Impact of Windows Server 2012 Licensing

Thanks to Mary Jo Foley of ZDNet/CNet, we have finally heard about Microsoft's licensing plans for the new version of Windows Server 2012 (codenamed "Windows Server 8") to be released this fall. In her article here, she covers the crux of the licensing announcement made by Microsoft but I want to look in depth at it a bit.

When you review the article by Mary Jo Foley, you can start to see some of Microsoft's next plays and whom they are going after with their pricing model and their offerings. As she says in her article:

The four SKUs are Foundation (available to OEMs only); Essentials; Standard and Datacenter. The Essentials SKU is for small/mid-size businesses and is limited to 25 users. The Standard and Datacenter SKUs round out the line-up. The former Windows Server Enterprise SKU is gone from the set of offered options.

Microsoft is removing a few of the SKU's. This includes the Enterprise SKU which was a step between Standard and Enterprise in the 2008/2008 R2 licensing model, the HPC (High Power Cluster) SKU meant for folks doing large scale computing and modeling like scientists or researchers, and the Small Business Server SKU meant for small companies as a bundle. Out of all of these SKU's, I think the biggest loss for most consumers is the Small Business Server one.

Small businesses do not have large capital to drop in large IT systems. As such, they find what they can to fit into their budget but tend to fall back on lower cost or free software to fill in the gaps. When I have worked with small business owners in the past, many had their teenager kids "build them a server" and install a Linux variant on it. The child goes off to school leaving the business to suffer with a server that cannot be updated for either features or security. In my history, about 30-40% of my consulting calls were this exact scenario.

To remedy, I would help them find a server that did cost more but gave them more bang for their buck. In many cases, it would be a commodity server of some sort running Microsoft Small Business Server. It gave the business owner something familiar for them in Windows, but also some more advanced offerings like Exchange and SQL Server. This gave them the ability to run their own messaging and calendaring server in Exchange and higher-end database server in SQL Server. They could buy software that needed one or the other to work to give them a competitive advantage against others that did not have these options. All in all, the Small Business Server was one of the better ideas that Microsoft came up with.

With the V2 release of Windows Home Server, Microsoft also released a Small Business Server related to the Home Server. This was a continuation of the Small Business Server with the Windows Home Server GUI placed on it. It offered easy AD creation, integration with Office 365, and a Premium add-in that gave the business Exchange and SQL on-premise versus only in the cloud. When I saw this offering, I was thrilled for small business owners. This could have been the "Small Business Server Appliance" operating system that could steamroll the market. After its release, all I did hear was crickets chirping and the deafening silence; the product never got off the ground.

Fast forward to Windows Server 2012 and no more Small Business Server SKU announcements today. For a business to replicate this offering,they will need to licensed either Essentials or Standard edition based on if they have more than 25 users. Then, the business will either have to license Exchange 2010/2013 (when released) or get their Exchange offering through Office 365. For the SQL services, the business could use the Express version of SQL for free but be limited by its connections/licensing model or purchase a larger copy of SQL. (For more information on 2012 SQL Licensing, check out the "Features Supported by the Editions of SQL Server 2012" page in MSDN.)

This is much more expensive than the Small Business Server model offered and will cause many small business to go back and rethink their IT strategy. In this one stroke, Microsoft may re-open the door for free packages like Linux and MySQL or have businesses using desktop operating systems as servers. Someone in Redmond needs to really look at this and remember that the small business is a large market for them. Don't just hand it over to the competition.