What is a software license?

A software license is given to you from a software company that gives you permission to use a specific software package and usually comes with many restrictions. The typical restrictions limit you to use only one copy of the software per license and prohibit you to distribute or copy the license in any way. Licenses for enterprise-class server software (such as SQL Server and Exchange Server) also require a Client Access License (CAL) as well for each user that is to access the server software.

To keep things simple, assume that you need one license for each instance of software. This also applies to software and computers in the home.

Example: If you have 10 machines running Microsoft Office 2007, to be adequately licensed, you need 10 Microsoft Office 2007 Licenses.

Purchasing Licenses

If you find yourself short on licenses or looking to expand, there are several ways to get more licenses.

OEM Licenses
An OEM (Original Equipment Manufacturer) license is the cheapest to obtain, but you can only get them with the purchase of a computer. When you buy a computer from a System Builder (such as Dell, Compaq, Gateway, etc) you are already paying for the operating system (such as Windows XP). By paying a little extra you can have it shipped with a copy of Microsoft Office 2003 as well.

These are called OEM Licenses and of course they come with restrictions. An OEM license only allows you to use the software on the specific computer it came with. In other words, when that computer is old and slow and it is time to throw it away, that license must legally be thrown away as well. That is the bad news, but the good news is that keeping track of all your licenses (at least for your desktops) is really easy and the OEM is usually responsible for technical support on the software that you bought.

Despite the ease of management, an OEM license is designed to be disposable and is not an investment. Not only that, but as you acquire new computers your network will end up being scattered with varying versions of Windows and Microsoft Office.  This is typically not good for large offices trying to keep a consistent environment.  Let's look at the next option.

Retail Licenses
With retail licenses you own the license and software no matter what happens to the machine it is installed on. But you pay much more than you would if you bought OEM, sometimes twice as much! Technical support is limited to a month after purchase. Retail software is usually bought at places like Staples, OfficeDepot, and Best Buy.

The license protection built into retail software is a nightmare; not only do you have to enter a key code, but you must also connect to Microsoft over the Internet or call them and get a special unlock code. The software also keeps track of your system to ensure that it has not been moved to a different machine. If the software believes that it has been moved in some way, you must once again call Microsoft and obtain a new unlock code. Microsoft keeps track of the use of key codes and the unlock codes they give you. If they feel that you are abusing the License Agreement they may refuse to give you an unlock code. They could also request to audit your software. Being reported for illegal software licensing practices is especially easy. www.microsoft.com/piracy is the reporting page that Microsoft has set up.

Example: Just by making hardware changes to your PC such as RAM or a new Hard Drive the software might require to be re-activated.

So with Retail, you get to keep the software, but are faced with a management headache trying to keep track of the number of licenses and which computer each license was installed on. You also have to make sure that you have not used the same keycode more than once so Microsoft does not start wondering what you are doing. This is an administrative nightmare and totally cost prohibitive. But on an up-note, you can purchase future additions in special upgrade packages. Upgrades are not available for the next type of license, Volume Licensing.

Volume Licensing
Lucky for us, Microsoft has threevolume licensing programs available to help customers organize their licenses, stay up to date, and receive savings. These programs vary by features, services and requirements. The simplest is Open License intended for businesses with at least 5 PCs. Select License and Enterprise Agreement Plans are licensing programs intended for corporations with at least 250 PCs.

Volume Licensing Programs vary with features and requirements such as free take-home licenses for employees, training programs, Software Assurance, employee software discounts, a single install key for each product, and extra install features - such as administrative installs. Each of these programs are described in detail in the Volume Licensing Article.

Please Note:  This information is provided solely for informational purposes.  Your use of Microsoft Software Products is governed by the terms and conditions of your licensing agreement.