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Microsoft clarifies cloud-hosted desktop licensing, stings OnLive

Bridget Botelho

Microsoft shouts "to the cloud" in its Windows 7 commercials, but the company's licensing policy doesn't make it easy for cloud providers to deliver Windows desktops and applications from there.

Microsoft defined its desktop outsourcing licensing policy

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in a blog post on March 8 and despite industry pressure, it did not update its licensing policy in favor of cloud-hosted desktops -- also known as Desktop as a Service (DaaS).

The company's elucidation was merely a move to address questions about cloud service provider OnLive Inc.'s free OnLive Desktop app. Available through iTunes, the app provides Windows 7 applications, including Microsoft Word, Excel and PowerPoint software to iPad users. The app is remotely hosted on OnLive's cloud service.

Questions surrounding the legality of this offering were recently raised by Gartner Inc. and by industry expert Brian Madden, who explained in his blog that while OnLive offers cloud-hosted Windows desktops for free, DaaS providers such as Desktone Inc. comply with Microsoft's licensing rules to the detriment of their business.

In Microsoft's blog, the company said, "We are actively engaged with OnLive with the hope of bringing them into a properly licensed scenario, and we are committed to seeing this issue is resolved."

OnLive said in an email that the company does not comment on licensing agreements with its partners. The free OnLive Desktop app was still available in the iTunes store as of March 9.

Meanwhile, DaaS providers such as Chelmsford, Mass.-based Desktone have offered a cloud-based alternative to on-premises virtual desktop infrastructure (VDI) for years now and they say that Microsoft's licensing rules hinder adoption.

Microsoft executives denied to be interviewed and did not offer information regarding the possibility of changes to its licensing policy.

Microsoft-hosted virtual desktop licensing

One big problem with Microsoft's licensing rules is the requirements that hosting hardware must be dedicated to, and for the benefit of the customer, and may not be shared by or with any other customers of that partner.

This increases the cost to provide hosted Windows desktops for small customers, said Danny Allan, CTO of Desktone.

"It's hard to offer this service to the low-end of the market when you can't fully use your hardware," Allan said. "It translates into a higher price point -- and that money isn't going to us. It is going to the hardware manufacturers."

Removing the dedicated server requirement "would let us use the cloud the way it is meant to be used: as a shared pool of capacity," Allan said.

More on DaaS:

OnLive complies with Microsoft licensing, DaaS providers weigh in

What OnLive app compliance means for DaaS industry

Cloud-hosted desktops and applications guide

Weighing cloud-hosted virtual desktops vs. VDI

To be fair, Microsoft has relaxed its dedicated hardware policy somewhat. Up until two years ago, Microsoft also required dedicated storage -- and it still requires it if using Microsoft storage, Allan said. "[It hasn't] relaxed enough," he added.

The other issue is that Microsoft does not provide a Services Provider License Agreement (SPLA) for DaaS providers. Instead, DaaS customers have to provide the partner licenses through their own agreements with Microsoft.

DaaS providers hope that Microsoft eventually creates an SPLA specifically for cloud providers because "it isn't feasible to ask a small customer to do volume licensing," Allan said.

One Microsoft licensing consultant said providing a DaaS SPLA and removing the dedicated hardware requirement would benefit Microsoft.

It would "keep Windows desktops relevant in the face of challenges, such as the iPad, without seriously harming revenue," said Paul DeGroot, principal consultant for Pica Communications. "OnLive demonstrated the demand."

Many companies would be happy to pay Microsoft more than Microsoft makes today from their permanent Windows licenses, DeGroot said, because they see hosted virtual desktops as the best option for their requirements.

For now, Microsoft limits what cloud-service providers can do. Its licensing policy states that partners who host under an SPLA may bring some desktop-like functionality as a service using Windows Server and Remote Desktop Services:

"The partner is free to offer this service to any customer they choose, whether or not they have a direct licensing agreement with Microsoft. However, it is important to note that SPLA does not support delivery of Windows 7 as a hosted client or provide the ability to access Office as a service through Windows 7. Office may only be provided as a service if it is hosted on Windows Server and Remote Desktop Services."

Some say Microsoft may update its licensing to make DaaS more economical because the company has as much to gain from a hosted virtual desktop model as do customers.

For example, DaaS customers can easily deliver the latest versions of Windows to end users on any type of device, which means faster transitions away from old versions of Windows and revenue for Microsoft, DeGroot explained.

It would also give Microsoft a way to protect Windows from the "post-PC era" trend.

"Microsoft still has an opportunity to ensure that it's only a 'Post-PC Hardware' world," DeGroot said. "What they make -- the software -- still has a lot of value in the post-hardware world and remains the most powerful, familiar and flexible desktop offering out there."

At the same time, Microsoft may not be keen on cloud-hosted virtual desktop model because it liberates customers from PC hardware, said Desktone's Allan.

Let us know what you think about the story; email Bridget Botelho or follow @BridgetBotelho on Twitter.


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