Microsoft yesterday confirmed that a retail copy of Office 2013 is permanently tied to the first PC on which it's installed, preventing customers from deleting the suite from one machine they own and installing it on another.

The move is a change from past Office end-user licensing agreements (EULAs), experts said, and is another way Microsoft is pushing customers, especially consumers, to opt for new "rent-not-own" subscription plans.

"That's a substantial shift in Microsoft licensing," said Daryl Ullman, co-founder and managing director of the Emerset Consulting Group, which specializes in helping companies negotiate software licensing deals. "Let's be frank. This is not in the consumer's best interest. They're paying more than before, because they're not getting the same benefits as before."

Past practices

Prior to Office 2013, which debuted last month, Microsoft's EULA for retail copies of Office plainly stated that customers could reassign a license when, for example, they replaced an aged PC with a newer model or the original machine gave out.

"You may reassign the license to a different device any number of times, but not more than one time every 90 days," stated the EULA for Office Home & Student 2010, the most popular consumer version of that edition. "If you reassign, that other device becomes the 'licensed device.' If you retire the licensed device due to hardware failure, you may reassign the license sooner."

That language showed in the EULAs of all retail versions of Office 2010, including Home & Business, which targets small businesses, and Professional, another business-oriented suite with even more applications.

Microsoft modified the EULA for the same editions of Office 2013, however, eliminating the suite's flexibility by striking the clause about reassigning the license. In several other places in the EULAs, those same EULAs also stated, "Our software license is permanently assigned to the licensed computer."

Change confirmed by Microsoft

On Thursday, Microsoft confirmed that once a retail copy of Office 2013 is installed on a PC and activated -- the process of entering a 25-character "key" to prove the software was legitimately obtained -- it cannot be uninstalled and then re-installed on another machine owned by the customer.

Via email, Computerworld asked Microsoft, "Once an Office 2013 retail license is assigned through activation to a PC, it's connected TO THAT PC, correct? Just as is Windows. That then means it cannot be reassigned to ANOTHER PC owned by the same individual, correct?"

The response from Microsoft's public relations firm was simply, "Correct."

Another question asked whether, under the retail Office 2013 EULA, customers could move the suite -- and its license -- to a replacement PC when the original was lost, stolen or destroyed. Microsoft reply: "No comment."

"This is stricter language than was available before," said Paul DeGroot, principal consultant at Pica Communications, and like Ullman, a licensing guru. "According to this language, if your computer dies, so does your Office license. Microsoft has had that language in place for OEM software in the past, but not for retail licenses."

OEM software is that pre-installed by a computer maker, or OEM (for "original equipment manufacturer"), such as Windows or a factory-installed copy of Office. OEM licenses differ in many aspects from copies purchased at retail, including shunting support to the OEM, and generally come with more restrictive rights.

Dead PC means another Office 2013 buy

The implications of Microsoft change were clear to Ullman. He posed a scenario where a customer had installed Office 2013 on a 2-year-old Windows 7 PC, then later wanted to move the suite to a newly purchased machine. Under the EULA, that would not be allowed. Instead, the customer would need to purchase another copy of Office 2013 for the new computer.

"If you want to buy a new computer, you've just thrown away the cost of [that first copy of] Office," Ullman said.

And he had no doubt about why Microsoft modified the EULA for Office 2013.

"This is no surprise to me," Ullman said. "Microsoft has been doing the same kinds of licensing policy changes for corporations. And they've brought these same [policies] down to the consumer level.

"They're very smart about maneuvering or changing licensing to meet a business goal," Ullman continued. "As I've said before, I see Microsoft as a licensing company first, and second as a technology company. It's not that they don't have good technology, but they're driven by, consumed by, licensing."

Enforcement methods unclear

It's unclear how, or even whether, Microsoft will enforce the install-once restriction of Office 2013. Ullman expected that the company would use its activation technology to do so, as it does to ensure Windows remains tied to a specific PC.

Historically, the activation process has been somewhat relaxed, with Microsoft often allowing customers to reinstall Windows on new hardware, or radically changed hardware, after a telephone call. Yesterday, for instance, Microsoft said that if a customer's computer crashed, "They are allowed to reinstall Office on that same computer [and] if there are problems with this process, customers can contact Microsoft technical support."

