Recent tweaks to licensing rules governing Vista Enterprise Edition will significantly curtail customers' choices to host virtual machines on blade PCs, as well as when swapping Vista Enterprise for Vista Ultimate, which some customers have done in order to get DVD-viewing codecs that are not included in Vista Enterprise. The changes reduce the utility of Vista Enterprise and complicate Vista licensing, although the number of affected customers today is relatively small.

Getting the Blade

Blade PCs are system boards, with processors, memory, network adapters, and sometimes storage, that can be slotted into backplanes, permitting a dozen or more PCs to occupy the space of a standard desktop PC. The backplanes are typically installed in a rack in a datacenter, where they can be easily managed, reducing the likelihood that IT staff will need to go to users' desks to fix hardware problems. Users connect to the blades with a remote desktop protocol, from either a standard PC or a thin terminal.

Customers who upgrade the OS on blade PCs, buying Software Assurance (SA) in order to upgrade from Windows XP or Vista Business to Vista Enterprise, will no longer get the same rights as customers who buy the same upgrade on regular PCs. Specifically, they will not get the right to run up to four additional instances of Vista in virtual machines (VMs) at no additional cost, nor will they be able to use blade PCs to run VMs that can be accessed by other PCs with Vista Enterprise Centralized Desktop (VECD) licenses, effectively closing off the ability to use Windows VMs on blades. This will raise licensing costs for organizations that want to combine virtualization and blade PCs to simplify management of their desktops.

Until Oct. 1, 2007, licensing rules for blades and standard PCs were identical, so customers with SA on their blade PCs had the same rights on blades as they did with standard PCs. (Blade PCs are included in PC counts for volume licensing purposes, so most customers with Enterprise Agreements likely have SA on their blade PCs.) Now, however, virtualization is not permitted on blade PCs licensed to run Vista Enterprise, although those customers can still use other special Vista Enterprise features, such as BitLocker disk encryption and the Multilingual User Interface.

Microsoft says this rule is justified because volume customers already have two other options for running VMs on client computers: they can use a local client PC running Vista Enterprise to run up to four VMs, or they can purchase VECD licenses, which permit desktops licensed for Vista Enterprise to simultaneously access up to four VMs that are running on a network server.

However, VMs running on local PCs are difficult for IT organizations to manage, and VECD licenses cost substantially more than the free VMs available on Vista Enterprise: about US$40 to US$100 per PC per year, on top of the US$30 to US$55 that customers must pay for SA, which is required to purchase VECD licenses. Furthermore, VECD licenses still do not permit users to access VMs running on blade PCs. The only remaining option for customers would be to purchase a retail copy of Windows for each VM running on a blade, significantly raising the cost of this solution.

The changes in licensing rights appear primarily intended to push enterprise customers to the more costly VECD licenses with their annual payments, running on more expensive server hardware and software. The move could also close off a route for expansion by VMware, which has little presence on the desktop today, and Citrix, which is planning a new remote desktop technology (code-named Trinity) that could make blade PCs more useful as a virtualization platform in the future. The changes to virtualization rights on blades will make such solutions prohibitively costly.

Ultimate Restricted, Codecs Extra

When Vista was released to volume customers in 2006, Microsoft gave customers who purchased SA on the OS the right to use Vista Ultimate or Vista Enterprise rather than Vista Business. Ultimate includes all of the features of Enterprise, including BitLocker disk encryption, as well as media and entertainment features, such as the ability to play DVDs, record television shows (with the appropriate hardware), and use the Media Center interface.

These multimedia capabilities proved popular with some enterprise customers. One reason is that Ultimate ships with the codecs required to play DVD video, while Vista Business and Enterprise do not. (Microsoft must license the codecs from third parties.)

Microsoft has now reversed course on the Vista Ultimate entitlement for volume SA customers—instead of permitting them to use Ultimate on any PC with SA, customers will be permitted only one Ultimate license for every 100 copies of Vista Business covered by SA. The company says this entitlement should be enough for training rooms, where multimedia capabilities are important.

Microsoft says the new rules apply only to new volume licensees who purchased Vista Business upgrades or obtained SA on Vista after Nov. 2007, and are not retroactive.

Customers who want to view DVDs on other business versions of Vista (Vista Business and Enterprise) will be able to purchase a US$4.32 DVD Playback Pack (with codecs licensed by MPEG and Dolby) that enables playback of DVD, MPEG-2, and 5.1-channel Dolby Digital files. The pack will be available in Jan. 2008.

The reason for the change, the company says, is that Ultimate is a consumer or home office OS, and each copy requires separate activation (unlike Vista Business or Enterprise, which can be activated with volume licensing keys). However, activation did not appear to be a problem for the customers who took advantage of the entitlement.

A more likely reason for the change is the potential for legal wrangling over the codecs: for every copy of Ultimate that volume customers are entitled to use, Microsoft must pay royalties on the DVD codecs. But Microsoft cannot reliably track new installations of Ultimate by customers exercising their volume licensing options, and would find it difficult to bill them for the codecs, since the activation process does not identify the particular computer or user. The DVD pack will give customers a relatively inexpensive route to legal codecs, avoiding the pitfall of distributing codecs via Ultimate that Microsoft can't count.

Impact of the Changes

The changes take some of the polish off the upgrade to Vista Enterprise, particularly for blade PC customers who saw blades as a future platform for inexpensive and centrally managed desktop VM images.

In addition, customers may resist being steered to more costly alternatives and seek out other options. For example, more customers could opt for OEM versions of Ultimate to get its multimedia capabilities without having to purchase a volume upgrade and an extra DVD pack.

Resources

Virtualization licensing for Microsoft products was described in "Virtualization Licensing Adapts to New Challenges" on page 46 of the June 2007 Update.

Vista editions were described in "More Editions in Windows Vista" on page 6 of the Apr. 2006 Update.