By Paul DeGroot [bio]
Posted: May 26, 2008

• Illustration: Multiplexing and Upgrades

The following is the full text of an article published by Directions on Microsoft, an independent research firm focused exclusively on Microsoft strategy & technology. More samples of our content, as well as a list of upcoming articles and reports are also available.

Multiplexing and pooling reduce the number of devices or users that directly access Microsoft servers, and Microsoft has rules in place to ensure that customers purchase enough Client Access Licenses (CALs) for servers that require them. Microsoft's definitions of multiplexing and pooling have become broader, however, triggering new CAL requirements. The changes could substantially boost Microsoft's revenues, but they are complex and Microsoft has not documented all of them. Customers should not undertake upgrades or staged migrations without written commitments from Microsoft and a clear understanding of the multiplexing rules, or they could find themselves liable for unbudgeted costs.

Multiplexing and Pooling

Multiplexing and pooling refer to techniques used to reduce the number of physical or logical connections between two points through some form of sharing.

Multiplexing is best known as a telecommunications technology—multiplexors are used to aggregate multiple signals so they can be sent across a single wire, with signals kept separate by giving each a slice of transmission time or a dedicated frequency. The consolidated signal is disaggregated at the transmission endpoint.

Pooling tackles a different problem, scarce IT resources, by sharing resources among many users or devices. A common use of software pooling is managing database connections. The processing overhead of opening the database for a transaction is high, and developers or database administrators often set up a pool of connections that can be reused.

Microsoft says customers cannot use these technologies to escape client licensing requirements by inserting some intermediary or proxy between clients and servers, such that only the proxy directly accesses the server.

For example, organizations commonly use pooling to reduce the number of clients that directly connect to SQL Server databases, since each time a connection is made it consumes additional server resources. A SQL Server used by 100 employees might be programmed to create 25 connections and place them in a pool, and each request to the database uses a connection from the pool. In this scenario, the customer must license 100 SQL Server clients, even though only 25 connections are used.

Note that the type of data stored in the database is not relevant to the question of whether the client is "accessing" the database or not. For example, a database used by a server-based antivirus application to hold metadata (OS edition, virus signature date) about client workstations still requires the clients to be licensed, even though the clients will never write to or query the database (since any client application can get the data directly from the client itself).

Exceptions to the Rules

The client licensing requirements for indirect access can be dealt with in several ways, including per-processor licenses, embedded licenses, and processes that interrupt access to the server and eliminate the requirement for client licenses.

Per-Processor Licensing

Microsoft server applications licensed per processor do not require further client licensing: they can be accessed by as many users or devices as the application server can handle.

For example, an organization with 100 users who access SQL Server either directly or through pooled connections can purchase a per-processor license for SQL Server, at significantly lower cost than if they bought a server license for each server and a CAL for each client. Licensed on a server-CAL basis in this scenario, SQL Server Standard Edition and 100 CALs would cost US$17,085. Licensed per processor, the same requirement could be met for US$5,737 (on a single-processor server).

SQL Server is the only Microsoft server application server that can be licensed both in server-CAL mode and per-processor mode; other servers that require CALs, such as Exchange, SharePoint, and Windows, are available only on a server-CAL basis. (Windows Server Datacenter Edition is sold on a per-processor basis, but still requires CALs.)

Embedded Licenses

As Microsoft began designing many of its server products to store critical information in an external database (and encouraged ISVs to do the same), the company needed a consistent way to license clients that leverage SQL Server indirectly through another server application.

In general, Microsoft treats this as a form of pooling and requires customers to have a license (and client licenses, if necessary) for the application server that they access directly, and also for the SQL Server that they access indirectly.

However, this could have led to customers adopting other external databases, such as free editions of the open source MySQL database, so Microsoft developed hybrid offerings that combine an application server license with a SQL Server license and that waive the requirement for separate SQL CALs.

For example, one edition of Configuration Manager—Configuration Manager 2007 with SQL Server 2005 Technology—includes a copy of SQL Server but requires no CALs. This copy of SQL Server can be used only with the licensed copy of Configuration Manager 2007; it cannot be used to store data from other applications, such as an enterprise search database.

Interestingly, when Microsoft waives the CAL requirement it does not make up the lost CAL revenue elsewhere, as shown by the price difference between a Configuration Manager edition that includes a SQL Server license and an edition that does not. For example, purchased by itself, Configuration Manager 2007 costs US$573; with SQL Server 2005 Technology, the cost is US$1,307, a difference of US$734—that's actually US$151 less than the cost of purchasing a stand-alone server license for SQL Server Standard Edition with no CALs.

Other products available in an edition with SQL Server are the Forefront Client Security Management Console, Mobile Device Manager 2008, Operations Manager 2007, System Center Essentials 2007 (a midmarket product for patching and monitoring devices), and Visual Studio Team System 2008 Team Foundation Server.

Third parties who want the same deal can get it through Microsoft's ISV Royalty Licensing program. It lets ISVs embed SQL Server in their applications and pay a royalty for each copy of the server sold, without triggering client license requirements.

