'No free lunch' with Office on Windows RT for business, says analyst

Bundled apps on Surface RT cannot be used for work without tying them to another Office license, Microsoft confirms

Microsoft confirmed Wednesday that owners of Windows RT hardware, including the company's own Surface RT, must acquire a commercial license for Office 2013 to use those devices' bundled Office apps at and for work.

The requirement isn't new, analysts said, and is consistent with current Microsoft policies related to Office versions designed for consumers.

Windows RT comes with four touch-enabled apps -- Word, Excel, PowerPoint and OneNote -- that combined to form Office Home & Student 2013 RT Preview. The scaled-down suite is included with each copy of Windows RT, the touch-first spinoff of Windows 8.

Microsoft plans to update the preview to final code via Windows Update, but has not set a date. Steven Sinofsky, who leads the Windows division, has only said that it would be "soon."

Because the RT version of Office is not designed for businesses -- the name gives that away -- it, like its cousin, Office Home & Student 2010, is not licensed for "commercial, nonprofit, or revenue-generating activities," according to Microsoft.

In other words, legally it cannot be used for work purposes.

To use Office Home & Student 2013 RT in a commercial setting, it must be tied to another Office license that is.

"Organizations who purchase commercial use rights or have a commercial license to Office 2013 suites can use Office Home & Student 2013 RT for commercial, nonprofit, or revenue-generating activities," Microsoft explained in a statement, and in an FAQ on the company's website that was revised Wednesday.

ZDNet blogger and longtime Windows watcher Mary Jo Foley first reported on the fine print.

Those rights can be acquired through some of the upcoming Office 365 subscriptions aimed at businesses -- which for a flat yearly fee let a worker run Office 2013 on up to five different devices -- by purchasing a higher-priced perpetual-licensed copy of Office Standard 2013 or Office 2013 Professional Plus; or by having an Office volume licensing contract, such as the annuity-like Software Assurance, in place.

In other words, to use Office Home & Student 2013 RT on a Windows RT tablet, businesses must have another, corporate-class license in place for the employee, even if the device is owned by that worker.

Microsoft made it clear who was to write the check. "Organizations, not individuals, are responsible for their licensing agreements," a company spokeswoman said in an email reply to questions Wednesday.

Microsoft's licensing policies and practices are arcane -- consultants specialize in explaining them to businesses -- but the requirement may have caught some by surprise.

"This issue is really the most significant for [users at] small/medium businesses who thought they could get a Windows RT device and not need to pay for Office," said Wes Miller, an analyst at Directions on Microsoft who follows Office for the research firm. "[But] there is no free lunch."

Those users -- and potential buyers of Windows RT hardware, including Microsoft's Surface RT, which shifted into pre-order mode Tuesday -- may have read the accounts this year that noted the inclusion of Office with Windows RT, and which cited analysts who said the deal could be a money-saver for business, which would get the suite for "free."

But Microsoft's customers, especially large organizations, should have, in fact, may well have, expected this.

"This isn't new," said Miller. "[Office] Home & Student has always had these limitations. The issue arises because it is integrated into Windows RT, and consumers could unwittingly buy a device with Windows RT thinking 'I have Office,' do commercial work on it, and then fail to be within the license guidelines."

Daryl Ullman, the co-founder and managing director of the Emerset Consulting Group, which helps companies negotiate software licensing deals, echoed Miller.

"No, this isn't a surprise. Microsoft has the same rules, although they're named differently, for an Office OEM license," said Ullman in a Wednesday interview, referring to copies of Office that are factory-installed on new PCs. "If Office is pre-installed on a device, [its license] is not sufficient for use in a business."

Microsoft has been making what Ullman called a "very subtle but very meaningful shift" in their licensing policies, edging away from the desktop PC as the center around which licenses revolve, and toward a more inclusive definition that stresses "devices" instead.

"Every device, whether it's a mobile [phone], tablet, desktop, notebook, are now required to be counted in the overall volume licenses [that a company pays for]," said Ullman. That's been driven by, among other factors, the "bring-your-own-device" (BYOD) movement to incorporate employee-owned hardware into businesses, as well as the growth in smartphones and tablets, and a corresponding slump in traditional PC sales.

The requirement to own or pay for an additional, enterprise-quality Office 2013 license to use Office 2013 RT at work is "just more of the same," said Ullman.

"Microsoft is not going to compromise their volume licensing revenue," said Ullman, referring to the license linking demand. "They will protect that with whatever means are available."

The bulk of Microsoft's Office revenue comes not from retail sales of the suite, but from enterprise licensing agreements.

"If they undermined that [by giving away Office RT], they would start losing revenue rather than increasing it," Ullman added. In response, Microsoft has inserted new language into its commercial contracts that allows Software Assurance plans or Office 365 subscription programs to bring Office 2013 RT into the workplace as an enabled device.

Like Miller, Ullman said the additional license, or as Microsoft put it, "use rights," may catch some potential customers off guard.

"Buying a Windows RT device is not going to reduce costs," he said of Office 2013 RT's bundling. "That may make some more apprehensive about buying, rethink the value proposition, and perhaps look at competitive devices instead."

Some use cases, he admitted, were tougher to call. What if an employee used her Surface RT tablet, and its Office 2013 Home & Student RT suite, to create documents for work, but did that at home. Was that allowed without an additional license?

"That gets into a very complex issue," said Ullman. "Are you connecting at all to the corporate network, or is this a stand-alone device? Working on a document at home, for work, that's one thing. But if you're accessing the network through a remote protocol, then you're really getting into a corporate licensing issue. The license for Office RT, that then isn't sufficient."

Miller, too, highlighted some iffy areas. "Depending on how you license the server-side technologies of Office, you could also still need Client Access Licenses (CALs). Those aren't included in the Office applications either," Miller said.

Microsoft's expanded Office 365 Portfolio -- it will eventually have six in place by the end of next month, Foley said -- will be one way to gain commercial-use rights for Office 2013 RT.

Office 356 Small Business Premium, for example, will cost $12.50 per month, or $150 annually, per user, for the right to run Office on up to five devices, effectively granting five licenses to that worker. One of those five licenses could conceivably be used to "unlock" a Surface RT tablet's copy of Office 2013 RT for business purposes.

Microsoft has said that those devices can include "select mobile devices" but has not defined what those devices will be.

Another option: Buy a copy of Office Standard 2013 or Office Professional 2013. While neither have been released, the pair will sell for $369.99 and $499.99, respectively. The cheaper $219.99 Office Home & Business 2013, while licensed for commercial use, won't unlock Office 2013 RT.

As Direction on Microsoft's Miller so succinctly put it: There is no such thing as a free lunch.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

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