Last week, Microsoft received approval for a patent for technology to meter software use and access to specific computer hardware. Why would they want this? Microsoft wants to introduce a “metered pay as you go” licensing model.

The new model would include fees that would be charged again as a prepaid or billed account for software and services. We believe that Microsoft is moving in this direction for several reasons; one being that their traditional licensing model is in trouble, CIOs are smarter about licensing and upgrading than they ever have been and are going to cut costs wherever possible. Look at companies like Salesforce.com and even telcos like Time Warner and Verizon, they have loyal customers that pay on a monthly basis for services - Microsoft has its eye on this model moving forward, they want constant income and locked-in customers.

Introducing a metered model will also allow Microsoft to bring Software as a Service (SaaS) models to consumers by charging usage for such tasks as word processing and web browsing. Microsoft needs a model like this to make a bold move in a technology market where Google is becoming the dominant player. They are hoping this will be there saving grace for new revenue streams and domination for the company once again!

Offering the option for companies to pay for only what they use sounds like a good idea to me, paying for web browsing and word processing by use on the other hand scares me a little. We’ll see if companies and consumers are actually saving or if this is going to hugely increase expenses once this model is offered I guess…

We know how much time you DON’T have so we decided to create this weekly digest to help folks stay on top of software licensing, compliance, and audit news specifically to Oracle and Microsoft. We also added other interesting tidbits on both companies here along with general licensing news that could ROCK your world.

Since last week, there has been a big hullabaloo about flat-rate or pay-as-you-go licensing for vendor software.

CNET News Should software face the flat-rate music future?

San Jose Mercury News Oracle Wins Patent Ruling

GigaOm 5 Trends That Will Separate the Strong From the Weak in 2009

Oracle Journal Viewpoint: Oracle Should in 2009 Support All Major x86 Virtualization Platforms

CNET News Oracle and backups in the Cloud

SC Magazine Making a case to the board

Seattle Post Intelligencer Claim: Microsoft earned $1.5B from “Vista Capable” PCs

CRN Five Reasons Microsoft Wants A Pay As You Go Model

ComputerWorld Ballmer Blasted for Linux Stance

For Select licensing programs, there are three separate components: Microsoft Business and Services Agreement (MBSA), Select License Agreement, and Select License enrollment.  The 3-tier agreement structure was created to allow organizations with multiple affiliates or geographies to have more flexibility.

We get a lot of questions on this 3-tier licensing agreement.  We hope that this clarifies that the three agreements work together.

Like the ISV licensing requirements, there are certain requirements that need to be met to qualify for cost savings found in the Service Provider License Agreement (SPLA) Program.

1-      Your organization must be enrolled in the Microsoft Partner Program as a Certified Partner for a Registered Member in the Hosting Program.

2-      You must also comply with the Services Provider Use Rights and export requirements.  In addition, as an ISV, you must provide technical support for licensed products delivered to customers.

3-      Monthly reports on licenses are expected, regardless of activity.

Licenses acquired under the SPLA are monthly, non-perpetual licenses that can be used during the term of the agreement and is available through two models:

The complexity of Microsoft licensing models - or any other software vendor for that matter - is constantly in flux.  However, some truths remain the same: licensing rules are complex and constantly changing.

  Independent software vendors who participate in Microsoft’s ISV Royalty program should be aware of the criteria:

One thing to be hyper aware of in terms of compliance is the Microsoft requirement to incorporate all license terms into your customer agreements.  This means if your customers are using your licensing improperly, you are in danger of being out of compliance.  Be sure to very clearly state their usage rights!

  This seems like a lot to ask - but the ISV licensing program can save you up to 50% on licensing costs. Microsoft provides a lot of information on the benefits of the ISV Royalty Program.

With the Microsoft Select licensing programs, the terms forecasting, pools and points are heard frequently.  The three items are a means of creating license estimates and determining discounts.  We’re often asked how this is done and what it all means.

Forecasting gives organizations the ability to estimate the total number of points per product pool needed over the standard 3-year licensing agreement period, which gives a licensing forecast.  The forecasted points determine an organization’s price level qualification with the biggest discount going to those projecting greatest usage of Microsoft programs, servers, etc.  But, as we always caution, it’s not always about the discounts.

The different price levels are listed below (Note: the minimum point requirement is 1,500 to qualify).  The four point minimums for a 3-year forecast per pool starts at 1,500; 12,000; 30,000; and 75,000.

Software products are categorized into three distinct product pools: applications, systems, and servers. Examples of software products in each pool are:

To give you a better idea as to where you fall into these programs - a complete list of point values can be found at Microsoft Volume Licensing.  Not all organizations will need or be able to forecast using this model.  But, Microsoft Select offers flexibility for organizations that have changing business needs and may require varying numbers of licensing over its licensing agreement term.

For those of you that like charts and diagrams to make these confusing programs more understandable - enjoy! ISV = Independent Software Vendor and SPLA = Service Provider License Agreement.

The Service Provider License Agreement (SPLA) is much more flexible than the ISV program. It allows you to license MS products on a monthly subscription basis, during a 3-year term, while enabling your organization to use the products to provide software services to customers.

The following scenarios would make the SPLA program the best suited for you:

Some of these scenarios will qualify you for both the ISV and SPLA programs, therefore you will need to look at each licensing program and choose which will benefit your individual business needs the most.

Microsoft Open Value Subscription is by far the most flexible licensing model and requires the lowest up-front costs for businesses that may have limited budgets and changing needs. An example of a business that could benefit from an Open Value Subscription is a forestry organization, where there is a fluctuation of personnel based on the season. Due to a constantly changing workforce - at times from hundreds during the busy season to only a few administrative employees in the off-season - this licensing plan allows for a forestry organization to only pay for the licenses it needs, at the time they are needed.  This model allows companies to easily increase or decrease licenses without having to re-negotiate SLAs every six months.

Microsoft published an interesting case study about C. Rokas SA’s realization regarding its licensing issues and move to Open Value Subscription, which has proven very successful for them. C. Rokas SA is a leader in renewable energy sources and electromechanical projects with 250 employees and 70 desktop systems. With a number of PCs and servers running different versions of applications, the IT team was faced with compatibility and security issues. Open Value Subscription enables the company to upgrade and unify its system with a single license key.

The Microsoft Select License program was designed specifically for medium and large organizations with 250 or more PCs that have mixed software requirements and require the use of multiple vendors, operating across multiple networks or platforms. For example, this program would work well for a global advertising agency with multiple employees and offices; some working on PCs with standard Office applications while others using Mac OS and related design programs. For organizations that meet these requirements and are looking for a “pay as you go” type program, this is the one.  There are three key benefits to Microsoft Select:

1.         Incentive-based Pricing, which is based on forecasted purchasing volume and reduces overall procurement costs based on volume of purchase. In other words, the more you buy, the more you save.  Obviously, you only save if you’re buying right. Don’t just do volume purchases for the savings as it invariably leads to shelfware.

2.         Purchasing Options is a “pay as you go” model. You don’t have to pay for unused apps and only pay for those you use. Well, duh.

3.        Accelerated Deployment offers access to media kits to ease evaluation of the applications before procurement and training of employees post-deployment.