Microsoft does a virtual 180 -- no, wait, a 360

On verge of dumping disliked Vista virtualization restrictions, company changes mind

After briefing reporters and analysts about a plan to cut controversial restrictions on how consumers can virtualize its new Vista operating system, Microsoft Corp. on Tuesday night pulled a second 180 at the last moment, saying it would stick with its current policy.

Using desktop virtualization software such as VMware Inc.'s VMplayer, Microsoft's Virtual PC, or Parallels Inc.'s Desktop for the Mac, users can create virtual copies of a PC, including the hardware, operating system and applications, that can run on top of another operating system or be transported to another machine. In the case of Parallels, that can even mean Windows XP or Vista-based virtual machines, or VMs, that run on top of Macs using Intel processors.

Microsoft planned to let consumers create VMs using retail versions of Vista Home Basic and Vista Home Premium. Those cost $199 and $239, respectively.

Microsoft's contracts, known as End User Licensing Agreements (EULA), only allow full retail versions of Vista Business or Vista Ultimate to be run as virtual guests of a host PC. Those cost $299 and $399, respectively.

This simple change in Microsoft's license -- there was no technical limitation preventing knowledgeable users from virtualizing retail versions of Home Basic or Home Premium -- would have saved customers at least $60 and up to $200.

The allure of virtualized Vista

Besides boosting flagging perceptions of Microsoft's overall virtualization strategy, the move would have made Vista virtualization much more attractive to a key and growing segment: Intel Mac owners who want to run Windows software.

"This is aimed at virtualization enthusiasts, and that includes consumers wanting to run Windows on Mac hardware, absolutely," said Scott Woodgate, a director in the Windows Vista team, in an interview on Monday before Microsoft's reversal.

According to Chris Swenson, software analyst for NPD Group Inc., almost one in ten PCs sold today at U.S. retail stores is a Mac.

Renton, Wash.-based Parallels has sold half a million copies of its software that lets Intel Mac owners boot up OS X but also run Windows XP or Vista applications.

"I would anticipate after this announcement, the number of people running Vista in virtual machines will explode," said Ben Rudolph, director of communications for Parallels, before Microsoft's about-face.

Reached on Tuesday night after Microsoft's turnabout, Rudolph said "we're obviously disappointed by Microsoft's decision ... but this is ultimately Microsoft's decision. It's their call on how they license their own software."

"What we will do -- which is easy to do because we are just down the road from Redmond -- is continue talking to them, keep advocating the enablement of virtualization, keep the issue alive," he said.

Microsoft had previously said that concern over security issues as well as a belief that few consumers would be interested in Vista virtualization were behind its earlier policy.

However, observers here and there criticized what appeared to be Microsoft's naked attempt to force consumers to buy pricier versions of Vista.

"Microsoft's explanation was, 'Well, consumers don't want to do this [virtualization] anyway.' Well, if consumers don't want to do this, why are you prohibiting it?" said Paul DeGroot, an analyst with the independent Kirkland, Wash.-based analyst firm Directions on Microsoft. "The EULA is a fairly artificial scheme that looks like an effort to force people [to] buy business editions of Vista."

That was what Microsoft appeared to want to rectify.

"The feedback that we received from customers, from partners, from analysts, and from the press over the past few months is that we should enable customers to choose," Woodgate had said on Monday.

Flip, flop and fly The announcement was originally set for Tuesday morning, with a post on the Windows Vista Team blog.

That was pushed back to Wednesday morning. Late on Tuesday night, however, Microsoft announced that it would not make the change after all.

"Microsoft has reassessed the Windows virtualization policy and decided that we will maintain the original policy announced last Fall," said a spokesman in an e-mailed statement.

"This is a setback for desktop virtualization and for future choice for consumers," said DeGroot, who said he was "somewhat disappointed" at Microsoft's reversal.

Microsoft, he said, appears to be grappling with the inability of anti-piracy technology like Windows Product Activation (WPA) and Windows Genuine Advantage (WGA) to keep pace with its already-complicated usage rules -- rules that become overwhelming once virtualization is brought into the mix.

"Virtualization opens the door to bypass Windows activation in several ways," he said.

For instance, using any retail version of Windows XP or Vista, users can create a single VM, put applications on it, and then create as many copies of that first VM as they want. Though that is prohibited by Microsoft's license -- and U.S. law -- it is an easy way to bypass Windows activation, DeGroot said.

Moreover, users should be able to store those VMs on a USB thumb drive and run them on another PC, thus conveniently taking their original computer and software with them -- but again violating Microsoft rules and U.S. law, DeGroot said.

DeGroot noted that maintaining its current restrictions, however, won't stop knowledgeable or accidental virtualization users.

"The EULA is a very bad tool to dictate user behavior or protect them against themselves," he said.

Copyright © 2007 IDG Communications, Inc.

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