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Microsoft To Make Licensing Changes To Quell Europe Controversy

Steven Burke, Wade Tyler Millward

Changes include eliminating the need for another license to virtualize Windows 10 and 11 on customer servers and outsourcers’ servers, removing the ability to outsource certain licenses on major cloud vendors’ data centers.

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Microsoft plans to roll out partner program policy changes with the goal of making outsourced infrastructure hosting easier after the tech giant’s software licensing policies stirred controversy in Europe earlier this year.

The changes include a new partner program for “hosters,” eliminating the need for another license to virtualize Windows 10 and 11 on customer servers and outsourcers’ servers, removing the ability to outsource certain licenses on major cloud vendors’ data centers and a new Windows Server virtual core licensing, according to Microsoft.

Microsoft announced the changes in a blog post published Monday and signed by Nicole Dezen, who was named the Redmond, Wash.-based tech giant’s chief partner officer and corporate vice president of the Global Partner Solutions organization during the summer.

[RELATED: AWS EXEC CALLS MICROSOFT LICENSING TACTICS ‘ANTI-COMPETITIVE’]

What Partner Program Changes Did Microsoft Announce?

CRN has reached out to Microsoft for comment.

Dezen’s promotion came with a reorganization of Microsoft’s partner organization following the departure of channel chief Rodney Clark.

The changes Microsoft announced Monday appear not to have an effect on the tech giant’s controversial “new commerce experience” campaign, which partners say has forced them to renegotiate terms with customers and has pushed partners and customers into annual subscription commitments instead of monthly ones.

Still, Michael Goldstein, president and CEO of Fort Lauderdale, Fla.-based Microsoft partner LAN Infotech, praised Microsoft for listening to partner feedback and making changes to simplify software licensing.

“It’s good to see Microsoft giving us more flexible licensing options,” he said. “Anything Microsoft can do to simplify licensing is much needed. This is going to save us and our customers time and money. What this comes down to is Microsoft is making it easier for partners like us to do business with them.”

Goldstein said that the biggest perk for his business among Microsoft’s announcement Monday is an option to license Windows Server on a virtual core, a license model compatible with shared server outsourcing, according to Microsoft.

“It looks like the new virtual core licensing allows our customers to buy what they need versus having to buy server core licensing in an eight pack,” he said.

With the new option, customers can license Windows Server by the number of virtual cores used in VMs, making Windows Server easier to license when virtualizing or outsourcing. Currently, Windows Server is licensed by physical core, so customers need access to physical server hardware to make sure they have enough licenses to cover all the physical cores in the machine.

“This change will help cloud providers appeal to customers with legacy Windows Server workloads by enabling them to move these workloads from on-premises servers to the cloud,” according to Microsoft.

Another benefit is Microsoft expanding one- and three-year subscription options for Windows Server, Remote Desktop Services (RDS) and SQL Server for partners in the Cloud Solution Provider program. Microsoft will also offer “more monthly billing options” for one-year commitments.

“Today customers buy a server license on an annual basis, it looks to me like they are allowing us to turn that annual commitment into a monthly license,” Goldstein said.

Goldstein said he needs to dig into the licensing changes in detail to determine the ultimate impact on his business and customers.

“You have to have your master’s degree in Microsoft software licensing to understand what’s going on here,” he said. “I am looking forward to digging into this to see what it means for us and our customers. The most important thing is Microsoft is listening to partner feedback and trying to simplify software licensing.”

Awaiting NCE Relief

Goldstein said that although the licensing changes announced by Microsoft do not appear to change Microsoft NCE licensing issues, he would still like to see “relief” for customers locked into Microsoft 365 annual licensing to get a 20 percent discount.

“We want to see flexible cancellation and transfer policies on Microsoft 365 licensing,” he said. “We heard there were changes coming. This is the time of year Microsoft makes these changes.”

With NCE, customers are required to make an annual commitment to Microsoft software offerings like Microsoft 365 or pay a 20 percent premium on month to month commitments. “We want to see flexible cancellation and transfer policies on Microsoft 365 licensing,” he said. “We would like to see some relief for customers that have bought X number of licenses and want to reduce those commitments because of business changes.”

Changes After Europe Controversy 

The European Commission has sought feedback from rivals to Microsoft’s cloud services after French cloud provider OVHcloud claimed Microsoft licensing interfered with OVHcloud running Microsoft products on its own cloud networks, according to Bloomberg.

At the same time, Microsoft makes it easier and less expensive to pair Windows, Office and Windows Server with Azure, according to the complaints.

Earlier in the summer, the controversy prompted an Amazon Web Services (AWS) executive to write on Microsoft-owned social media network LinkedIn about the tech giant’s situation in Europe.

As part of the upcoming licensing changes, after Oct. 1, Microsoft will eliminate the need for an additional license to virtualize Windows 10 and Windows 11 on customers’ servers or an outsourcer’s server. The policy change applies to users with Microsoft 365 F3, Microsoft 365 E3 or Microsoft 365 E5 licenses, according to the company.

The policy change does not apply to providers Alibaba, AWS, Google and Microsoft itself. Customers who want to use those vendors for outsourcing “can acquire licenses directly from” the provider, according to Microsoft.

But the policy change still applies even if the user’s primary device has a qualifying operating system (QOS). Users do not need to get additional licenses for virtualizing Windows 10 or 11 on their servers or on outsourcers’ servers.

However, users still need a primary device with a QOS to run Windows 10 and Windows 11 Enterprise locally on computers, according to Microsoft.

Microsoft will introduce a new flexible virtualization benefit so that Software Assurance and subscription license customers can use their own licensed software to build and install services and run them on any outsourcers’ infrastructure, dedicated or shared, according to Microsoft.

“This gives partners that offer infrastructure outsourcing the opportunity to host the customer solutions on more flexible hardware configurations, and enables hosting partners that sell license-included hosting (such as Windows Server under Services Provider Licensing Agreements, or SPLA) to allow their customers to install customer-licensed products, like SQL Server, Microsoft 365 Apps, and more, on their hosted solutions,” according to Microsoft

In October, Microsoft will also change its Services Provider Licensing Agreements program to remove the ability to outsource these licenses on data centers from Microsoft itself and cloud rivals Google, Alibaba and AWS.

The change attempts to correct the issue of managed service providers (MSPs) buying through SPLA to host on others’ data centers, according to Microsoft. Instead, SPLA was meant for partners to offer hosted services on their own data centers.

“Any SPLA partner impacted by this change has until September 30, 2025 to transition from” AWS, Google, Microsoft or Alibab outsourced hosting “or to license directly from the Listed Provider outside of their SPLA,” according to Microsoft.

Microsoft will launch “later this year” a program within its Cloud Solution Provider (CSP) channel partner program. The “CSP - Hoster” program – which replaces Microsoft’s qualified multitenant hosting (QMTH) program – is meant to allow partners to pre-build hosted desktop and server services for sale to customers who need a new license or already have one.

At the beginning, the hoster program will be limited to direct-bill partners only, “but we look forward to expanding program eligibility over time,” according to Microsoft.

The customer must have a Microsoft Customer Agreement with the hoster-partner and proof of the preexisting license, if applicable.

Partners can access a catalog of Microsoft software used to pre-build services instead of getting distinct media and keys from each end customer to deploy the pre-built service, according to Microsoft.

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