The Basics of Microsoft Licensing for Your Business

Confused about choosing the right Microsoft operating system or software licensing option for your business? You’re not alone. Microsoft licensing is a complex topic, and deciphering which option is the best deal can be a real challenge, even for the most seasoned IT professionals.

To further complicate matters, different generations are licensed in different ways, and in many cases, each has its own restrictions and minimum purchase requirements.

Microsoft licensing has evolved over the years to try to keep pace with hardware advances, virtualization and a variety of other influences including other vendor’s licensing schemes, says Kevin Campbell, senior account executive at Aventis Systems. Many customers aren’t even aware that Microsoft has licensing programs.

“Microsoft’s licensing is so complex because it is the most pirated software on the planet,” Campbell says. “They also have to adapt their licensing to include everyone from end users to SMBs to the largest enterprise companies, which is difficult because any of those entities can use just about any of their products.”

Microsoft has different licensing programs for all sizes and types of customers. To get you started, here is an overview of the different Microsoft licensing options and what you can expect from each one:

Retail Software Licenses

A retail software license is the simplest license Microsoft offers and is what you get when you purchase a full packaged product (FPP) online or in a store. If you buy a product like Windows or Office from a retailer, for example, you then own the product and may even be given a number of complimentary users for the software in your environment.

Once you have purchased the software, you can install and reinstall it multiple times, as long as it’s only installed on a single device at a time. Sometimes retail licenses will allow you to install the same copy on a desktop as well as a tablet or laptop as long as the devices are being used by the person who purchased the license.

Retail Windows Server licenses typically come with five client access licenses (CALs) that allow five users (or devices) to connect to that server at any given time.

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OEM Software Licenses

If you buy a computer from a big-box store like Best Buy or directly from the original equipment manager (OEM), a Windows operating system — and sometimes Microsoft Office — will most likely already be installed on the machine.

In this case, the cost of the license is included in the price of the machine, and you don’t need to purchase an additional software license. However, an OEM license is tied to the machine it was purchased with and is non-transferable. If you upgrade your computer to a newer model, the software license doesn’t go along with it.

Volume Licensing

Small and mid-sized businesses with five to 250 users generally opt for Volume licensing from Microsoft, which allows them to buy software in bulk with greater flexibility. The type of license you choose will depend on the size and type of your business, the products you need to license and the way your organization will use those products.

Volume licensing is often more cost-effective than retail because it doesn’t include a fully packaged product. With a Volume license, you only receive the software via electronic distribution — not the retail box complete with packaging, CD-ROM or DVD, printed user’s guide, hard copy of Microsoft’s software license terms and access to product support. In many cases, you will simply receive a serial number that represents the license.

Most Volume licensing programs require an initial purchase of at least five licenses, which can be split across Microsoft’s entire product offering. You then have the option to purchase as many additional licenses as you need.

With Volume licensing, you can downgrade the software and applications to the previous version of the same edition, and the same license can be used on multiple devices (desktop and tablet, for example) for no additional cost. Licenses can also be transferred between machines if you purchase a new server.

Volume licensing is available in several different program options through Microsoft Open Licensing Programs. These programs are an ideal way for small to mid-sized businesses to invest in the newest Microsoft technology without paying a lot upfront. These programs are simple, cost-effective and available in three options:

Open Licensing

Open License is a purchased license that gives you unlimited use of and rights to the software. This is a great choice for businesses, as well as government and educational customers who want a minimum initial purchase of only five software licenses with the ability to pay as they require more services and licenses.

“Open licensing is common and provides software through the Volume licensing portal via electronic download,” says Campbell. “The online offerings focus primarily on Office 365 and Windows 10.”

The fee for the software licenses must be paid upfront in one lump sum. Licenses are purchased one at a time, a buying process that can be somewhat labor-intensive.

Because it can be difficult to know how many updates and licenses you will need as your company grows and your needs change, the Open License agreement allows you to change your agreement as you go. Software Assurance is an optional feature that entitles you to technical support as well as all software updates during the two-year Open License agreement period.

To summarize:

• Minimum of five desktop
• PCs Payment upfront
• Two-year agreement
• Software Assurance available
• Online Services available

Open Value

With the Open Value program, payments are spread out over the three-year agreement period in three equal annual payments. This annual payment structure is a better option for small and mid-sized organizations looking for lower upfront costs.

This program is recommended for organizations with five or more desktop PCs and includes Software Assurance, which provides training, deployment, upgrades and product support. The Open Value Companywide Program enables the whole company to use the software, which is easier on your IT department but requires an enterprise-wide commitment to certain products.

To summarize: Minimum of five desktop PCs Payment upfront or annually Three-year agreement Software Assurance included Online Services available

“Open Value is attractive because of the low cost of entry, but most customers don’t understand that they are basically paying for software licenses over three years,” says Campbell. “It doesn’t save any money, but it does spread out the cost.”

Open Value Subscription

The Open Value Subscription program is for businesses that prefer to subscribe to the software rather than purchase it outright. Payments can be spread out, resulting in much lower upfront and monthly costs. This program is very flexible, enabling you to easily add users and adjust your subscription fees if your total number of employees changes.

