One of the greatest mysteries in life isn’t if we go to heaven when we die or even if the light in the fridge goes out when you close the door… it’s the mystery of Microsoft licensing, something that’s confounded even the experts for years. I’ve fielded questions in this subject area for so long that one has to wonder why I haven’t added this to the “Geek Stuff” page before…
Most people know that when you buy a copy of Windows XP, you’re not really paying for the CD and the manual. You’re actually paying for a license to use the software. That license is sold in many different ways, and it can be incredibly complicated to makes heads or tails of the mess Microsoft has created with their licensing schemes. So let me break it down for you in plain English:
1) Retail license – In Microsoft-speak this is called “FPP”, which stands for “Full Packaged Product”. These are copies of Windows or Office sold in shrink-wrapped retail packages at Best Buy, Staples or Office Depot. You may install Windows XP or Office on any one computer at a time for each retail license you purchase. Since you “own” the license, you can install and use XP\Office on any subsequent computers you may own, provided that you reformat the hard drive of the old computer you subsequently sell or dispose of. So if you were to buy a new “barebones” computer today and install a retail copy of XP on it, you are free to install that same copy of XP on a new computer you buy a year from now provided that you wipe XP from the old computer before selling or donating it. FPP packages sometimes come in “full versions” and “upgrade versions”; the main difference between the two is that the upgrade will ask you to insert a “qualifying media” in your CD-ROM drive during the install. For example, if you buy an upgrade version of Windows XP, you will be asked to insert your Windows 2000 or Windows 98 CD-ROM into the drive during installation. Full versions do not have this limitation. A special note about Microsoft Office: on all retail versions of Microsoft Office 2003, you are allowed to install one copy onto a PC and another onto a laptop, provided that it is for non-concurrent use. In other words, if you have a desktop and a laptop, you can install the same software onto both; you may not, however, install Office on your PC and on your wife’s laptop. Also, Microsoft Office Student and Teacher Edition 2003 can be installed on up to three computers in the same household if that household member is qualified. So if you have three children, you can install STE on all of their computers; if you happen to be a teacher, you can install STE on your computer as well as two of your children’s computers. For all retail products, Microsoft is your sole provider of technical support.
2) OEM license – OEM stands for “Original Equipment Manufacturer”. When you buy a computer from Dell or HP that has Windows and\or Office already installed, it’s almost certainly an OEM copy of the software. Because the OEM (Dell, HP) is providing you with technical support instead of Microsoft, and because OEMs sell millions of copies of Microsoft products a year, Microsoft usually gives OEMs a huge price break for the software. However, OEM software is tied to the hardware on which it was sold. This means that you cannot legally install an OEM copy of XP onto another computer under any circumstances. If you sell a computer that came with an OEM license, you *must* sell the license and all media (install CDs, manuals, etc.) without retaining any copies of the license key or installation media. You cannot, for example, copy the XP CD and install it on a new computer using your old OEM license key, even if the old computer is sitting in a landfill somewhere. Microsoft used to require the purchase of a “substantial system component” (such as a motherboard, processor or hard drive) at the same time of purchase as an OEM copy of an operating system; they have relaxed this requirement substantially in the past couple of years. You can now purchase something as trivial as a power cord and legally be allowed to purchase XP or Office OEM from a vendor – although the same “the software is attached to hardware” requirement remains.
3) Volume license – This is Microsoft’s license scheme for businesses and anyone else that might purchase large quantities of Microsoft software. There are actually several different volume license programs available, including “MS Select” and “Open License”, however all of the programs work in roughly the same way: the company pays Microsoft $X and in return they get a sheet of paper from Microsoft (“the license”) saying that they are entitled to Y numbers of computers running XP or Office. The license typically also has a single license key which will be used throughout the organization; this key is not random, it is assigned to the company, so that if it were to leak onto the Internet, Microsoft would know instantly which company said key came from. Although Microsoft usually doesn’t care how their volume license customers install XP or Office onto their machines, the typical process is for the company to spend an additional $35 for a copy of the “installation media” (CD or DVD) and to install the software using the company’s unique license key. It is important to understand that all licenses for software under this system are valid for machines on this company’s premises only (remote sites or laptop users excluded). In other words, the company cannot sell any of their licenses or any computers running the volume license software. These *must* be wiped before sale. An important new feature of most volume license programs is “Software Assurance”, in which Microsoft will give companies “free” upgrades to any new operating systems or office suites as long as the customer is a valid member of said volume license program when the new software is released. For example, if your company signs up for a Windows XP volume license plan today, your license for “100 copies of Windows XP” will automatically become “100 copies of Windows Vista” when that OS is released. Because many (most?) Microsoft license agreements are backwards-compatible, you may still run XP on any (or all) your machines, or you may upgrade them to Vista. Because most Microsoft volume license software does not have the “product activation” requirement, volume license software is a favorite of hackers.
