What is a software licence? How Microsoft licensing works

Have you ever found yourself scratching your head over Microsoft Licensing or pondering why software licensing, in general, seems so absurd?

Consider this scenario: You've purchased a server license, yet you're still prohibited from using it until you've acquired client access licenses. You've already forked out for the server license, so what's the story with these client access licenses?

Or, take another example: Why can't you purchase bare-bones computers for your enterprise and then deploy Windows Enterprise on them because you hold a Microsoft Enterprise Agreement?

It just doesn't make sense!

If you've found yourself pondering these conundrums, I empathise. When I dipped my toes into the IT sector more than two decades ago and first endeavoured to make my way through the labyrinth of software licensing, I was flummoxed. It was only after dedicating a number of years to Software Asset Management that I finally discovered the most logical explanation.

Software license explained

The confusion around software licensing often arises because we consider a license as a tangible object. But it's not.

Imagine you're shopping online, and you pay for a Microsoft Visio license with your credit card. Do you now own Visio? The answer is no, you don't.

What's really happened is that you've paid a license fee. In return for this fee, Microsoft grants you permission to download Visio, install it, and use it – but only within the parameters and rules that Microsoft sets.

When you purchase a physical object, say a camera, a mug, or a chair, you exchange your money for something tangible. For millennia, that's how transactions worked, marking a clear transfer of ownership.

Software licenses, however, don't work this way. Strictly speaking, you can't "buy" software. Instead, you pay a license fee. In exchange for this fee, the provider gives you the rights to use their software, but again, only within the boundaries they've outlined. Essentially, you have to abide by their rules.

So, the next time you find software licenses a bit puzzling, remember not to treat them as physical objects. Consider them more as contracts, a collection of terms and conditions, rights and obligations.

Why required license quantities often seem non-sensical

The reason for the commonly perceived 'nonsense' of required license quantities is closely tied to the concept explained above. The number of licenses you need doesn't always match the number of software installations. Misunderstanding this can lead to costly errors, either through overpayment or audit penalties. This misunderstanding – the idea that there isn't always a one-to-one connection – is a primary cause of non-compliance.

With certain products, a single license might cover multiple instances of that product.

Consider this example: your employees remotely access a single instance of Microsoft Visio from their homes via a VPN. When it comes to licensing Microsoft Visio, you need to account for their home devices. If they have 15,000 devices with even a remote possibility of accessing that single copy of Microsoft Visio, you need 15,000 licenses.

I see this error being made all the time. A company purchases a new server or sets up a virtual machine and automatically orders a new license for it. However, they might already have sufficient licenses, or the licensing agreement might permit unlimited virtual machines. The result can be an unnecessary expenditure.

The number of software instances doesn't dictate license requirements. Instead, they depend on where and how you've deployed the software, who has access to it, and how it's being used.

So, make sure to read the fine print. Diligently study the Product Terms to prevent draining your budget unnecessarily.

It's not that licensing is always nonsensical (although it can seem that way at times). The real issue is our misunderstanding of how licensing works.

Remember, a license is a right, not a physical object. Once you grasp this and approach all licensing from this perspective, you'll make fewer mistakes.

And this principle applies to Microsoft licenses and those from any other vendor alike.

Consult a Microsoft Licensing Specialist

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