Analysts question Vista virtualisation flip-flop

For months, the industry has been calling on Microsoft to ease restrictions forcing customers to use only the priciest versions of Windows Vista for desktop virtualisation, which it had planned this week before changing its mind at the last minute.

All along, Microsoft has been saying there are security risks associated with the latest generation of virtualisation technology.

But analysts have questioned the tie between the security issue and the licensing restriction.

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Paul DeGroot, an analyst with Directions on Microsoft, said the licensing agreement, which few people read, is the wrong place to set security policy. He said: "If you want to make your product more secure, then make your product more secure."

As it stands now, only the full versions of Vista Business and Vista Ultimate are properly licensed to run as a "guest OS"; that is, inside a virtual machine. Vista Business sells for $299, while a full copy of Ultimate fetches $399.

Given all the feedback Microsoft had been getting, and apparently was keen to accommodate, it's not clear what prompted the last minute flip-flop.

DeGroot said: "It just sounds like somebody put the brakes on hearing about this, (someone) who had not been part of the initial decision." This is pretty curious, though, since changes to the Windows licensing agreement are not made lightly and typically get thorough scrutiny, including a review for antitrust issues by Microsoft's legal team.

Even Microsoft's partners have gotten little explanation. As part of its planned announcement, Microsoft had talked with Parallels, securing a quote from one of its executives praising the deal. Like the rest of the industry, Parallels was left scratching its head over the about-face.

On the one hand, Microsoft stands to gain some additional revenue from a more liberal virtualisation policy, either from Mac users who historically weren't paying for Windows at all, or from Windows users who want to run more than one copy of the operating system at a time.

But Microsoft also may see hidden dangers to its business model from virtualisation. DeGroot said: "I think what we are seeing is a company having a great deal of difficulty deciding what they are going to do with virtualisation on the desktop," adding that while other software makers are also facing this challenge, it is of paramount importance to Microsoft. "It's where they make all their profits."

Ina Fried writes for CNET News.com