• Chart: Options for Local and Remote OSs
• Illustration: Diskless, Virtual Machine Architectures

Changes to Windows desktop licensing clarify Microsoft's rules for running Windows when the OS is installed somewhere other than on a local machine's hard disk, such as executing Windows on a diskless PC or inside a virtual machine (VM) on a server. The new licensing rights recognize the increasing popularity of these options (which can reduce the cost of acquiring and managing desktop PCs); establish client licensing for upcoming Microsoft VM technologies; and could have a positive impact on Microsoft client revenues, since they require the customer to have Software Assurance (SA), Microsoft's upgrade rights offering, on the Windows client OS.

Running the OS over the Network

The licensing changes affect Product Use Rights (PUR), which govern the use of Microsoft software by volume licensing customers. The PUR document is updated quarterly, and in the Apr. 2007 edition Microsoft added a paragraph that says, "Instead of installing the [OS] software on the licensed device, as permitted under the Desktop Operating System licensing model, you may install one copy on a storage device, such as a network server. You may use that copy to run the software over an internal network on any licensed device for which you have active Software Assurance coverage."

Microsoft says this change will be particularly useful for deployment of diskless client devices, which can be either standard PCs or terminals that lack a built-in hard disk and boot off the network. (For an illustration of this and other network OS options, see "Diskless, Virtual Machine Architectures".)

Another change to the PUR, expected in July 2007, will outline use of VMs stored and executed on centralized servers that can be used to display the OS desktop and client applications on a PC or thin client. Microsoft calls this latter license, which will likely be sold as an annual subscription, a Vista Enterprise Centralized Desktop. (For a chart showing different ways to deploy an OS, see "Options for Local and Remote OSs".)

These solutions take advantage of advances in IT management, network speed, and virtualization, including the following:

• New Microsoft and third-party management tools that ease the task of managing and deploying OS images to networked devices
• Gigabit data networks or storage area networks that can stream massive amounts of data—such as a full, working image of the Windows OS—to networked devices in a timely manner
• New CPU capabilities, such as AMD's Pacifica and Intel's Virtualization Technology (VT), designed to enhance the use of VMs.

These solutions are becoming popular because they address some of the management and deployment shortcomings of the PC desktop. PCs are vulnerable to hard disk failure, configuration changes by users, spyware, and application conflicts. PCs also require frequent patching. However, locking down the desktop simply introduces a new set of problems, such as restricting the ability of users to reconfigure or install software, which then mandates intervention by IT staff to ensure that desktop PCs have the specific applications and configurations they require. OSs loaded off the network, on the other hand, can be centrally provisioned, customized, configured, and patched, without requiring desktop PC management.

Microsoft's previous licensing rules for desktop OSs use did not anticipate the full impact of these changes, and therefore certain deployment practices were not explicitly enabled by Microsoft's licensing policies. For example, Microsoft's licensing rules required that any PC used for volume licensing had to come with a full version of the Windows OS installed by an OEM or purchased from a retail source, but it's impossible to install an OS on a diskless PC.

In addition, the licensing change helps Microsoft earn extra money from these advances. Before, as long as each device had a license for the OS, customers could use advanced deployment technologies that eliminated the need for a copy of the OS to be actually installed on the device, and they didn't have to pay extra for the privilege. Now, they will incur an extra charge—the cost of SA—for each licensed device.

Diskless PCs

Diskless PCs lack a hard disk and boot off the network using a specially configured network interface to retrieve an OS image from a network location. The customers most interested in the new deployment options are likely to be large organizations with standardized desktop configurations for whom managing individual OS images stored on desktop PCs is problematic and expensive.

Although the lack of a hard disk means a diskless PC does not have a copy of the OS installed, it must still be licensed for the OS. OEMs can now purchase a license for a new edition of Windows, called Windows Vista Business for Diskless PCs, and place a Certificate of Authenticity on the PC, indicating that it is legally licensed to use the OS. The machine is also licensed to run a conventional version of Vista Business if the customer adds a hard disk to it. Since Windows Vista Business for Diskless PCs is sold only through OEMs, pricing has not been revealed.

This change to licensing is a break with Microsoft's longtime policy of linking each PC with a particular copy of the OS. One copy of the OS configured for a particular business purpose can now be shared by several users, such as staff manning various shifts in a call center. For example, the Software-Streaming Platform from Ardence (recently acquired by Citrix) delivers OSs and applications on demand to PCs and allows different OS images to be dynamically assigned to specific devices.

