Microsoft adds rental option for Office, Windows

Microsoft addressed a gap in its product licensing for businesses that rent out PCs by announcing an extra, one-time fee for Office and Windows.

Although countless kiosks, Internet cafes and business centers already rent time on Windows-based computers, the Microsoft Partner Network Web site indicates that Windows and Office system licenses do not permit renting, leasing, or outsourcing the software to third parties. Those that have done so have not been compliant with license requirements.

"Rental Rights are a simple way for organizations to get a waiver of these licensing restrictions through a one-time license transaction valid for the term of the underlying software license or life of the PC," according to the site.

Microsoft announced the new "Rental Rights" licensing on Jan. 1 for Windows and Office, adding it to the list of license types available worldwide. The company also announced a 30 percent discount on the license fees, available until June 30. With the discount, Rental Rights fees per software copy are $58 for Office Professional, $45 for Office Standard and $23 for Windows.

Enterprise customers won't be affected by the new pricing. However, the Rental Rights costs will be an additional expense for hotels, small businesses and office equipment leasing companies. Unaffected organizations include libraries, academic institutions, internal use (shared PCs) or traditional financing, such as rent-to-own programs.

Microsoft is merely plugging a hole in its licensing, according to Scott Braden, an analyst with NET(net) Inc.

"In the past, these types of business have skirted the gray areas of the license rules — and in many cases stepped right across the line, since the Microsoft EULAs do clearly prohibit rental of the software," he stated in an e-mail. "I see this as a relatively minor announcement for many customers, but quite significant to those companies who are affected."

While the one-time fee is not significant for many businesses, major outsourcers may take a hit, Braden said. For example, for a company that has outsourced 2,000 PCs, Rental Rights fees will tack on roughly $50 per Office license in volume. The result is an unbudgeted $100,000 cost, due immediately.

Still, rental companies likely will be able to recoup the difference, according to Paul DeGroot, an analyst with Directions on Microsoft.

"I calculate that if you charge an extra 25 cents an hour and a PC gets used two hours a day during business hours, you'll get your money back in a bit over a year," he said.

Previously, companies renting out computers would have had to pay a monthly subscription fee through Microsoft's Services Provider Licensing Agreement (SPLA). Microsoft has considered alternatives. In 2006, Microsoft researched "pay-as-you-go" licenses in several countries in which users could choose three- or six-month subscriptions.

DeGroot said that companies that rented out computers without licenses faced a difficult decision in the past — choosing between the SPLA or shutting down. If enforcement had been too rigorous, DeGroot said, many would have chosen closure or, less likely, would have switched to Linux and OpenOffice.org.

DeGroot calls the new Rental Rights licensing a "velvet glove" approach to enforcement.

"For not a lot of extra money, you can keep doing what you're doing, but with Microsoft's blessing," he said. "I can't see it having much impact on upgrades, but it could have a measurable financial and antipiracy impact."

The idea of Microsoft issuing a new fee for something that was previously tolerated at no charge has met with critical opinion, although industry watchers have been more positive.

DeGroot noted that the agreement allows organizations that rent computers to get legal at a relatively low cost. In addition, Rental Rights are much more straightforward than SPLAs, which require legal review and special software to track license use. "This is a lot simpler, especially for a little guy," he said.

Companies with seasonal businesses involving holidays or tax time may find short-term rentals particularly attractive. Also, DeGroot suggested, because the one-time payment is simple, it could encourage new rental-only computer businesses in places like coffee shops and laundromats.

Both DeGroot and Braden said they were surprised that only Windows and Office are covered under the new licensing arrangement.

DeGroot suggested that Microsoft could consider making a broader product set available.

"People who need Visio and Project only occasionally, for example, might find it handy to sit down at a rental machine for the time they need them," he said. "It would also be interesting to see other vendors get into this game, notably Adobe."