Breaking the Connection

In many situations, access to a server is interrupted by a business process or procedure, thus eliminating the need for a client license. A common example is one in which a user captures output from a server and then transmits it to other users via e-mail or by posting it on a file server or Web portal.

For example, a client that accesses SQL Server reports directly via SQL Server Reporting Services needs a SQL Server CAL, or SQL Server must be licensed per processor. However, if reports are sent to an assistant who then e-mails them to others or posts them to a file server, only the assistant needs a CAL. Microsoft's multiplexing rules apply to "hardware or software" that reduces the number of devices or users that directly access a server, but not to human processes that interrupt direct connections.

In one case, Exchange 2007, the use of a specific network protocol, the Simple Mail Transport Protocol (SMTP, used by the popular POP and IMAP mail protocols), "breaks" the connection and eliminates the need for CALs, Microsoft says.

Expanding Multiplexing's Reach

With the advent of Exchange 2007, Microsoft has significantly extended its definition of multiplexing.

The company has always required that a CAL version be equal to or greater than the server version that clients access. For example, an Exchange Server 2003 CAL is required for access to an Exchange Server 2003 and can also be used to access earlier versions of Exchange. If an organization had Exchange 2000 in New York and Exchange 2003 in Tokyo, the New York clients would require Exchange 2000 CALs and the Tokyo clients would require Exchange 2003 CALs.

With Exchange 2007, however, the rules have changed: Microsoft now requires that all clients on a network must have CALs that match the latest version of a server anywhere on the network, as long as the server "shares functionality." (See the illustration "Multiplexing and Upgrades".)

While the meaning of "shared functionality" may be mysterious, in practice it means that if the office in Tokyo upgrades to Exchange 2007, it triggers a requirement for Exchange 2007 CALs not only in Tokyo but also in New York. Furthermore, in what Microsoft says is an effort to bring consistency to its licensing policies, it now applies the same policy to all servers that are licensed with CALs. Thus, if the Tokyo Exchange Server is also upgraded to Windows Server 2008, the New York office must also upgrade its Windows Server CALs, even if its local clients only directly access earlier versions of those servers.

Note that the SMTP rule can break the connection for Exchange 2007, but not for other servers. Thus, if our example organization has a Hong Kong office that uses SMTP to connect to the Tokyo office it is not required to upgrade from earlier CALs to Exchange 2007 CALs, although it may be required to update other CALs.

The company has not updated its licensing rules, such as the Product Use Rights, to specifically note the change—the change is based primarily on redefining internally the meanings of "multiplexing" and "indirect access." The Exchange SMTP exception will be included in the end user license agreement in a future version of Exchange, however.

Changing Economics of Upgrades

The practical implications of Microsoft's multiplexing and pooling rules are far-reaching.

The impact on customer licensing costs is likely the most significant: faced with the need to ensure that all clients are properly licensed for all of the servers that might be running on the corporate network, most customers will find it easiest—if most expensive—to sign all-encompassing volume license agreements, such as Enterprise Agreements that include the Enterprise CAL suite, a bundle of CALs for 11 Microsoft servers and services that includes Software Assurance upgrade rights. This eliminates much of the risk that a customer will go out of compliance or will face unexpected extra costs if they undertake an incremental server upgrade.

Customers who want to avoid significant licensing cost increases clearly have a harder row to hoe if they want to avoid triggering companywide CAL upgrades.

Careful upgrades. Customers should plan any server upgrades very carefully, using trial versions of the software on isolated networks to ensure that upgraded servers do not go into production before the organization has purchased the requisite number of CALs.

Wait for the rules. In general, organizations should not complete their planning for an upgrade until the server has become generally available and the End User License Agreement has been published. It may contain exceptions or specific requirements that affect network design, server configuration, or licensing of other servers and clients.

Licensing compliance. In the past, Microsoft has said that to prove licensing compliance, customers need to document the number of licenses they purchase and the number of devices or users that employ them. But customers should also document network architectures, server configurations, and even business processes if they want to avoid tripping over rules regarding indirect access to servers.

Get it in writing. Microsoft says any customers who have questions about undocumented rules, such as the Exchange SMTP exception, should contact the company for guidance, since the rule is not documented and may not be for a year or more.

Relying on undocumented rules in commercial transactions is not only extraordinary (particularly in areas that touch on contracts and intellectual property, as volume licensing does) but dangerous. Undocumented advice from a Microsoft salesperson or licensing adviser may not suffice over the long term, as both customer and Microsoft personnel change and new rules come into effect. Customers will need dated and signed documentation of their communications with Microsoft to ensure that upgrades, network architectures, server configurations, and business processes are licensed consistently with advice they received from the company, since no other documentation may be available.

ISV implications. ISVs that build on top of Microsoft servers need to be aware of the implications of design choices that could trigger a CAL requirement because of indirect access rules, and significantly increase the cost of their product.

Resources

The latest Product Use Rights, licensing briefs, product lists, and other licensing information can be downloaded from links at www.microsoft.com/licensing.

The ISV Royalty Licensing Program is described at www.microsoft.com/licensing/programs/isv/default.mspx.