Friday, January 22, 2010

Microsoft Licensing for Schools Lock-In

Like many large IT companies, Microsoft offers discounts for educational institutions. But what most people don't realize is that these licensing agreements make it financially undesirable for schools to use anything under than Windows and Office on their computers. Since schools participate in volume licensing, some sort of counting is needed to determine how much that school should be paying. After all, a fixed cost regardless of how many computers or users would be pretty unfair. But it's in this counting itself that results in lock-in. The bundle typically includes Windows upgrade, Office, and Client Access Licenses (CAL) for Windows Server and Exchange. Note that this means any PC purchased must already have some version of Windows on it in order to qualify; a school can't just buy a PC with no OS license and install Windows based on this program alone. Upgrades and extended patch support are included as long as the school maintains the agreement contract.

K-12 schools can use Microsoft School Agreement. This is what Fairfax County Public Schools uses. FCPS spent $2.9 million on Microsoft School Agreement in FY2009 for its roughly 98000 desktops and laptops. That comes out to about $30 for each PC, which, considering the retail cost of Windows Professional and Office Professional, is a really good deal. However, from the School Agreement information booklet:
School Agreement requires an institution-wide commitment for any application, system, and Client Access License (CAL) products selected. To that end, you must include all of the eligible PCs in the participating school(s) or district. Eligible PCs include all of the Pentium III, iMac G3, or equivalent or better machines*. You must also include any additional machines within your institution on which any of the software will be run.
*Includes machines with similar processors, such as Intel Celeron and AMD Athlon.

In other words, if a school has PCs that are Pentium III or iMac G3 or better, they have to count them even if those PCs won't be using some or even any of the products covered under the agreement. Another way to put it is if a school runs Windows on only half of its computers (the other half could be Mac or Linux, etc.), and all of those computers are less than 5 years old, the school wouldn't pay Microsoft any less than if it ran Windows on all its computers. Older computers only have to be counted if they are going to run software from the agreement, otherwise they can be left out.

Higher education can utilize a similar program, the Microsoft Campus Agreement. The lock-in here is potentially worse:
Campus Agreement pricing for any application, system, and CAL products you select is based on a count of your total faculty/staff FTE employees and requires organization- or department-wide coverage. To that end, you must include all FTE employees in the participating institution(s) or departments(s) (including student employees) using the calculation below.

Non-knowledge workers, such as maintenance, grounds keeping, and cafeteria staff may be excluded from the faculty/staff FTE employee count if they do not use institutional computers.

So colleges and universities don't even pay based on how many computers there are, but based on how many people they hire. Part-time faculty and staff are included as fractions.

From a financial perspective, then, it makes the most sense to run Windows on every computer.

So what about thin clients?
I found an interesting article from Computerworld, written about three years ago. The Software Assurance mentioned is included with both School and Campus Agreement options. Microsoft has a Vista Enterprise Centralized Desktop program for thin clients, it seems. However, it's unclear exactly what the interaction between that and a School or Campus Agreement would be. In any event, from the information document:
Thin client license. For thin clients, a single annual subscription purchase is required. With this subscription, companies can install unlimited copies of Windows Vista Enterprise or earlier operating systems, such as Windows XP Professional or Microsoft Windows 2000 Professional, on any number of physical servers, as long as the VMs are accessed only by licensed client devices. Users can access up to four running VM instances on up to four servers per subscription license. In addition, the annual subscription has Software Assurance built-in and provides for earlier versions, and well as upgrades that are made available within the license time frame.
To use desktop applications (for example, Microsoft Office Professional 2007) from the licensed device, each accessing device must be licensed for the application. Windows Vista Enterprise Centralized Desktop does not include application licenses.

It sounds like the OS would be licensed on a concurrent user basis (assuming the thin client disconnects from a VM when it isn't in use), while Office would need to be licensed per-thin client that might potentially use the application. It's also unclear if licensing under VECD would be more or less expensive than licensing under SA/CA. At the least, though, VECD seems to be less restrictive than the traditional licensing agreements, but perhaps only by necessity. However, it's also possible that Microsoft assumes the use of a Microsoft-based thin client, and they would demand a more stringent contract in the presence of, say, a Sun thin client that runs no Microsoft OS on-board.

So yes, maybe a school district or university stands to save by using alternative platforms such as Linux or Solaris, or would like to do graphics work on Macs. But unless they completely dump Microsoft, or opt for a different and probably more expensive (unit cost-wise) licensing agreement, this is at best difficult to do, especially in economically hard times. That said, I'm not saying institutions shouldn't try, and VECD may be a good way to go in and of itself if I've understood it correctly.

UPDATE 1/24/2010: I want to clarify the volume licensing mentioned above is on a subscription and not a perpetual basis. Customers have to recount and repay for each and every eligible system on a regular basis (either annual or three year contract).


  1. "From a financial perspective, then, it makes the most sense to run Windows on every computer."

    Um, no it doesn't. If the goal is to get as much Windows for as little money per installation as possible, then yes; but once the volume license has been bought, it is a "sunk cost" and should no longer factor into calculations. Financially speaking, nothing is lost if some Windows installations are replaced with Linux.

  2. I'm not sure it can be considered a 'sunk cost' though since the systems loaded with Linux have to continue to be counted and paid for on a yearly basis (this isn't a one-time fee). You have to figure in training and support costs as well.

  3. Okay. I still feel like the decision-making process ought to be more along the lines of, "How many computers do we need? How many of those do we want to run Windows? Given those numbers, is it worth it to buy a volume license?" There is pressure against adding more machines than necessary, not against adding non-Windows machines.

  4. Yeah, it should, but I suspect you'd have to have a really low percentage of computers running Windows then since Office 2007 Standard full version costs $400 and Windows 7 Professional upgrade costs $200, which if you amortize it over six years still comes out to $100/yr/PC, triple what FCPS pays now. Based on those assumptions, the hard cost to FCPS of Microsoft licensing of 30% Windows or 95% Windows is the same. That said, I didn't look too far into some of the other options Microsoft offers, but I doubt they are likely to give educational institution discounts without requiring 100% coverage. And of course it's not an issue if you start from scratch with Linux, it's just that seriously attempting to transition from Microsoft to something else may result in some degree of seemingly wasted dollars. Again, not trying to say people shouldn't try, but I feel like not many people are aware of the lock-in clauses that schools have to deal with.