The Hierarchy of Microsoft Software Licensing Terms

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A Plethora of Resources

It is becoming critical for organisations to understand whether the written guidance on licensing relied upon to inform IT decision makers are considered influential or ‘binding’ by the Microsoft. An organisation may often refer to written guidance and specific terms extracted from a wide range of publicly available information published by Microsoft (and other 3rd party commentators) to support their interpretation and implementation of Microsoft Software. This becomes critically important when attempting to quantify risk (in preparation or in response to assessing risk of non-compliance) or in assessment of the ‘real’ total cost of ownership of new technology choices.
An organisation’s hardware environment, software deployment footprint, processes and infrastructure topology and technology choices can all be impacted by Microsoft’s commercial licensing models. This may affect the outcome of a vendor ‘review’ or official audit or contribute to unmitigated risk when considering a merger, acquisition, divestiture or sale.

Accordingly, an organisation’s IT department may have referred to guidance from a plethora or resources to inform their approach, including but not limited to:

  • Microsoft Business and Services Agreement (MBSA)
  • Volume Agreement – Master Agreement
  • Volume Agreement – Enrollment
  • Contractual Amendments
  • Microsoft Product Terms
  • Older Product Lists and Product Use Rights
  • Online Service Terms
  • Microsoft Websites
  • Microsoft Licensing Briefs
  • Written statements by Microsoft Employees
  • Written statements from LSP (Licensing Solution Providers)
  • 3rd Party white papers, licensing guides , websites, blogs and written statements
  • Responses in online forums and wikis
  • Oral guidance from trusted advisers

In the current economic climate it is increasingly important to understand what software use terms, definitions, and explanatory guidance are ‘binding’ on your organisation. If this is understood, it is possible to start understanding the total and extended risk for your organisation.

The Hierarchy of Binding Documentation

The most important documents to refer to our the Volume Agreement(s) your organisation has procured licenses through and the Product Terms. These contract documents are considered by Microsoft as ‘binding’ upon your organisation.
It is important to understand what Microsoft Volume Agreement(s) your organisation has signed with Microsoft. This may include, but not limited to, Select Agreement(s), Microsoft Products and Services Agreement(s), or Enterprise Agreement(s) or other specialist Enterprise Enrollment(s) along with any signed contractual amendments/exceptions.

These documents, in conjunction with the relevant applicable releases of the Product Terms documents for your deployed software, are your bespoke canon to understanding the appropriate software use terms for your deployed (and planned) software footprint.

The diagram below illustrates the subsequent precedence of the Product Terms  and then illustrates the hierarchy of software use terms within that document. Universal License Terms will remain in effect unless explicitly retracted or amended as specified in either the General License Terms or Product-Specific License Terms and Additional Terms within the Product Use Rights.

Getting a view of all applicable terms involves a ‘little bit of reading’ (I use this phrase lightly) especially If you have both current and prior releases deployed or are trying to map existing footprint versus future planned requirements. The diagram above is intended to give a ‘high level’ top-down view as to precedence of ‘binding’ documentation. While not a definitive guide for all situations, it provides an overview of the hierarchical precedence of Microsoft licensing documentation and distinguishes between ‘binding’ and ‘non-binding’ advisory documentation from Microsoft and 3rd parties.

While its recommend to look at the source documentation, as an example, the ‘License Mobility’ rules are further amended and defined at the Product-Specific level. So when you look at the Universal License Term and any associated definition, It is worth looking at specific product-level applications or exceptions, and the role of Software Assurance or defined by contract type.

In regards to the Online Service Terms (OST), this general guidance applies:

  • Microsoft don’t change the OST for the term of the subscription
  • If there is a new service, for a bundle, the only addition will be for this service and feature.
  • For example., Office365 E3 could have a different OST, compared to new services added mid-term.
  • The OST resets at the beginning of the new enrollment. The version will be applicable for the first initial term of the subscription.

A Comprehensive Approach

Ultimately, appropriate licensing resources should be combined with a systematic approach to discovery, metering, management, analysis, optimisation and negotiation strategy to deliver the returns your organisations demands of It’s IT.

A systematic approach could include, but not limited to:

  • The use rights for an older version that you originally purchased will apply, normally until upgrade.
  • If you buy a new version of a license and rely on ‘downgrade’ rights to run the prior version, normally the use rights for the current licensed version will apply.
  • The use rights of a licensed product can be materially impacted by the type of procurement contract.
  • Your business should assess the extended benefits of an expansive ‘suite’ or ‘bundle’ of products against  Microsoft “lock-in” and your IT roadmap.
  • Awareness of “lock-in” when reviewing both licensing models, and procurement contracts.
  • Awareness of associated ‘extended’ software use rights embedded in Software Assurance (SA) or in the License itself.
  • Awareness of associated technical restrictions, or limitations, based on license plan, or license model, or ‘active’ Software Assurance (SA).
  • Awareness of requirements for accessing extended functionality based on a licensing plan, or license model, and to keep on top of it should Microsoft seek to curtail that extended use right or functionality to take effect at your next renewal.
  • Awareness of requirements for special limited rights of purchase, that are only enabled by retaining Software Assurance (SA)
  • Comparative analysis of available software procurement “Packages” and “Suites” reviewed against individual product/component based procurement and associated negotiation empowerment.
  • Increased costs for extended security updates, or alternatives of  upgrade, re-host to Azure, re-host to other 3rd party cloud providers, or refactoring to another platform.
  • Alignment of contract and licensing model to planned future server environment or consolidations strategy.
  • Understanding impact of respective hardware ownership, and service levels of service infrastructure, or hardware dedication,  from 3rd party cloud providers.
  • Understanding required accreditation and reporting obligations of 3rd party cloud service providers to enable moving workloads to that provider.
  • Understanding the role of licensing and Software Assurance (SA), and contract type, in enabling ‘bring your own license’ to 3rd party cloud providers.
  • Availability and analysis of price protection for committed up-front spend, versus transactional procurement model(s).
  • Access to comparative analysis of procurement models, price lists, currency impact, and global sourcing options.

