Is Microsoft's carrot enough for businesses to take the Windows 8 Enterprise stick?

Microsoft pours out the Windows 8 news this week, ahead of fiscal 2012 third quarter earnings results. Yesterday, the company revealed the new SKUs and Windows Server 2012 naming. Today comes more information on the most distinct edition -- Windows 8 Enterprise. I debated all day what to write about the software, feeling that there's more marketing speak than substantive information in the blog post announcement. The devil is in the details as they say, and never more than Windows Enterprise and so-called Software Assurance benefits coming with it.

That's because Enterprise is a slippery slope for large businesses to climb. Most enterprises acquire Windows on new PCs -- OEMs account for 75 percent of sales -- but from there Microsoft licensing rules get sticky. Businesses can reimage PCs based on whatever license rights they have. Those wanting to deploy Windows Enterprise must take on something else: Software Assurance is required and adds considerable upfront cost: 29 percent of the full price for two or three years, paid annually. The real benefits -- that carrot -- are all about licensing, for those businesses willing to be beat by the stick (Software Assurance).

Assessing Software Assurance

Eleven months ago, Pica Communications president Paul DeGroot wrote an 8-part Microsoft licensing series for BetaNews. Microsoft has tweaked licensing over the past year, largely to support the cloud and Windows 8 Enterprise Software Assurance reflects some of the tweaking. Largely, what DeGroot laid out in May 2011 still holds true. That 29 percent works out to 13 percent savings over a three-year annuity contract. He explains:

At 29 percent a year on desktop products like Windows and Office, if you hold out for four years or more, the non-SA customer will pay 'only' 100 percent for the upgrade license, while the SA customer will pay 116 percent. In effect, the Software Assurance customer is paying a 16 percent premium to get a 13 percent discount. In fact, since larger business customers pay for Software Assurance three years at a time, they pay 87 percent for the first three years, and if they renew SA without getting an upgrade, another 87 percent for the next three years. That adds up to 174 percent, or a 74 percent premium to get a 13 percent discount.

Most enterprises upgrade less frequently than three or even four years, based on multiple analyst studies and an easily observable situation: More than 10 years after its release -- with Vista and 7 in between, XP is still the most widely deployed Windows. As an upgrade plan, for the majority of large businesses buying Windows, Software Assurance is no benefit at all from cost-savings perspective.

However, one benefit is commonly used -- and it's one Microsoft likes to keep secret: Many large businesses use annuity contracts to exercise downgrade rights, so they can maintain compatability across the organization. So they buy new PCs with, say, Windows 7 and reimage with XP.

But there are other benefits that Microsoft touts, and few have done much to increase Enterprise Edition adoption. When Windows 7 launched nearly three years ago, OEMs accounted for 80 percent of sales. Since, with Microsoft all but forcing enterprises to take Software Assurance, there has been 5 percent shift. I have argued since Vista's release more than 5 five years ago that the Software Assurance requirement discourages enterprises from deploying newer Windows versions.

Microsoft won't change, because it wants for Windows what it has with Office: The majority of sales are tied to lucrative annuity contracts, not uncertain PC sales.

Enterprise Edition Benefits

Microsoft's Software Assurance stick is hard. What about the carrot? In today's blog post, Erwin Visser breaks down the benefits by features and licensing terms -- but they're really all about licensing. Microsoft makes a choice to license certain features in one Windows 8 edition or another. There is no technical reason, as there might be for hardware, for any distinction. About features, he explains:

• Windows To Go is a fully manageable corporate Windows 8 desktop on a bootable external USB stick. This will allow IT organizations to support the “Bring Your Own PC” trend and businesses can give contingent staff access to the corporate environment without compromising security.
• DirectAccess allows remote users to seamlessly access resources inside a corporate network without having to launch a separate VPN and helps IT administrators keep remote users’ PCs in compliance by applying the latest policies, software updates, is easier to deploy, and it can be implemented with the existing IPv4 infrastructure.
• BranchCache allows users’ PCs to cache files, websites, and other content from central servers, so content is not repeatedly downloaded across the wide area network (WAN). When used with Windows Server 2012, Windows 8 brings several improvements to BranchCache to streamline the deployment process, optimize bandwidth over WAN connections and ensure better security and scalabilty.
• AppLocker can help mitigate issues by restricting the files and apps that users or groups are allowed to run.
• VDI enhancements: Enhancements in Microsoft RemoteFX and Windows Server 2012, provide users with a rich desktop experience with the ability to play 3D graphics, use USB peripherals and use touch-enabled devices across any type of network (LAN or WAN) for VDI scenarios.
• New Windows 8 App Deployment: Domain joined PCs and tablets running Windows 8 Enterprise will automatically be enabled to side-load internal, Windows 8 Metro style apps.

