Microsoft OEM licensing confusion row

In a row over the terms of Microsoft's OEM agreements with hardware manufacturers many businesses are complaining that they are paying twice for operating system licences because they come pre-installed on PCs.

silicon.com was contacted by the IT buyer from a large NHS Trust who complained they were effectively paying double because they already had licences through the national NHS framework agreement and hardware supplier Dell would not sell them 'blank' PCs. Analyst group Gartner also admitted it is contacted all the time with this query from businesses.

But silicon.com can clear up the confusion and reveal that it is purely the complexity of Microsoft's licensing agreements that makes it appear firms are paying more than once for their software licences.

John Mien, analyst at Gartner, told silicon.com volume agreements such as the NHS framework only cover upgrade rights for versions of the Windows operating system users have already bought.

He said: "It's a regular issue and it's a pretty straightforward answer. I would suggest you have a buyer who needs a bit of education. The licence you buy when you get a Windows desktop from Dell is an OEM licence and that is a full installation licence. What is included in the NHS framework is likely to be upgrade rights only that allow them to upgrade the OEM licence to a future version."

Alex Hilton, SMB Sales Manager for Microsoft UK, also confirmed that the full 'install' licence cost is not levied upon customers.

"If they [customers] are already licensed for a copy of Windows through their OEM purchase it is not necessary for them to purchase into a licensing agreement. However the customer may choose to purchase Software Assurance which would allow them rights to future upgrades from their OEM licence," he said.

Microsoft has been attempting to win back the hearts and minds of its customer base after the poor way it handled the introduction of the controversial Software Assurance licence changes last summer, and it recently included some "value adds" that allow, for example, companies to load copies of Office onto a worker's home computer for no extra charge.

The changes are effective from 1 September 2003 and Gartner's Mien said this is significant as it is the first contract renewal window for many Microsoft customers since Software Assurance came in.

He said: "We reckon about 10 per cent of customers who signed agreements two-years ago are now looking to renew those in September. That is an important time for Microsoft and by the end of September we will get a better idea of how customers have reacted to the licensing changes."