Microsoft Senior Sales Excellence Manager - Eric Ligman

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OEM Software. Let's Set The Record Straight...

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OEM Software. Let's Set The Record Straight...

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Over the past several months this topic seems to continue to arise and the amount of misinformation and illegitimate offers appears to grow and grow which causes much confusion for those who are truly looking to acquire legitimate Microsoft software. As such, I hope to help set the record straight on some very common misinformation that is floating around out there so that you know what is right and wrong in the hopes of clearing up much of this confusion.

First, one resource you may want to check out is the, "Things you NEED to know about OEM software. MANY misconceptions exist today," video we have posted on the Microsoft Small Business Channel Community Site: http://www.mssmallbiz.com in the Common Question and Misconceptions section. Many of these topics are discussed in there. In fact, we have several videos posted in this section regarding different topics which seem to come up quite often. Ok, back to the post at hand...

1) Can OEM Microsoft software be purchased by itself or with "some hardware" such as a hard drive, etc.?
- ANSWER: If you are buying OEM Microsoft Server or Application software (such as Windows Server, Small Business Server, Office, etc.), then the answer is No, you cannot purchase legitimate OEM Microsoft Server or Application software this way. Note, I did state "legitimate" OEM Microsoft software. I am fully aware that there are people out there offering to sell you OEM Microsoft Server or Application software this way, but realize that legitimate OEM Microsoft software can NOT be sold this way. In fact, in the Microsoft System Builder Agreement, it specifically states, "If the individual software license is application or server software, we grant you a nonexclusive right to distribute individual software licenses; provided that each one is distributed with a fully assembled computer system." Note the requirement, it must be sold with, "A FULLY ASSEMBLED COMPUTER SYSTEM." And did you know that in the OEM End-User License Agreement (EULA), there is a clause that states that if you acquire the OEM software without the qualifying hardware (in this case a fully assembled computer system), you cannot use the software? In essence, you own NOTHING if you purchase it separate from a fully assembled computer system. Did the company you found at www.(insert your search engine of choice).com where you saw the OEM software by itself tell you that? They should have, because ultimately they are selling you nothing that you can legally use for whatever price they have listed.

If it is an OEM Microsoft Desktop Operating System (such as Windows XP Pro or Windows XP Home), then it must also be sold only with a fully-assembled computer system as well (as of September 1, 2005), just like OEM server and application software.  Prior to September 1, 2005, an OEM Desktop Operating System license could be sold with specific individual hardware components. These specific hardware components were defined as a nonperipheral computer hardware component... A "nonperipheral computer hardware component" means a component that will be an integral part of the fully assembled computer system on which the individual software license will be installed.." So, prior to September 1, 2005, an OEM Microsoft Desktop Operating System license (such as Windows XP Pro or Windows XP Home) could be sold with a hard drive, motherboard, CPU, memory, etc. if that hardware component is being used in the computer that the Desktop Operating System software is being installed. Many unscrupulous dealers out there will try to convince you that just because a Desktop Operating System used to be able to be sold with individual hardware components, the same is true for Office or Servers. This is NOT true and do NOT believe them. As you can see from the two paragraphs above, they had very different hardware requirements that they must be sold with and No, noone has a "special arrangement with Microsoft" to distribute it outside of these rights.  As of September 1, 2005 though, there is the same requirements for OEM Applications, Servers, and Desktop Operating Systems.  All must be sold with a fully-assembled computer system.  You can read more about these changes that took place on September 1, 2005 in our two other posts:

- OEM Microsoft Office Licensing Changes You Need To Know About! - Posted September 7, 2005
- OEM Microsoft Windows (including XP Pro and XP Home) Licensing Changes You Need To Know About! - Posted September 7, 2005

2) Why are companies allowed to advertise OEM Office and Server products separately from a fully assembled computer system then if they cannot be sold separately?
- ANSWER: They aren't. In the Microsoft System Builder Agreement, it specifically states, "You must not advertise, provide a separate price for, or otherwise market or distribute individual software licenses, or any part of them, as separate items from the fully assembled computer system or nonperipheral computer component." So if you see OEM Microsoft software advertised without the qualifying hardware with it (For OEM Office or Servers the qualifying hardware is a fully assembled computer system. For OEM Desktop Operating Systems the qualifying hardware is a fully assembled computer system or a non-peripheral computer hardware component that will be an integral part of the computer system it is installed on), do NOT buy it. Red flags should go up and alarm bells should go off if you see someone selling something that cannot be sold. What are the odds that the software is legitimate if it is being sold in direct violation of our terms? If the supplier tells you they can sell that way, either they have no idea on what constitutes a legal sale of Microsoft OEM software or they are lying to you. Do you feel comfortable with either of those options? Remember, if you buy the OEM software without the qualifying hardware, the OEM license itself states that you cannot use the software. So why spend money on something you cannot use?

3) I am a System Builder and want to buy OEM Microsoft software for the machines I build. Where should I buy it from?
- ANSWER: Microsoft has authorized OEM Distributors who are eligible to distribute legitimate OEM software to dealers such as yourself for you to include with the PC Systems you build. You can find the list of Authorized OEM Distributors for your country at: http://www.microsoft.com/oem/authdist/default.mspx.

4) Can I uninstall my OEM software from one machine and install it on a new or replacement machine?
- ANSWER: No. OEM software has no transferability of license rights. This is not new and has been the case for a long, long, long, time. Look in your End-User License Agreement (EULA) for your OEM software. You will notice it does not include Transferability of License Rights. This is just one of the many differences between OEM and Retail or Volume License software. For a more in-depth comparison of the various licensing types, I would recommend either viewing the, "What is the difference between OEM, Retail Box, and Volume Licensing software? Which is right for me?" video we have posted on the Microsoft Small Business Channel Community Site in the Common Question and Misconceptions section or read through the, "Open vs. Retail Print Version" document we have posted in the MS Small Biz Shared Documents section of the Microsoft Small Business Channel Community Site.

