Microsoft Licensing Rights for Virtualized Desktop Environments

I conducted some research on Microsoft virtualization products the other day in preparation for a customer presentation. While digging through various licensing resources (read: boring) I found some interesting licensing changes that I was not aware of. First, let me stress that the following changes only apply to those of you who license your Microsoft software under one of the volume licensing programs. If you purchased your copy of Windows or Office off-the-shelf, or it came with your PC -- you are out of luck.

Hidden within a Microsoft Licensing Brief from May 2004 (MS Word document) is new language regarding the use of virtualized desktop environments. It breaks down like this:

• If you have a valid license for Windows XP Pro or Windows 2000, you can run one additional OS inside a virtual machine (Virtual PC 2004 or VMware) at no additional charge. This means you can use Virtual PC or VMware to run legacy applications that require NT 4 inside a virtual machine without needing to buy a second OS license. The additional benefit to this scenario is that your virtual machine can access a Windows network without the need for a second Windows CAL. Very cool stuff! And the virtual guest isn't limited to just NT -- you could run Windows 9x, Windows 2000 Professional or Windows XP Professional. The only thing you can't do is run any flavor of Windows Server as the host OS, or the virtual guest. This licensing benefit is for desktops only.

• But wait, there's more! Let's say you are also licensed for Microsoft Office in addition to Windows. The same license brief says that you can run Microsoft Office inside the virtual machine for no additional charge - as long as the virtualized Office installation is one version older than the one running on the host. This means that if you run Office 2003 on your host you need to install Office XP (or earlier) in your guest OS. Sounds weird -- but it's true.

Microsoft's policies regarding virtualized server environments are much more strict. Check out this licensing brief (MS Word document) for information on server licensing changes.