4) Academic license – This is the Microsoft license for academic institutions or the individual members thereof. This category can be highly complex because there are essentially two types of Microsoft “academic software”: the first is an “academic version” of the retail product, which might come in a retail box with “ACADEMIC VERSION” stamped across it, or it might come in a simple black & white sleeve which resembles older OEM versions of Microsoft products. In this case, the license is granted to the student or professor, and it may (or may not) be legal to use the software once you have graduated or otherwise leave the university. The second type of academic software is basically what amounts to an “academic volume license”. Instead of being licensed to an individual, this software is licensed to the university as a whole and absolutely cannot be used by you once you leave school for any reason. “Academic volume license” software usually comes on a CD-R disc with either a handwritten label, a “label maker” label or an inkjet sticker on it. Some universities might even have a secure FTP site where students can download a disk image to their own PCs and burn their own CDs of the software. The easiest way to differentiate the two is packaging and price. The “academic versions” usually come in a shrink-wrapped package and cost between $50 and $200. The “academic volume license” versions come on burned CDs and (usually) cost around $5-$10, although the software’s true cost might be hidden in one of the various “student fees”.
5) Client Access License – Universally known as a “CAL”, Client Access Licenses are required when your organization’s client PCs connect to most Microsoft server products. Note that CALs are required in addition to the individual server (Windows 2003) license and the client (Windows XP) licenses. For example, Small Business Server 2003 is a complete server solution for small businesses; the “premium version” comes with Windows Server 2003, Exchange 2003 (email), SQL Server (database), ISA Server (firewall) and more. By default, SBS 2003 comes with licenses for only 5 users; you must buy additional CALs (in packs of 5 or 20) until you have enough CALs to cover your total number of employees. Another example is terminal services, which is a “remote desktop” type of application (like pcAnywhere, VNC or GoToMyPC) which is built into Windows. A company might use Terminal Services for any number of reasons: it might be cheaper and\or easier to install a program on one server and allow employees to “remote in” to the server instead of installing the program on every client PC in the organization; the company might have a remote office or mobile users that need to use an application that’s stored on a server; or the company might be standardized on an Apple or Unix desktop platform and needs to use a single Windows application, in which case installing the Terminal Services client on every workstation and buying Terminal Services CALs is much cheaper and less of a hassle than converting the entire company over to Windows desktops. In any case, Windows Server 2003 comes with 2 Terminal Services CALs for remote administration; if the company wants additional Terminal Services users, they will need to buy CALs. Now, to make matters even more confusing, there are two different models of CAL for most Microsoft server products: Device CALs and User CALs. As you might guess from their names, Device CALs are attached to devices (which is good for companies where many users will use the same PC, such as a call center) while User CALs are good for companies that have users that will connect to the server through multiple devices (such as a desktop PC, laptop, PocketPC and Smartphone).
6) Open Giving license – This is Microsoft’s program for charities and other non-profit organizations. Depending on the organization’s agreement with Microsoft, the software might be distributed in a volume license format or a retail package format, or a combination of both. For example, Microsoft might give an organization volume licenses of XP and Office but retail copies of children’s software. Open Giving software is either given away for free or sold to an organization for a ridiculously low price.
7) NFR license – Stands for “Not For Retail”. This is the software that Microsoft gives away at various events or as a learning tool for sales and\or support staff. Functionally it’s exactly the same as a retail product. NFR software is usually for testing purposes only and should not be used on production machines, although there is nothing in the software itself that prevents you from doing so.
8) MSDN\Action Pack license – MSDN and the Action Pack are two types of learning tools for IT support folks, QA testers and software developers. When buying a subscription for one of these programs, the company receives a binder full of Microsoft software that they are free to use as testing platforms. Like NFR software, you are not allowed to use this software on a production machine.
Although most of the above information seems cut-and-dry, in reality you’ll often find licensing to be as confusing (if not more so) than any technical problem you might face, especially in a corporate setting. While it’s usually pretty easy to keep up with licensing on servers, you’ll often find that corporate desktops are a hodgepodge of OEM licenses, upgrades and perhaps volume licenses. Even in the home it can be confusing. Let’s say that you have an older Dell computer that has an OEM license for Windows 98. You buy the XP upgrade (which requires the 98 CD for “verification” during the XP install). Once you sell (or give away) the computer, you no longer have the 98 CD, so the XP license is no longer valid. And then there’s Small Business Server, which requires a CAL for each user. That CAL includes a license for Outlook 2003 – so what do you do when it comes to licenses for the rest of the Office 2003 suite?
I don’t know either. Good luck!