Microsoft Licensing: Part 7 (how to buy Microsoft software)

This content is 16 years old. I don't routinely update old blog posts as they are only intended to represent a view at a particular point in time. Please be warned that the information here may be out of date.

Continuing the series on Microsoft licensing, I’m going to look at how to buy Microsoft software. Basically, there are three ways to buy a license:

  • Full packaged product (FPP) – purchased from a retailer and typically a single box contains a single license.
  • Original equipment manufacturer (OEM) – software supplied with a computer and which “lives and dies” on that machine.
  • Volume licensing – purchased from resellers with a variety of programmes to suit different types of organisation.

Technically, there is a fourth method too – software may be made available for download free of charge from the web (although this is still subject to an end user license agreement).

There’s not much to say about buying FPP software – except that it’s the most expensive way to buy software and should be avoided where possible.

OEM software packs are intended for system builders only and are not intended for distribution to end users unless the end users are acting as system builders by assembling their own PCs. Often, it’s possible to purchase OEM software from distributors but there are conditions attached. OEM software is intended for system builders and the system builder license agreement is effectively accepted when the shrink-wrap on the software is broken and acceptance of those terms involves offering support on the product.

Effectively, if I buy OEM software from a distributor and build a PC for someone (even family) with that software pre-applied, I need to offer end-user support.

OEM software requires product activation, is only available as a full product (no upgrades – although software assurance may be available if enrolled by the end user within 30 or 90 days, depending on the product) and must be pre-installed with the certificate of authenticity or proof of license label attached to the hardware. Once installed, the product is only available for use with that computer and cannot be transferred.

Certain OEM software may be legally downgraded, for example Windows Vista Business and Ultimate Editions may be downgraded to Windows XP Professional and Windows Server 2008 may be downgraded to Windows Server 2003 or Windows Server 2000. One notable exception is Office 2007, which cannot be downgraded. Instead, Microsoft has the concept of an Office Ready PC – a 60-day trial version of Office 2007 for pre-installation by the OEM, sold with a medialess license kit (MLK). The end user can upgrade to a full version of Office when the trial ends and end-user technical support is offered by Microsoft, rather than by the OEM.

OEM copies of Windows also include the rights to produce images of the software for deployment.

Before moving on to look at Volume licensing, let’s examine licensing Windows desktop operating systems, where there is one point I need to make crystal clear – FPP and OEM are the only ways to purchase a full Windows desktop operating system license.

This means that if an organisation thinks it can save money by buying PCs without Windows (certain vendors will do this, e.g. a grey box PC with Linux pre-installed) and then apply copies of Windows obtained through a volume license programme, they are not licensed to use Windows. The only way to become legal from this situation is to an FPP copy of Windows. Windows Vista Business upgrade licenses sold though volume license agreements are upgrades only (for Windows XP Professional computers) and are not intended for installation on a “naked” PC.

For any organisation with more than 5 users, Volume licensing programmes are available. Volume licensing separates the license from the media, packaging and support as well as offering flexible rights such as:

  • Downgrade rights.
  • Transfer and reassignment rights (except Windows Vista upgrade – and FPP products have a one-time transfer right).
  • Imaging rights.
  • Flexible payment options.
  • Alternative language use rights.

The type of agreement will depend on the number of users, and whether or not the software is to be purchased (a perpetual license) or leased (non-perpetual):

5-250 PCs >250 PCs
Owned Open License Select License
Open Value License (with SA) Enterprise Agreement (with SA for all PCs)
Open Value License Company Wide (with SA for all PCs)
Leased Open Value License Subscription (with SA for all PCs) Enterprise Subscription Agreement (with SA for all PCs)

In the case of leased (non-perpetual) software, the agreement can be converted or re-purchased upon expiry but if these options are not exercised then the organisation is no longer licensed to use the software.

Open Licenses are sold by resellers via the distribution channel, whereas Select and Enterprise agreements are sold by specialist Large Account Resellers (LARs) via Microsoft.

For organisations looking to standardise their PCs (e.g. for support reasons), Open Value Company Wide or Enterprise Agreements (EAs) can be advantageous.

Software Assurance (SA) includes upgrade rights for all software released as long as the agreement is current. It also includes a number of other benefits (which is why I’ll save a full explanation for another post). SA can either be purchased as part of a volume license agreement or on an individual product.

There are also a number of special licensing arrangements for educational establishments – in addition to Open and Select licensing, Campus Agreement subscriptions and School Agreement subscriptions are available to schools, colleges and universities, as well as local education authorities, public libraries, public museums and some charitable organisations.

Further details of Microsoft Volume Licensing arrangements are available in the Microsoft Volume Licensing Reference Guide.

Microsoft also takes part in the Charity Technology eXchange (CTX) programme, donating software to eligible organisations with a very heavy discount (all that is charged is an administrative fee). Charities can request up to 50 licenses from each of 6 titles (selected from 13 available products) in a two-year product. Eligible charitable organisations are defined as non-profit or non-govermental organisations holding charitable status with the aim of releif to the poor, advancement of education, social and community welfare, culture, the natural environment or other purposes that are beneficial to the community. An FAQ is available with further details on Microsoft’s involvement in CTX.

In the next post in this series, I’ll take a more detailed look at software assurance.

4 thoughts on “Microsoft Licensing: Part 7 (how to buy Microsoft software)

  1. I have an idea. You should buy a mac so that you don’t have to mess with Microsoft or its products. Unless of course you want a bloated piece of eye candy. Just stick to things that work.

  2. @Chicago REMAX. I have two Macs. And whilst they work well for me as a consumer – they are overpriced eye-candy for corporate IT. They also fall over from time to time – like all computers.

    (I really should learn not to respond to Apple bigots, or for that matter Linux bigots or Microsoft bigots…)

    One more thing… I’ve removed the URL you provided as your email address leads me to believe that you are using this post for Internet marketing purposes. Blog spammers annoy me even more than Apple bigots.

  3. Thanks for the read. But the comment “FPP is the most expensive way to buy microsoft software” is not true. At least from my research. We operate a small business of 11 workstations. I am investigating upgrading all our computers to windows 7 x64 and office 2010 when it becomes available. Currently we are all over the place… To do this via Microsoft’s direct download option, it is basically 50% of the cost of a volume license with software assurance for 3 years, or 75% of the cost of a volume license without SA. Plus I have absolute flexibility as to when I can reallocate this licenses through the office. This isn’t even taking into account that for new PC’s we’d further need to factor in purchasing OEM software initially anyway. Volume licensing is a wrought for any company with less than 500 workstations…

    Microsoft should take a look at how Autodesk does their licensing. Makes a lot more sense…

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