On Monday, the Redmond, Wash., software giant announced new licensing options for two new centralized architectures based on Windows Vista Enterprise Edition, which is available only to customers in the company's Software Assurance software maintenance program.
First, Microsoft introduced a new subscription license called Windows Vista Enterprise Centralized Desktops, which enables end users to run virtual machines centralized on server hardware.
Windows Vista Enterprise Centralized Desktops is available to Software Assurance customers at an annual, per-device free that varies based on whether the customer is licensing a PC or a thin-client device.
The second option is the right to use Windows Vista on diskless PCs, or those that lack hard drives or the ability to store data locally. It is free to customers that sign up for Software Assurance.
Microsoft's changes primarily impact enterprise customers, since Vista Enterprise is available only to volume license customers that sign up for Software Assurance. Microsoft said the changes will give enterprise customers more flexibility in how they deploy Vista and partners new opportunities to sell hardware and software solutions, such as virtualized and centralized desktops, diskless PCs, SANs and servers.
But the changes also signify Microsoft's loosening grip on its core PC desktop business, which is under siege from VMware's successful enterprise hosted-desktop model and other multi-user computing models by Linux rivals and startups such as nComputing.
VMware's enterprise hosted desktop allows customers to deploy hundreds of secure, virtualized Windows desktops from a central server.
Several partners who participate in the lucrative virtualization business said they have made lots of money over the past 12 months deploying VMware's enterprise hosted desktop.
One ISV said Microsoft is under pressure to bend its licensing rules or lose Vista business. "This helps them move Vista licenses," said David Crosbie, CTO of Leostream, which develops and supports virtualization management platforms. "We have a lot of customers who are looking at VMS because they do not want to do a hardware refresh, so they can use the existing hardware and remote desktop into Vista running inside a virtual machine."
The second option Microsoft made available this week is the right to use Vista on diskless PCs. Microsoft is making this option available free to Software Assurance customers and said it will allow customers to move data and applications to centralized storage such as SANs.
But industry observers sid the change is also Microsoft's response to multi-user computing options from Linux rivals and firms such as nComputing, whose solution makes it possible to use one Windows PC to host seven or more free Windows desktops without buying additional licenses.
Microsoft has declined making any changes to its highly lucrative desktop licensing model because of its stronghold on the market, which for many years hovered at about 95 percent share.
But the company's iron grip on the PC desktop is fading because of the impact of virtualization software in uncoupling the software from the hardware, multi-user models and emergence of software-as-a-service models embodied by Google.
One enterprise consultant said Microsoft must bend and go with the flow of the market to keep its Windows franchise healthy.
"VMware has about 85 percent of the virtualization marketplace in enterprise customers and is minting money as the trend accelerates. VMware poses a real threat to an area Microsoft wants to secure and grow," said the longtime Microsoft consultant. "Microsoft made a major error not buying VMware when they could have and then misread the virtualization trend. As a result, Microsoft has not yet put a good equivalent into the market but is scrambling to adapt what it has and
get what it needs out the door."