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Organizations Risk Millions in Unexpected Microsoft Licensing Feeswhen...



- Intelligent Business Research Services (http://www.ibrs.com.au) (IBRS), an Australian-based business and technology advisory firm, has identified that many enterprises are at risk of unintentionally breaching an antiquated quirk in Microsoft'ss licensing that can expose them to many millions of dollars of unexpected license fees. Furthermore, unless Microsoft changes its licensing model to meet current business practices, it is likely that the software giant will suffer erosion of its desktop products suite over the next three to six years.





In IBRS'ss recently published report The Business Ramifications of Thin Desktops: a guide for CEOs, CIOs and CFOs (http://www.ibrs.com.au), the IBRS identified different approaches for thin client deployments, examined the total cost of ownership of such solutions and analyzed Microsoft'ss licensing options in detail. The authors have ascertained that there are significant financial risks for organization that are unaware of the nuances of Microsoft'ss desktop licensing with regards to thin client and virtual desktop deployments.



According to IBRS, Microsoft'ss software licensing scheme dates back to the early 1980'ss when few people saw the power of the Internet and networks to transform how applications would be delivered. Because of this, all Microsoft'ss desktop products - including its ubiquitous Office Suite - are licensed to a physical computer. However, three decades on, businesses have much more mobile staff, accessing applications via the Internet and increasingly through virtual desktops.



Put simply, businesses now view desktop applications as belonging to individual users, not tied a physical desktop computer, but Microsoft does not. This mismatch is causing enterprises to either discover that they are no longer compliant with Microsoft'ss licensing, or that they must pay multiple times for software that they want to make Microsoft'ss applications available to mobile employees and contractors.



Dr. Kevin McIsaac (http://ibrs.com.au/index.phpoption=com_mtree's38;task=analyst's38;analyst_id=68), co-author of The Business Ramifications Thin Desktops report, says Rather than adjust its licensing to adapt to the realities of the new business environment, Microsoft is telling organizations adopting virtualization that they are in breach of Microsoft licensing, often to the tune of multiple millions of dollars.



In order to tease out the complexities of the licensing, IBRS analyzed multiple licensing scenarios based on real client needs in order to pin-point financial risk factors. The results confirmed that Microsoft'ss approach added significant and often unexpected costs right across an organization as soon as it begins to adopt virtual desktops.



To illustrate the problem Mr. Joseph Sweeney (http://ibrs.com.au/index.phpoption=com_mtree's38;task=analyst's38;analyst_id=65), another co-author of the report, says, Let'ss say you have 5,000 PCs in your organization and you have 200 managers that have a special virtual desktop that they can access anywhere in the organization. Their special virtual desktop includes Microsoft Project. How many licenses of Microsoft Project do you need to buy The logical answer for most people would be 200. However, Microsoft says it'ss 5,000. The issue is not how many people will ever use the software, but how many physical computers could potentially run that software. The end result is that you can end up paying for thousands of copies of software that you don'st need and will never use.



Dr Kevin McIsaac believes that Microsoft'ss outdated licensing model is forcing organizations to reconsider their relationship with the software giant: We'sve been working with organizations who wish to deploy virtual desktops to tens of thousands of workers. This is an especially big issue for organizations that are undergoing mergers, those that are looking at contracting and outsourcing, and those that are attempting to reign in on-going IT management costs. Basically that'ss any firm hit by the global financial crisis.



On the surface, virtual desktops look like an easy way to manage change and gain some control over IT budgets. Yet when we work through the Microsoft licensing issues with our clients, they quickly realize that there are huge additional licensing costs due to Microsoft'ss insistence that the physical desktop is king. The bigger the organization, the bigger the expense, even if the virtual desktop initiative is relatively small and covers just a few employees. Basically, Microsoft is making desktop virtualization uncompetitive.



For Microsoft, the problem is that organizations want the added control virtualization can provide. The result is that businesses are beginning to look for alternatives to Microsoft. Dr. McIsaac says, Google comes up at board-level meetings, as does Open Office. That rarely happened in the past. Even worse for Microsoft, we'sve seen an increase in the number of organizations seriously considering dropping their Microsoft Enterprise Agreements, which is the bread-and-butter of Microsoft'ss business market. Even those organizations that have decided to renew their Enterprise Agreements are looking for ways to lessen their reliance on Microsoft for their next round of licensing negotiations in three year'ss time.



According to Mr. Sweeney, there are ways to limit exposure to Microsoft licensing in this area, using a combination of third-party licensing control tools and licensing rationalization processes. However, he stresses that the only satisfactory long-term solution must come from Microsoft itself.



Interestingly, Microsoft is about to offer its own approach to desktop virtualization built into its new Windows 7 operating system. How this will compete with the likes of established players in the market, such as VMWare (VDI) and Citrix is unknown, but under the current Microsoft licensing scene none of these solutions are competitive.






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