Regarding benefits directly related to Software Assurance:

• Windows To Go Use Rights: Windows To Go will allow companies to support Bring Your Own PC scenarios and will give employees who need to work from home more secure access to their full corporate environment. With Windows To Go use rights under Software Assurance, an employee will be able to use Windows To Go on any company PC licensed with Windows SA as well as from their home PC. Additionally, through a new companion device license for SA, employees will be able to use WTG on their personal devices at work.
• Windows RT Virtual Desktop Access (VDA) Rights: When used as a companion of a Windows Software Assurance licensed PC, Windows RT will automatically receive extended VDA rights. These rights will provide access to a full VDI image running in the datacenter which will make Windows RT a great complementary tablet option for business customers.
• Companion Device License: For customers who want to provide full flexibility for how employees access their corporate desktop across devices, we are introducing a new Companion Device License for Windows SA customers. For users of Windows Software Assurance licensed PCs this optional add-on will provide rights to access a corporate desktop either through VDI or Windows To Go on up to four personally owned devices.

In looking over both lists, I make an immediate observation: The major benefits are all about enabling businesses to better handle different device types. Stated differently: Windows 8 Enterprise is Microsoft's solution to businesses' consumerization of IT problem -- if you can really call it a problem.

Analysts Weigh In

When Microsoft introduced Software Assurance in May 2001, it positioned the annuity license plan for upgrades. But over time, businesses consistently used SA to exercise the aforementioned downgrade rights, while many others chose to pay full price since they wouldn't upgrade any sooner than four years. Microsoft responded by adding so-called benefits, such as home use rights, to tempt more enterprises to Software Assurance. The real question about Windows 8 Enterprise: Are the select features and new SA benefits enough for the bulk of businesses?

"The transition is going to be pretty slow for enterprise", Roger Kay, Endpoint Technologies president told me today. "It always is, and it seems like the pace of OS turnover is slowing as the incremental increase in value of each transition declines (oddly, because the last one was so good)".

In looking at new features, "there is some new value here", Kay says, "but is it enough to stimulate a large-scale transition? The Win7 transition is still under way. So, I'd say first tentative experiments in 2012 and 2013, more adoption in 2014, and flood tide in 2015". Oh? If Microsoft keeps to releasing a new Windows every three years, the tide would like, Windows 8 this year, flood the new version.

DeGroot is a bit more optimistic, but not exactly glowing. He told me today:

Windows RT VDA rights and the Companion device licenses could be very important. While I still think Microsoft's VDI licensing stinks, and this doesn't change it a lot, these new rights are vastly superior to the current SA Roaming Right for Windows, which are ridiculously restrictive. The SA Roaming Right only gives you the right to use third-party devices over other people's networks.

My short description of this is that it gives you the right to access corporate resources only over insecure networks from untrusted devices. These two benefits, in contrast get it right: SA on Win 8 will give customers the added flexibility that they should have been getting all along when they bought SA.

Earlier today, Microsoft refreshed Intune. Licensing changes related to Windows 8 Enterprise are promising.

"The accompanying Windows Intune blot/release says you'll be able to manage up to four addtional devices, and it will cover iPads, Android, etc, at the same $11 a month price", DeGroot explains. "I have always thought Intune was seriously overpriced, but this really can deliver value, and it's much better for mobile devices than using conventional management tools".

That circles back to the actual features and extent of their appeal.

"They've got some new stuff here: AppLocker, probably the VDI stuff (although it would be nice to get a closer look), the sideloading of Metro apps", Kay says. "I imagine Windows To Go and DirectAccess, taken together, make a pretty nice offering".

DeGroot sees Microsoft making an important concession to all businesses that actually diminishes Windows 8 Enterprise's appeal. "The two most important enterprise pieces, BitLocker and the MUI, are in Win 8 Pro and don't require SA anymore. I'm happy to see those changes, but they also reduce the value of SA somewhat", he says.

"The other stuff, like App Locker, DirectAccess, BranchCache, are features that some folks appreciate, but they're not going to drive many people to Enterprise", he adds. "Microsoft is always evolving RDP, and I'll give them credit for an excellent job there, so I'm not sure what additional VDI enhancements SA provides".

Consider all this an introduction to posing the question to you and your IT organization: Is Microsoft promising enough for you to seriously consider adopting Windows 8 Enterprise, particularly if you don't have Software Assurance coverage today?

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