5) Can I install a previous version of the OEM software I purchased on my machine? (i.e. I purchase a computer with OEM Microsoft Office 2003. Can I use Microsoft Office XP instead?)
- ANSWER: The only OEM Microsoft software products with the rights to load a previous version instead are SBS 2003 Premium Edition (which allows you to "downgrade" to SBS 2000) and Windows XP Professional, which allows you to "downgrade" to any prior Desktop Operating System back to Windows 98. (You can learn more about the downgrade rights associated with Windows XP Professional in the, "What is different about the OEM Windows XP Professional EULA from all other OEM EULAs?" video we have posted on the Microsoft Small Business Channel Community Site in the Common Question and Misconceptions section. This is a clip from one of the live training sessions I have given in the past that was recorded. The clip on this page is just around the changes to the Windows XP Professional OEM license that we made.)

As for other OEM Microsoft software products, OEM software has no downgrade rights. This means that the OEM version of software that you purchased on your machine, that is the only version you are entitled to run. This is not new and has been the case for a long, long, long, time. Look in your End-User License Agreement (EULA) for your OEM software. You will notice it does not include Downgrade Rights. This is just one of the many differences between OEM and Retail or Volume License software. For a more in-depth comparison of the various licensing types, I would recommend either viewing the, "What is the difference between OEM, Retail Box, and Volume Licensing software? Which is right for me?" video we have posted on the Microsoft Small Business Channel Community Site in the Common Question and Misconceptions section or read through the, "Open vs. Retail Print Version" document we have posted in the MS Small Biz Shared Documents section of the Microsoft Small Business Channel Community Site.

6) I have an OEM license for Microsoft Office (or any other OEM Microsoft application). Can I use that license to run Office off a server on a network?
- ANSWER: No. OEM software has no network storage and use rights. This is not new and has been the case for a long, long, long, time. Look in your End-User License Agreement (EULA) for your OEM software. You will notice it does not include Network Storage and Use Rights. This means that the OEM software license is only allowed to be installed on that machine from that machine's CD/DVD drive (there are no network installation rights either) and it must be run on that machine only. This is just one of the many differences between OEM and Retail or Volume License software. For a more in-depth comparison of the various licensing types, I would recommend either viewing the, "What is the difference between OEM, Retail Box, and Volume Licensing software? Which is right for me?" video we have posted on the Microsoft Small Business Channel Community Site in the Common Question and Misconceptions section or read through the, "Open vs. Retail Print Version" document we have posted in the MS Small Biz Shared Documents section of the Microsoft Small Business Channel Community Site.

7) What if I bought Software Assurance for my OEM software? Does that change anything?
- ANSWER: Yes. Purchasing Software Assurance for your OEM Office software (No OEM version of Microsoft Office prior to Office 2003 qualifies for Software Assurance. With OEM Microsoft Office 2003, you have 90 days after purchase of your OEM Microsoft Office 2003 software to add Software Assurance), purchased with qualifying hardware, does provide you with full Volume License rights for your Microsoft Office software. You can see a side-by-side comparison of these rights pre and post Software Assurance in the, "Office Rights" document we have posted in the MS Small Biz Shared Documents section of the Microsoft Small Business Channel Community Site. You can also learn more about Software Assurance itself at: http://www.microsoft.com/licensing/programs/sa.

8) Is there an online seminar on licensing I can view to learn more about these items?
- ANSWER: Yes. Microsoft offers many licensing seminars to try and address these types of questions. We have several recorded session on the Microsoft Small Business Channel Community site that you can view in the "LiveMeetings" section of our site (http://www.mssmallbiz.com/LiveMeetings/Forms/AllItems.aspx) such as:
1) Full licensing seminar - "Understanding MS Licensing To Save Money" presented on December 9, 2004 by Eric Ligman
2) "Microsoft Partner Readiness: SMB Licensing Basics 101" - Presented February 10, 2005 by Eric Ligman
3) "Microsoft Partner Readiness: Acquiring The Best Licensing For Your Customers" - Presented February 17, 2005 by Eric Ligman
4) "Microsoft Partner Readiness: SMB Product Licensing Drilldown" - Presented February 24, 2005 by Eric Ligman
5) You can also read many of the documents contained in the MS Small Biz Shared Documents section of the Microsoft Small Business Channel Community Site: http://www.mssmallbiz.com for additional tips & tricks and information on Microsoft software licensing.

There are also all of the videos in the Common Question and Misconceptions section of our site (http://www.mssmallbiz.com), along with the Microsoft Small Business Center (http://www.microsoft.com/smallbusiness/buy/software/detail.mspx) and the Microsoft Events Website: http://www.microsoft.com/events.

Hopefully the information contained above helps clarify several of the questions and misconceptions that are out there. If it helps even a handful of you save your company's money from being thrown away on some vendor offering you OEM software without the qualifying hardware so you can't legally use it or helps you understand what your rights truly are with OEM software, then the time to write this post will be well worth it. I know everyone is looking for that one "great deal" or "diamond in the rough" supplier; however, please realize that there are MANY companies out there who know this and will prey upon unsuspecting people to get your money by telling you what you want to hear. If it sounds too good to be true, it probably is.

Thank you and have a wonderful day,

Eric Ligman
Microsoft US Senior Manager
Small Business Community Engagement

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