Depending on how many licenses you need at one time, more PCs can be added, short-term, free of charge as long as the total number of users doesn’t change by the due date. This makes it easy for businesses to reduce the cost of seasonal fluctuation in the number of employees. Likewise, if your total number of PCs declines, you can reduce your total licensing costs for that year.

The single platform option can be added to an Open Value Subscription agreement. Special pricing is also available for government, academic and nonprofit organizations for this and all Open Licensing programs.

With the subscription program, your business can only run the software for the duration of your licensing agreement. Once the subscription expires, it must be renewed.

In summary:

• Minimum of five desktop PCs
• Payment annually One- or three-year agreement
• Software Assurance included
• Online Services available

Online Services

Today, many employees have multiple devices. In addition to their desktop PCs, they also have laptops, tablets and smartphones. Microsoft’s Online Services make it easy to give employees access to the cloud with file sharing, instant messaging, cloud-based email, calendars and more.

Cloud services are available with a Microsoft Open License or Open Value agreement, enabling employees to seamlessly use software across multiple devices. The five license minimum initial purchase is waived for Online Services products with an Open License agreement.

Microsoft Enterprise Agreement

Organizations with more than 250 users can choose primarily from an Enterprise Agreement or Microsoft Products and Services Agreement (MPSA), Campbell says.

Under these agreements, organizations subscribe to the right to use Microsoft’s products and services rather than purchasing them outright, which substantially lowers initial licensing costs. The number of subscriptions can be increased or decreased annually, and licenses, as well as cloud services, can be purchased under one agreement.

“The Enterprise Agreement is for organizations with over 500 users or devices and provides a manageable licensing program under one agreement for the entire company,” Campbell says. “MPSA provides a single agreement for organizations with 250 or more users or devices and is NOT an organization-wide commitment. Instead, it provides for a single agreement that doesn’t expire.”

Specialized agreements and pricing are also available for government, education, healthcare and nonprofit organizations, Campbell says.

SQL Server 2016 Licensing

Your Microsoft SQL Server 2016 is responsible for mission-critical performance across all of your organization’s workloads. The SQL Server 2016 offers two licensing models — one based on computing power and one based on users and devices.

There are two main editions of SQL Server 2016: Enterprise and Standard. Enterprise is available through core-based licensing, while the Standard edition can be licensed through the core-based model or the Server + CAL licensing model.

Core-based licensing is licensing based on computer power. These licenses are sold in two-core packs, and all cores in the physical server must be licensed. A minimum of four core licenses is required for each physical processor in the server.

The Server + CAL licensing model is available for the Standard edition and can be used any time the number of users can be readily counted. Each user must have a SQL Server CAL that is the same version or newer, and each SQL Server 2016 CAL can provide access to multiple licensed SQL Servers.

There is also a Cloud Optimized Licensing option that allows you to license individual database virtual machines. To license a VM with core-based licenses, you can pay for the virtual cores allocated within the VM. A minimum of four core licenses per VM is required. To license a VM under the Server + CAL model, you can purchase the server license and associated SQL Server CALs for each user.

Each licensed VM that is covered by Software Assurance can be moved around your server farm or to a third-party cloud services provider.

Windows Server 2016 Licensing

The Windows Server 2016 operating system, which makes it easy for customers to transition to cloud computing, is available in three editions: Datacenter, Standard and Essentials.

The Datacenter edition is ideal for virtualized and software-defined datacenter environments. The Standard edition is for customers with low-density or non-virtualized environments. The Essentials edition is cloud-connected and designed for small businesses with up to 25 users (and 50 devices).

Late last year, the Datacenter and Standard editions moved from processor-based to core-based licensing with the general availability of Windows Server 2016. Core-based licensing requires all physical cores in the server to be licensed. A minimum of eight core licenses — which are sold in packs of two — is required for each physical processor, and a minimum of 16 core licenses are required for each server.

The Standard edition provides the rights for up to two operating system environments or Hyper-V containers when all physical cores in the server are licensed. (For each additional virtual machine, all of the physical cores in the server must be relicensed.)

Each user (or device) accessing a Datacenter or Standard edition requires a Windows Server CAL, which allows access to any edition of Windows Server of the same or earlier version. Customers buying new licenses will purchase licenses under the core-based model. Existing customers with Software Assurance will move to core-based licensing at their first renewal.

The Essentials edition falls under a specialty server licensing model. Although it is limited to 25 users, the client access licenses are included in the price of the license.

Software Assurance

Software Assurance is an annual agreement that is available for many products including Windows Enterprise OS, Windows Server, Office, Exchange and SQL Server. It is also available for CALs for most Microsoft products.

“Software Assurance is a valuable, but often overlooked aspect of Microsoft’s licensing programs,” says Campbell. “It allows customers to reduce software costs as it provides rights to new software releases and makes upgrades less expensive.”

With Software Assurance, users pay a small amount of “insurance” each year to gain access to new versions at no additional cost.

To learn more about which Microsoft operating system or software licensing package is the best fit for your organization, call us today at 1-855-AVENTIS.