tools. Each section lists general restrictions, followed by exceptions to those restrictions.

This organization has proven unwieldy, however. For example, lumping all servers into one category failed to reflect the variety of licensing approaches, including server licenses that require additional Client Access Licenses (CALs), products that require only CALs, servers licensed on a per-processor basis, and numerous other models. Some products, such as the Microsoft Business Network, were covered by two separate sections of the PUR (servers and online services).

The net effect was, Microsoft estimates, 70 different licensing models, described in a document that consists mostly of exceptions to the rules. For example, the spring 2005 PUR (the document is updated each quarter) describes the general rules for servers on three pages, and the exceptions to those rules on the following 41 pages, in sections A through GG.

Nine Product Categories

The revised PUR will drop the practice of listing products by pools (although the pools remain in place for volume licensing purposes) and will instead organize Microsoft products into nine categories based on the type of product or licensing model. (For a list of these categories, see the sidebar "New Product Use Rights Categories".)

Although this results in more categories, it also results in fewer exceptions, as common exceptions that cropped up in many products become general rules that govern a smaller group of products.

In addition, the dense legal language of the PUR will be replaced by plainer text, making the document easier to understand. Paragraphs that differed only slightly have been made identical, which could lead to less confusion over trivial differences in wording.

The net result is that customers should find it easier to locate and understand the rules governing their products, and will better understand a limited set of clear rules that cover similar types of products.

Furthermore, Microsoft's worldwide licensing and pricing group says the company will take a much stronger stance against the numerous exceptions that have made licensing rules so complex. In the future, product groups will be expected to license their new products using the general rights and restrictions for their product category. Groups that want to make an exception to those rules for a specific product will need to prepare a business case and follow a formal process that will determine whether the exception is justified.

Only a Start

As welcome as the changes are, only the documentation describing licensing rules has changed—not the licensing rules themselves. Even at an estimated 44 pages, down significantly from 107, the new PUR will require careful attention from volume licensing customers to ensure that they are compliant with their license restrictions.

The new PUR may also require modification over time, incorporating new categories to ensure that new licensing models do not become exceptions to current models, and to fit Microsoft's product lines better. For example, while most Windows Server editions are covered in the Servers category, Windows Server Web Edition is covered in the Specialty Servers category, which contains several dissimilar products. And while products using the server/CAL model are treated separately from server OSs, all of the server OS products nevertheless employ CALs.

Resources

Volume licensing programs are described in the Dec. 2003 Research Report, "Understanding Microsoft Licensing."

Licensing provisions for new online services are described in "Online Services Pioneer New Licensing Model" on page 26 of the Sept. 2004 Update.

The Product Use Rights document can be downloaded from a link at www.microsoft.com/licensing.