But the company may also more strictly administer Office 2013 than it did Office 2010. When asked how the Office 2013 EULA would be enforced, Microsoft dodged the question, and instead replied with boilerplate of, "Software piracy is a substantial global issue, and we implement a number of protocols to prevent unlawful software distribution."

It doesn't take an expert to guess Microsoft's motivation for the tougher line. "They want to drive people to the new Office 365," said Jeff Muscarella, a partner with Atlanta-based consultancy NPI.

"It's part of the carrot and stick," agreed Rob Horwitz of Directions on Microsoft, a research firm that focuses on the Redmond, Wash., developer.

Pushing Office 365

Microsoft said almost the same. When asked why it had not told customers of the change in ways other than to simply tuck it inside the EULA, which relatively few read, its answer was revealing. "We've been very clear in all of our communications that customers seeking transferability should get Office 365 and that Office 2013 is licensed to one device," the Microsoft spokeswoman said in an email reply to questions.

Perhaps. Although Microsoft has noted that Office 2013 can be installed on one, and only one PC -- a change from Office 2010, which was available to consumers and small businesses in multi-license packages -- it has not publicized the fact that once installed Office could not be moved, even to another system owned by the customer. In fact, the Office 2013 EULA issue went unreported until Melbourne's The Age noted the change in a news story titled "Does your copy of Office 2013 die with your computer?"

Office 365 does boast, as Microsoft put it, "transferability." The by-subscription plans let customers pull a license from one machine and move it to anther with a few clicks on a management portal. Office 365 Home Premium, which Microsoft rolled out last month, provides five Office licenses that can be assigned and reassigned at will to a household's computers.

Microsoft is to launch a line of subscription plans for small, medium and large businesses later this month.

As Directions' Horwitz noted, Microsoft has both offered a carrot and brandished a stick to nudge customers to its software-by-subscription concept.

Price changes

One of the carrots has been pricing. Microsoft sells Office 365 Home Premium for $100 annually, or $10 monthly. For families that want Windows' Office 2013 or OS X's Office for Mac 2011 on four or more PCs or Macs, Computerworld's analysis has shown that Office 365 is a better deal than buying separate "perpetual" licenses, the buy-once-use-forever kind sold at retail.

But it's wielded a stick, too. To make those perpetual licenses less attractive, Microsoft raised prices as much as 17%, and eliminated the multilicense packs of Office 2010 it sold to consumers and small businesses.

The change to the perpetually licensed, retail copies of Office 2013 is another stick, the experts said. "Through licensing, Microsoft is pushing technology in the direction they want to go," said Ullman. "And they're definitely pushing customers to Office 365."

And to paraphrase President Theodore Roosevelt, that stick is pretty big.

For example, Computerworld's "rent versus buy" calculations, made without factoring in the EULA change, are rendered obsolete: If a customer must buy another copy of Office 2013 because of the change -- to equip a new PC, say -- Office 365 Home Premium becomes the better deal if just three PCs, rather than the earlier estimate of four, install the suite over a five-year span.

As all the licensing experts pointed out, the EULA change does not affect businesses that have any of several Office volume licensing deals in place. For them, the new restriction is moot, as those deals allow flexible license reassignment.

"Volume software used by business is not affected by this," said DeGroot, citing language in Microsoft's latest product use rights document.

In that regard, the consumer-esque Office 365 Home Premium resembles a volume license agreement, said Ullman, who blasted Microsoft for not publicizing the EULA change.

Consumers in the dark

"Isn't Microsoft obligated to inform end users of this substantial change?" he asked. "I think so. As a leading technology company, I think they're obligated or at least have the responsibility to tell their customers of the change. Otherwise, consumers will simply accept [the EULA], perceiving it to be the same as what they've used for years. But only after they install it, or try to reassign it, will they discover that the use rights have changed."

His criticism, he said, was based in part on Office's widespread use. "There's not a consumer or user who doesn't know of or use Office," Ullman argued. "And this change will affect millions of consumers."

Microsoft has published the EULAs for Office 2013 on its website, and retains the licensing agreements for older editions as well. To read the new EULAs of the two lower-priced editions, or compare them to those for Office 2010, customers can use these direct links to download PDFs: Office Home & Student 2010, Office Home & Student 2013, Office Home and Business 2010 and Office Home & Business 2013.

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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