A Question of Interpretation

As exemplified from this extract from the Product Terms, explanations within the binding documentation are often ‘limited’ and indeed, Microsoft themselves may be unable to refer to wording, explanations or definitions solely in binding documentation when seeking to explain (or enforce their view).

Microsoft does  provide guidance that where official contract definitions are unavailable that the contract terms should be interpreted under ‘generally accepted officially recognized English words defined and protected within’ but may ultimately determine unilaterally whether an organisation has used the software in a way that conform to the limited guidance within the binding contract documents.

There remains no independent regulator for the software licensing industry (as advocated by www.clearlicensing.org)

It is the personal view of the author, that an organisation should ensure that the technical reality conforms to the reasonable IT industry interpretation of the terminology of the publicly available binding documentation (where specific vendor definitions are not publicly available) of the Vendor. However, this will have limited impact If the vendor takes a different perspective.

It is not uncommon for a vendor to extrapolate the widest possible impact of a technological decision or lack of control, It is the personal view of the author, that any extrapolation should be based on the technical reality of the environment, and of course, reasonable and foreseeable.

Advisory documentation rarely refer to source ‘binding’ documentation like the Product Terms and increasingly, it should be recognized that Microsoft licensing briefs, white papers and training resources, and 3rd party commentators, while useful, are not contractually binding documentation (yes sadly this website is not binding, but has been used as ‘ammunition’ in the past to the ire of the occasional Microsoft employee in the past).

As an example, the Microsoft ‘Multiplexing Rule’ was created to  protect and maintain a proportional and scalable commercial licensing model for CALs (Client Access Licenses); to ensure financial protection for the software vendor for their server product(s) that will not limited by “hardware or software you use to pool connections, reroute information, reduce the number of devices or users that directly access or use the product”. [Ref: Product Use Rights, April 2013, Page 11], this was later updated to an abridged iteration:

“Multiplexing or pooling to reduce direct connections with the software does not reduce the number of required Licenses” [Ref: Product Terms, April 2019, page 9]

However, the  ‘Multiplexing Rule’ when reviewed solely on the limited guidance provided in ‘binding’ documents like the  Product Terms could potentially be used to support the widest possible interpretation of those terms. Microsoft can apply this logic unless there is an explicit exception sourced from binding documentation. Microsoft will not have to consider written terms, explanations or exceptions sourced from non-binding sources (even those written by Microsoft) even If your organisation may consider reliance on Microsoft advisory literature to inform their software deployment as fair use.

As a hypothetical example, if a member of the public accesses a public website and enters information into a web portal of an ‘eCommerce company’, it could be deemed to “access or use the product” under the ‘Multiplexing Rule’ if that data is subsequently used by some internal SQL Server(s) for internal business analytics by the eCommerce company; the general public could potentially considered licensable as an ‘external user’ and licensable for the ‘access or use’ of the internal servers use for business intelligence. While it may seem unlikely to your IT or Security Team that a member of the general public would “access or use the product” when SQL is deployed internally for soles purposes of business analytics of (for example, analysis of anonymous and aggregated user data – by internal eCommerce staff); the overarching precedence of the Multiplexing Rule as a Universal License Term  within the Product Use Rights and ‘limited’ guidance and definitions within, could potentially support the ‘widest possible’ interpretation by the Vendor (and often does). It wasn’t until later Microsoft amended the wording for BI edition (before it’s eventual subsumption in Enterprise Edition), however it was to no avail for the ‘eCommerce’ business.

Final Thoughts

While it is accepted than many Microsoft licensing briefs, and websites may state that they are to be used as a ‘guide only’ (while often quoted by the Microsoft subsidiary to support their own view), the customer must ultimately look to the ‘binding’ terms and extrapolate how this could be interpreted, implemented and controlled for their current, and planned environment. The documentation has greatly improved over the last few years, but the usual ‘grey areas’ to continue to exist.

It is now, more often than not, that non-binding advisory documentation is of limited influence unless it directly supports the ‘current’ view of the vendor. (There is no independent ombudsman or regulator to adjudicate that interpretation) . It is therefore recommended to extrapolate the ‘widest possible’ risk assessment of vendor interpretation of your deployed software footprint when evaluating and seeking to limit risk and cost associated with enterprise software. Normally, a risk to the business becomes ‘hard’ when the strategic relationship with the vendor falters (normally occurring at renewal). As always, seek specialist advice – a less known ‘binding’ exception could be your card up your sleeve.

Thanks All


About

This website is a way to give back to the licensing community and as an information resource for all customers that work with Microsoft software and licensing. I hope you find it of value.

Tony Mackelworth is Head of Microsoft Advisory Services at SoftwareONE

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