Microsoft Licensing Part II: Buying Programs

Author: Dave Norwood

I have been explaining the ins and outs of Microsoft licensing for many years.  It is time to put it down in ink.  This is part two of my two part blog.  Part one, published a few weeks ago, was all about Software Assurance.  Part two, below, explains the 5 “buying programs” that Microsoft offers.

Microsoft offers five buying programs.  They are OEM, Retail, Open, Select, and Enterprise.  All have different benefits and restrictions and can be useful.  You just have to pick the right one for your particular need.


OEM licenses come with hardware.  The term OEM means “Original Equipment Manufacturer”.  Meaning the equipment manufacturer pre-installs the software on their hardware.  Most often, the license key is a physical COA (Certificate of Authenticity) in the form of a sticker stuck to the hardware.  When you buy a PC, laptop or server with Microsoft software pre-installed, it is most likely an OEM license.

The benefits of OEM are around price and ease.  OEM prices are normally relatively low.  They are bundled with the hardware so you get extra discounts- it is a way to get you to “default” to the Microsoft software already installed on the gear you purchased.  It is also easy, no big downloads, the software is preinstalled.

The restrictions with OEM software are many.  Most of the time the license “dies with the hardware”.  Think about it, the COA is stuck to the hardware, when you retire the hardware, you throw out the COA/license.  And what if you lost a laptop?  You would have to repurchase the hardware *and* software with OEM.  OEM usually has registration requirements.  Meaning, you must register the software before you use it or before a counter/timer expires.  This is to help prevent software piracy.  Because you can purchase the OEM license anonymously (with cash), it can’t be tacked back to you.  So Microsoft forces the license be registered before use so it would be detected if installed on many machines.   Imaging can also be difficult with OEM (each image would need its own license key) and you don’t get downgrade rights.  Finally, most OEM software can’t be run in a virtual or terminal services environment.

NOTE: By adding SA to an OEM license within 90 days of purchase, you effectively convert that OEM license into an Open license.  See Open licensing below.


Retail licensing is very similar to OEM except you don’t have to buy it with hardware.  You might also hear retail licensing called “boxed” or “shrink wrapped” software.  The idea is you go into your local electronics store and buy the software in a nice retail box.

The only benefit I see of retail licensing is you can go buy it right now (just drive to the store); but its benefit is being reduced by the fact that we all have fast Internet connections and can do big software downloads for even faster access to a new purchase.

On restrictions, most of the restrictions I listed for OEM apply, except with the additional “restriction” that retail usually isn’t very cheap.  Retail is more expensive than OEM but with most of the same restrictions.  Many times it is even more expensive than Open, without the many benefits of Open.  Unless you only need one or two copies of a software package, I personally would stay away from retail.


Microsoft Open licensing is all we sell at TNS (with a few very specific exceptions).  With Open, you purchase a license created just for you.  We get a license certificate in your company’s name and you download the software and install it on as many machines as you licensed, all with one license key.

The benefits of Open are plentiful.  You get one license key that you install on all your machines (up to the number of licenses you purchased).  This makes imaging and license management a snap.  There are no virtualization/terminal services limitations and you don’t have to register the software to use it; and the license does not “die” with the hardware, you can transfer the license to a new machine.  With loss, theft or fire, the license does *not* get lost, the license is stored in the “cloud” on Microsoft’s servers and can always be recovered.  You can choose to add Software Assurance to Open, or not.  Also, the buy-in is very easy; you just have to buy 5 licenses to get into the Open program.  With that small buy-in, for the next 2 years, you can buy as few as 1 license at a time.

The restrictions are very few.  You do have to buy 5 licenses to get into the program.  Also, the license is not anonymous; it is put in your company’s name- this restriction is what allows Microsoft to be so generous on licenses management (single license key for many machines, no registration needed to run software, etc.).  The license can be tracked back to the purchasing company, so don’t let your Open keys get into the “wild.”


The Select Agreement is designed for companies with 250 users or more.  It is based on your license volume and is non-binding.  Basically, you tell Microsoft how much you plan on buying in the next 3 years.  Based off that predicted volume, Microsoft puts you into a price band, better discounts for higher predicted volume.  In year one, you purchase your needed licensing on the Select Agreement at the set price band “as you go”.  At the end of one year your actual purchases are reviewed and if you have purchased approximately 1/3 of your 3 year predicted purchase, you are left at the set price band.  However, if you purchase much less or much more than 1/3 of your 3 year goal, you can get “re-leveled” and put into a price band that more matches your actual spending.  The good news is, they don’t go back and ask you to pay the delta for your year 1 purchases if your discounts were lowered for years 2 and 3.

You get the same benefits of Open with the *possibility* of lower pricing (depends on the price band).  My experience has been that unless you are making a really big purchase, you can get the same pricing (even better) with Open without going through the process of signing up for a Select Agreement.


An Enterprise Agreement (EA) is only for companies with 250 or more employees.  It is a binding 3-year contract and you must have Software Assurance on all the licensing.  The “buy-in” is purchasing 250+ licenses for your employees at once plus signing an EA contract.  Once under contract, you can install and run most any Microsoft Server/Office/Desktop software without first purchasing it.  Once a year you must do a “true-up” and document what software you are running and how many instances.  Microsoft then adjusts your EA fees to match the software you are now running.

The benefits of an EA are around pricing and easy access to Microsoft licenses.  For a large organization, an EA can offer very attractive discounts and, this is the only program that you can run most any software without first purchasing it up-front.  During the yearly “true-up” you get charged for the software.

The restrictions are the limit of at least 250 users (large buy-in) and you must buy Software Assurance on everything.

I hope this helps you understand the basics of Microsoft’s licensing programs.  In the end, you might want to talk with a Microsoft Gold partner (Trusted Network Solutions) and/or Microsoft Certified Licensing Professional (me and many of my staff) to do a deep-dive into your particular licensing needs.  Drop us a line, we’re here to help.

NOTE: I am not a Microsoft employee nor do I know *all* the ins and outs of Microsoft licensing.  This is just my interpretation of the rules.  In no way am I speaking on behalf of Microsoft or offering legal advice.  Also, the rules change as new versions are released and new technologies change how things are done (example: virtualization).

Author: Dave Norwood

About Trusted Network Solutions:

TNS is a leading Value Added Reseller providing secure network systems and solutions to the SMB and enterprise markets. TNS offers best-of-breed technical solutions acquired, installed, secured, and maintained using the most cost effective methods available.


Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s