Despite customer frustration, Microsoft might be among the friendlier companies when it comes to virtualization licensing terms. The recent report by the Burton Group said Microsoft is one of five management application vendors that provide virtualization-friendly licensing, along with HP, Opsware, Sun and Symantec. However, Burton also said Microsoft does a poor job in licensing virtual instances of client/erver and middleware products. Microsoft customers who use Exchange Server 2007 and SQL Server 2005 are allowed to move virtual machines between physical servers only once per 90 days, Burton noted.

For Windows Server 2003, Burton said Microsoft generally offers good licensing terms, except when it comes to moving a virtual machine from one physical server to another. This requires a license transfer.

Burton analysts argued that punitive licensing terms may stall adoption of server virtualization. Punitive terms found across the marketplace range from supporting only certain hypervisors to tying licenses to specific hardware components or penalizing customers for maintaining offline copies of virtual machines for disaster-recovery purposes.

James Norwood, vice president of product marketing at Epicor, notes that customers are asking for better licensing terms on virtual servers.

"Our customers are asking for it," he said. "We are a Microsoft shop but all our customers are heavily invested in VMware. It's a challenge."

Norwood was speaking at another Forrester session that covered several topics related to software licensing. The panel also featured Microsoft's Jason Kap, general manager of licensing and pricing, who said vendors want to prevent getting short-changed when customers move to virtualization. Applications still have value to the customer, even if they are running on a virtual machine rather than "on metal," he said.