Microsoft licensing rules

Microsoft Licensing Rules

There are various rules when it comes to licensing Microsoft software, depending on the various software, license types and licensing models. This article is meant to provide accurate information about these rules.

Software License Agreement

A software license agreement is an agreement about the use of and rights to the software between the manufacturer and the user. This agreement ensures that the users will use the software the way the manufacturer intended it to be used. The information in the software agreement usually refers to the number of times the software can be installed and how the software is to be distributed. Depending on the type of Microsoft license, the information in the software agreement might vary. For example, with OEM licenses, the software comes pre-installed with the hardware and cannot be re-installed on another device. This is not the case with Volume licenses or Retail licenses from Microsoft. These are not bound to the device, therefore can be transferred. Subscription-based licenses, on the other hand can be used on any device as long as there is an internet connection. Microsoft’s Software License Agreement, just like any other software agreement, prevents the abuse of the software. Moreover, the license agreement states the correct distribution of the license. Microsoft’s software can be distributed by direct Microsoft partners and independent distributors, and resellers.

Other important information included in the Microsoft License Agreement refers to general information about the agreement, the parties involved, the terms of the agreement and the fine print.

Core-Based Licensing

Core-based licensing is a licensing model that determines the number of licenses a user needs based on the server cores of the processors and their amount. Core-based licensing has been introduced in 2016 with the Windows Server. The reason for the creation of the core-based licensing model is the need for a consistent licensing metric.

Windows Server

For companies to license correctly their Windows Server they must comply with Microsoft’s licensing guidelines. Windows Server’s core-based licensing comes with three basic rules that must be respected. First, each physical core in a server must be licensed. Second, every processor should be licensed to cover at least 8 cores. Lastly, every server should be licensed so, that it covers 16 cores minimum.

As a rule of thumb, a base license of 16 cores should be acquired first. In case the user’s server has more than 16 cores, they will need additional licenses for any of the additional cores. The additional licenses can be purchased as a 2, 4 or 16 cores.

A user will also need additional licenses if they use more than 2 virtual machines on a Windows Server Standard license. Should the user have Windows Server Datacenter, they would not need any additional licenses for the virtual machines, as there is no limit for those.

When a user runs applications on the Windows Server such as SQL Server or Exchange Server, then the general licensing rules for these servers must be applied. 

SQL Server

There are two ways to license SQL Server. One of them is with CALs (explained in the next section) and the other is “per core”. Licensing the server plus CALs requires companies to buy a server license for each server and a CAL license for each user and/or device. This licensing model is usually preferred by smaller companies as it is more cost-efficient. The licensing per core requires that a certain number of core licenses be assigned to each SQL server. While this model offers a more precise way to measure computing power, it is also more expensive and preferred by bigger companies. One of its main advantages is that the number of users is unlimited which eliminates the need for CAL licenses. SQL Servers Standard and Enterprise can be acquired as a pack of 2 cores. The minimum requirement for both editions of the SQL Server is 4 cores per processor or the total amount of cores on the server. The rule of thumb is to choose whichever is higher.

CAL Licensing

CAL is short for Client Access License. These licenses authorize the access of users and/or devices that need to connect to a server license. There are two types of CALs based on the authorization they provide – standard CALs and Remote Desktop Services (RDS) CALs. Standard CALs cannot be substituted through RDS CALs but are rather completed. Both standard and RDS CALs can be either User or Device CALs. The choice between User and Device CALs depends on the number of users and devices that need access to the server. In their essence, standard CALs do not need to be activated like the other software licenses.

User CAL Licensing

User CALs are usually chosen more frequently than Device CALs, however the choice heavily depends on the number of users and devices. If the users need to access the server and its services through multiple devices, then a more cost-efficient solution would be to license the users with User CALs.

Device CAL Licensing

Device CAL licenses are a good solution for companies with rotating personnel or less devices than users that require access to the server. Should multiple people need access to the server through fewer devices, then Device CALs are more cost-effective than User CALs.

Remote Desktop Services CAL Licensing

Remote Desktop Services or RDS CALs provide user and/or devices with a remote access to the server and its services. Following the licensing logic from the standard User and Device CALs, choosing the amount and type of RDS CALs also depends on the number of users and devices that need to be granted access to the server. An important licensing rule to notice is that RDS CALs do not substitute standard CALs. They are only an addition to them for the cases where a remote access is needed.

Rules for Used Licenses

As mentioned above, the software license agreement states the correct distribution of the software and the rights the user has. Since Microsoft sells the right to use the software, this right can also be resold. This decision has been made by the European Court of Justice in its decision on 3 July 2012 C-128/11. Since then, the reselling of Microsoft’s software licenses is legal under the following 5 requirements.

  1. The used software must not be used at the time of the delivery
  2. The used software license has been obtained indefinitely
  3. There are no other charges connecting with using the pre-owned software
  4. The used software license is not split or otherwise incomplete
  5. The used software license has been bought and sold in a country part of the European Union with the permission of the software owner.

As with every other license, the number of used software must be equal to the licenses for which the company/user has proof of purchase.

Noncompliance with Microsoft’s Rules

In case a company ignores or refuses to comply with Microsoft’s guidelines and set of rules, they face consequences. Depending on the violation, a company must either pay a fine or face legal action.

Microsoft can check whether a company respects the software guidelines through audits. A company can be audited randomly, if Microsoft suspects noncompliance or based on a signal from a third party. An audit is essentially a regular check of whether a company is over- or under-licensing the software it uses. The following article presents the different types of Microsoft Audits and how to pass them.