As Microsoft officially released its Application Virtualization 4.5 software this week, it also announced several licensing changes around virtual desktops and application virtualization, while omitting a long-anticipated one.

Enterprises will welcome some of the changes but dislike others, analysts said.

Starting Jan. 1, the Vista Enterprise Centralized Desktop (VECD) virtualization license will be expanded to accommodate IT managers facing several situations. According to Scott Woodgate, director of Windows product management, one such situation is to allow enterprises to deliver Virtual Desktop Infrastructure (VDI) Windows desktops from servers to client PCs that are owned and controlled by an employee.

Another is to allow IT managers to deploy VDI desktops to PCs used by contract workers or firms. The third scenario is to allow employees who occasionally work from home to use a Windows virtual machine either streamed from a server to their home computer or to run from a USB thumb drive.

Virtual desktops are typically deployed only to PCs directly managed by central IT. These changes will give IT managers more flexibility, according to Paul DeGroot, an analyst with the independent firm, Directions On Microsoft.

"Now you can reduce the startup time for your favorite contract development shop in India. So it's useful that [Microsoft is] expanding this," DeGroot said.

For the convenience, however, Microsoft plans to charge US$110 per PC per year for the first two scenarios. For contract workers who work less than a full year, the cost will be pro-rated in an as-yet-undetermined way, Woodgate said. Both scenarios include the cost of Software Assurance (SA), which is a prerequisite in order to buy and use VECD.

To enable occasional VDI on employees' home computers, Microsoft plans to charge US$23 a year. That would not include the cost of SA, which DeGroot says is an additional US$33 to $55 per device per year.

To further add to the cost, Microsoft will continue its longstanding policy of requiring a license for every device that is to be used, no matter how little it is used or how short of a duration, rather than grant IT managers the money-saving option of buying a pool of concurrent licenses it can share among all its users.

Concurrent licensing is being adopted by some vendors, especially Software-as-a-Service (SaaS) vendors. Not Microsoft, however, which is "an old type of company with an old way of thinking," according to Brian Madden, an independent virtualization analyst.

"We live in a world of Windows apps, and that's not going to go away anytime soon. So why should Microsoft get progressive? They have zero incentive to be," he said. "They are doing exactly as they should be doing, as a publicly traded company with fiduciary duties."

Microsoft lets hosting companies stream any application -- except Microsoft's App-V 4.5, formerly known as SoftGrid Application Virtualization when Microsoft bought it in 2006, which was released to manufacturing this week, Woodgate said.

The application will be available to Microsoft Desktop Optimization Pack (MDOP) customers in a few weeks as part of the MDOP 2008 R2 release. This version will support 11 languages and will offer improved security and management, Woodgate said.

The news was detailed on Microsoft's MDOP blog.

Another licensing change announced concurrently with App-V 4.5's release will allow hosting providers to use the software to stream applications to end users. This change to its service providers license agreement, or SPLA, applies to applications from any vendor, with the exception of Microsoft's own apps.

The news also contradicts reports earlier this spring that Microsoft was on the verge of allowing Web hosting firms to stream Microsoft Office to consumers and small businesses in order to help it compete with the small but growing popularity of the cloud-based Google Apps. And at least one British hosting company, Fasthosts, is apparently already streaming Microsoft Office without reprisal from the software maker.

Woodgate didn't comment on Fasthosts, but he said Microsoft will eventually allow Office and other Microsoft apps to be streamed by hosting companies, though he gave no timetable.

DeGroot said Microsoft's apparent pullback runs the risk of encouraging hosting firms to start streaming applications that compete with Office, such as OpenOffice.org or IBM's Lotus Symphony.

But Madden said that allowing hosting firms to stream Office could have led to technical difficulties and a "support nightmare" for Microsoft. Because App-V partly installs an application onto the end user's PC, it can be vulnerable to security holes, hardware incompatibilities, missing software drivers, and other problems, Madden said.

The only way to "smooth out all of the security and hardware incompatibility issues" is to deliver virtualized apps inside the "pristine Windows environment" of a virtual machine (VM) either on a server or already running on the client PC, he said. That is enforceable when an enterprise is managing the desktops, but nearly impossible with the consumer and small business PCs to which a hosting firm would potentially be streaming Microsoft Office, he said.

Microsoft also said that Citrix's forthcoming XenDesktop 2.1 management broker will be able to deploy VMs created by Microsoft software such as Hyper-V. This will be available shortly after the release of Virtual Machine Manager 2008, which is expected in the fourth quarter.