Diskless PC customers are also likely to be using Microsoft Enterprise Agreements (EAs), which include SA upgrade rights, so the licensing changes will not present a significant financial barrier to those whose diskless PCs are already part of the PC count on which their annual EA payments are based.

Windows activation is one other factor organizations must consider with diskless PCs. Each time a diskless PC boots from a network image, Windows activation may take place, since the OS is, in effect, being installed on the device each time. Customers using Windows XP with images created from volume licensing media should have no problem—their volume licensing keys eliminate the need for activation each time. However, customers using Vista have two options, a Key Management Service (KMS) or Multiple Activation Keys (MAKs). While MAKs require less local infrastructure, they are not suitable for diskless PCs—an organization will decrement one of its keys each time a diskless PC boots, and they will quickly run out of keys. Instead, the organization should implement a KMS infrastructure, which allows unlimited installs within the organization.

Vista Enterprise Centralized Desktops

Growing interest in blade PCs (single-board PCs that are installed in a backplane in a data center) and VMs has sparked development of many management tools that permit desktop PCs or thin clients to execute their OS on a blade or on a remote VM rather than on the desktop. Microsoft will offer Vista Enterprise Centralized Desktops (VECD), a subscription license that permits devices to access an unlimited number of VMs stored on the network and to run up to four VMs at once. (Although Vista is specified in the name, the OS running in the VM could also be an older OS, such as Windows XP.)

Current rules permit a user with Vista Enterprise Edition (which requires SA on the OS) to install no more than four additional copies of the OS in VMs on a properly licensed desktop, so the VECD greatly expands the range of VMs that a desktop client can access.

Specific rules for the VECD have not yet been published—Microsoft says they will appear in the July 2007 version of the PUR. Prices for the VECD have not been announced, but the licensing model is similar to another desktop subscription license that requires SA, the Desktop Optimization Pack, which costs an additional US$6 to US$10 a year per PC.

The VECD architecture can be used to run legacy applications; permits use of low-power thin clients (as well as standard PCs); and offers complete isolation of each OS session from others. Microsoft's Virtual Server and third-party products such as VMware's ESX allow many VMs to run on a central server. Microsoft's upcoming System Center Virtual Machine Manager, as well as virtualization technology planned for Windows Server "Longhorn," will strengthen Microsoft platforms for running and managing VMs.

As with diskless PCs, a KMS activation infrastructure will be preferable for VECD, since a KMS permits creation of the unlimited number of VMs allowed by VECD licensing.

Revenue Impact

The changes not only acknowledge new technologies and management tools that are becoming popular among customers but may also affect Microsoft's OS revenue picture.

In spite of the lack of explicit licensing rules, customers have been using these new deployment technologies without complaint from Microsoft, as long as all of the devices have a license for the desktop OS. The new rules, however, add another requirement: not only must each device be licensed for Windows but the customer must also have SA on each copy of the Windows desktop OS. Depending on the customer's volume agreement, this can cost from US$33 to US$53 a year for each device.

While many large customers already have SA on their devices, these customers are already fully licensed for the latest version of Windows, and some have considered not renewing SA, given that its main value is upgrade rights to the next version of the OS, which might not appear for several years.

Microsoft has already seen some weakness in business customers buying SA on the Windows OS, which has had a negative impact on client revenue, and some customers could be questioning the value of renewing their Enterprise Agreements (which are particularly lucrative for Microsoft), given that they are currently licensed for Vista and Office 2007 and may not need to upgrade for four or five years.

By making SA a requirement for using diskless PCs or centralized desktops (even though this architecture has nothing to do with software upgrades), Microsoft gives existing SA customers an incentive to renew their SA coverage and could generate greater interest in SA among new customers.

Resources

The Product Use Rights document can be downloaded from a link on Microsoft's licensing home page at www.microsoft.com/licensing.

Ardence is at www.ardence.com, Citrix is at www.citrix.com, and VMware is at www.vmware.com.

The Dynamic Systems Initiative and other upcoming Microsoft management products are described in "Management Model Roadmap" on page 10 of the Oct. 2006 Update.

The basics of virtualization are covered in "Changes to Server Virtualization Roadmap" on page 14 of the Jan. 2006 Update.

CPU virtualization technologies from Intel and AMD are described in "What Are Intel VT and AMD Pacifica?" on page 17 of the Jan. 2006 Update.

KMS and MAK licensing for Vista are described in "Product Activation Comes to Business" on page 25 of the Dec. 2006 Update.

Blade PCs are covered in "Remote Desktop Licenses Enable Blade PCs" on page 36 of the Oct. 2004 Update.