It's a Virtual(ization) Mystery

Joe Wilcox Microsoft's eleventh-hour switch on Vista virtualization licensing is a case for Nancy Drew—assuming she knows as much about techno-ware as classic wear.

To recap: Earlier this week, Microsoft pre-briefed analysts and reporters about changes to its Vista EULA (end-user licensing agreement) regarding virtualization. Microsoft had restricted use of the Basic and Premium Vista versions in a virtual machine. Microsoft's revamped licensing would have allowed virtualization for both products.

The briefings started on Monday. On Tuesday, Microsoft asked that the embargoed news be held for 24 hours. Later on Tuesday, just before the EULA revision would have been made public, Microsoft did a complete reversal: no changes. Vista Basic and Home licensing would not allow virtualization.

The suddenness of the change is perplexing, and Microsoft isn't giving any explanations—even to analysts, who are more typically in the know.

Julie Giera, a Forrester Research vice president, expressed shock at the rapidity of the policy decision, for which Microsoft would give her no explanation.

"Why?" remains the unanswered question.

I considered some entanglement with Microsoft antitrust oversight as one long-shot possibility and I'm not yet fully convinced that it isn't a factor. Microsoft's virtualization turnabout of the turnabout came the same day the company agreed to make changes to Vista search. My sources say there is no connection, but I'm not fully convinced, even though there is nothing obvious from Tuesday's routine court filing. I'd say at this point I am 90 percent certain that there is no connection.

Besides, Microsoft's legal department would have cleared the licensing changes anyway.

"You don't put together EULA changes and brief reporters and analysts and only then start asking the legal team what they think about it, or the marketing people what impact the changes could have on the business," said Paul DeGroot, Directions on Microsoft lead analyst for Sales, Support and Desktop Strategies.

"It's not clear that the decision really has a strong strategic basis at this point," he added. "The reason I say that is the speed with which the reversal came about. They went from briefing people on it to hitting the brakes on it in about 24 hours. To me it sounds like a seat-of-the-pants decision by a senior manager who hadn't been in the loop or who got cold feet."

But cold feet don't get that way without cause.

"No virtualization for consumers prevents the development of the whole computing-as-a-service business for individuals," said Roger Kay, president of Endpoint Technologies. One of many virtualized business scenarios is the delivery of a full desktop experience to consumers on a subscription/rental basis.

"In the end, what gets prevented is delivering a full-experience PC to a consumer economically," because providers would have to buy Ultimate licenses, Kay said.

In April, Microsoft introduced the Windows Vista Enterprise Centralized Desktop license so that businesses could deliver virtualized copies from a server. The concept isn't so far from what Kay envisions for consumer desktops, although I question how the planned-and-scrapped Vista EULA changes would lead to a similar business-to-consumer service.

Could Microsoft's patent-licensing efforts have been a reason for the turnabout? Microsoft claims that open source violates more than 200 patents—not that anyone in Redmond is saying which ones. Meanwhile, the company has embarked on an aggressive campaign of cross-patent licensing with companies that offer open-source software. But some major Linux distributors, such as Red Hat and Ubuntu, don't plan to enter into patent deals with Microsoft.

Relaxation of the virtualization licensing would allow Windows Vista to run on some Linux distributions, which Microsoft might dislike for patent licensing and competitive reasons. Theoretically, some Microsoft competitors could offer Linux on the desktop along with virtualized consumer Vista versions, even Basic! If compatibility is the Linux-adopting business' goal, even Basic would be sufficient for some businesses. Windows Basic isn't pretty and much of the entertainment stuff—crapware to some IT departments—wouldn't be present. Linux and the virtual machine could provide networking and security features found in Enterprise or Ultimate versions. Basic would cost a lot less than Vista Enterprise, which could be lost revenue to Microsoft.

"Microsoft is very nervous about virtualization on the desktop," DeGroot said. "Their server rules are relatively liberal, while their desktop rules are quite restrictive. They don't know where this is going, and don't want to experiment with their most popular business, so they're being very cautious."

Conspiracy theories make for fun speculation, but they're often off the mark. What if the reason is very simple? Perhaps Microsoft executives thought they were ready, but they missed something that needed fixing. In that case, the EULA changes could still come but would be tweaked to alleviate whatever problem caused the cold feet.

Will we ever know what happened? Maybe someone at Microsoft would tell me if I donned a skirt and said my name was Nancy Drew.

But maybe not.

Related Posts:

• What's Behind All These Patent Agreements?, Microsoft Watch, June 7, 2007
• Open Source: Microsoft's Patent FUD Campaign, Microsoft Watch, May 13, 2007
• Vista Virtualization Goes Back to the Future, Microsoft Watch, April 2, 2007
• VMware Strikes Back, Microsoft Watch, February 26, 2007
• Virtual PC and the Value of Free, Microsoft Watch, February 20, 2007