In Software Licensing as in Taxation, Two Plus Two is Not Always Four. | AccountingWEB

In Software Licensing as in Taxation, Two Plus Two is Not Always Four.

I recently wrote an article about a friend who purchased Office 2007 in the early days of busy season. This license is called an “OEM” license, and cannot be transferred to a new computer. In my case, Rhonda bought three copies of Office 2007 with three laptops. When those laptops wear out, have Diet Coke spilled on them, or are otherwise retired, the “rights” to run Office 2007 cannot be transferred to the replacement hardware (e.g. the license goes with the hardware instead of being portable to whatever hardware you choose to use, as you might have with a “Standard” or “Full” license.) Other license types include “Upgrade”, “Academic”, and various forms of volume licensing.

Just as many of us have learned with taxation, two plus two doesn’t always equal four in the world of software licensing. If one purchases one kind if license, you may get additional rights (such as the right for employees to install software on their home PC’s, the right to upgrade and downgrade to earlier or later versions, etc.). Just as structuring a transaction for tax purposes is very technical and can have huge implications for the total cost of ownership of an acquired business, the subject of software licensing is very technical, and one really needs to work with an expert when you are trying to meet your organization’s needs so that the type of license you purchase meets ALL of your needs for the software.

With that in mind, an industry peer (Ken McClelland at Network Management Group) wrote this excellent explanation of the difference in OEM and “Open Licensing with Software Assurance” – two opposite ends of the spectrum in terms of rights imparted to the user (thanks to NMGI for letting me repost this). [BTW, these guys have a site where they recommend hardware for CPA firms and other professional service organizations at which receives rave reviews. One participant who paid $350 for a one day class I taught recently wrote that “The hardware site ( was worth the cost of the seminar by itself.”] Let’s get to the question:

Q. Why is it cheaper to buy an “OEM” license of Microsoft Office with a new computer instead of purchasing a copy through a volume licensing program like OpenLicense, or than purchasing the copy of the software at retail in a computer store. If it’s all Microsoft Office (and the same version), why do I care what kind of license I purchase?

A. An OEM license is cheaper because you don’t get all the “rights” that you receive with Open Licensing.

  1. With OEM you do not have any downgrade rights (if you wanted Office 2003 but they only bundle with 2007).
  2. With OEM the license is tied to that PC….cannot be transferred to another PC if the user upgrades hardware.
  3. Open License with Software Assurance would allow for any upgrades for free as long as the software assurance is kept current and up to date. If you own xx07 and xx08 comes out you have no additional expense to upgrade.
  4. Proof of ownership is much simpler under Open License as all licenses are documented on the Microsoft eOpen website. Also as mentioned, a single license key.
  5. If you have Office under Software Assurance (SA is an add-on which gives you automatic upgrade add-on for the volume licensing plan)…you get work at home rights which allow employees to install Office on their home system for only the cost of install media. They have rights to run the software on their home pc as long as they are employed by your firm and Software Assurance is kept current (!)
    [Word and Excel as an employee benefit – wow!]

A subsidy promo just ended (Jan 31) on Microsoft Office that you could have got up to $150 / license that could have been used for your local reseller to provide services.

Currently, the promotion is that you can get Office Enterprise for the price of Office Pro. Max 249 licenses.

Basically it boils down to determining which if any of these features are important to your firm and choose the appropriate licensing strategy. BTW - A better comparison would be to take Open License price (with no Software Assurance) vs. the OEM. Price for the Office Pro 2007 should be somewhere around $430 – so your new delta would be $170 or so.

Note: Software Assurance can be added to the OEM license as long as it is done during the first 90 days of ownership.

Well said, Ken. That’s exactly why we need an expert in this stuff. Thanks for doing such a great job on this, BTW.

Brian Tankersley, CPA.CITP is a CPA, speaker, and consultant based in Knoxville, Tennessee. He teaches continuing education classes with K2 Enterprises, instructs CPA review classes for Becker CPA Review, and blogs about accounting and technology matters on his website at

This blog

by The K2 Team - Look here for anything that involves technology and accounting. K2 Enterprises is the largest supplier of technology CPE (Continuing Professional Education) for CPAs, CGAs and CAs in North America. The K2 team routinely reviews software and hardware products from all major publishers and teaches accountants how to use these tools effectively. The entire K2 team has 10+ years of experience, many with 30+ years of technology and accounting experience.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.


Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.


Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.


Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".


William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.


Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (, a software development firm of high-volume, high-productivity accounting and payroll technology.


Eva Rosenberg, MBA, EA, is the publisher of, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.


Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website:
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.


The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.


FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.


Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.


Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of a website devoted to training for governmental auditors.


AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish share their ideas, insights, and perspectives from across the pond.