Microsoft revives free Windows 10 upgrade for SMBs

Another move to get customers paying subscriptions for software

Microsoft last week resurrected its free Windows 10 upgrade, but aimed the deal at small- and mid-sized businesses that had passed on the earlier offer.

"They're extending the free upgrade to this segment of customers to help them get to Windows 10," said Wes Miller, an analyst at Directions on Microsoft who specializes in the technology company's complex licensing rules and practices.

Like the 12-month upgrade deal that ended last August, the new offer applies to personal computers running Windows 7 or Windows 8.1. But the new program is limited to a select group of customers. Only businesses that have signed up for one of the Windows Enterprise subscription plans can take advantage of the free upgrade.

[Related: Windows 10 'upgrade' attacked my PC like a virus]

"Customers subscribed to Windows 10 Enterprise E3 and E5 as well as Secure Productive Enterprise E3 and E5, can now upgrade their Windows 7 and Windows 8.1 PCs and devices to Windows 10 without the need to purchase separate upgrade licenses," said Nic Fillingham, small business product manager, in a post to a company blog Jan. 19.

The Windows 10 Enterprise E3 and E5 subscriptions cost $7 per user per month and $14 per user per month, respectively, or $84 and $168 annually. Unlike Microsoft's historical licensing -- which permanently licensed the operating system on a per-device basis -- the E3 and E5 subscriptions are per-user licenses, and payments must be maintained to run the OS. Microsoft introduced the plans in July and began selling them in the fall.

Previously, Fillingham had said the subscription plans targeted customers who did not want to sign a "long-term volume licensing agreement." Larger customers, particularly enterprises, typically purchase Windows and other Microsoft products under such agreements.

To be eligible for a Windows 10 Enterprise E3 or E5 subscription -- which are delivered through a program called "Cloud Solution Provider," or CSP, usually by Microsoft resellers -- customers' devices must already be running Windows 10 Pro. Small- and mid-sized businesses could have upgraded free of charge from Windows 7 Professional or Windows 8.1 Pro to Windows 10 Pro during the previous year-long offer, or acquired new devices already equipped with Windows 10 Pro.

The new deal, then, focuses on customers that still have Windows 7 and Windows 8.1 systems, either because the machines were not replaced with newer hardware or because the company opted to not dive into Windows 10 during the first year when the free upgrade was available.

"When the CSP originated, the only qualifying OS was [Windows] 10 Pro Anniversary Update," said Miller, referring to the August 2, 2016 upgrade. "You had to be on 10 Pro. So, if you missed the consumer upgrade window, you would have to buy the underlying 10 Pro license."

It's that license that Microsoft will now give away to customers subscribing to Windows 10 Enterprise E3 or E5. At retail, an upgrade to Windows 10 Pro from Windows 7 or 8.1 costs $199.

Microsoft said that the Windows 10 Pro license acquired through the free upgrade is "perpetual" and tied to the specific device. "This means the license will not expire or be revoked if the customer chooses to end their Windows cloud subscription in the CSP program," Fillingham said. That, too, was the case with the earlier year-long free upgrade.

Because the upgrade was considered a subscriber benefit, customers presumably must upgrade the PC yet again -- from Windows 10 Pro to Windows 10 Enterprise -- and then if the device is to be used by a worker not already covered by an E3 or E5 subscription, pay $7 or $14 monthly for that user to run the system.

Miller cited the likeliest reasons why Microsoft renewed the free upgrade offer. First on his list: "They want to get people onto the User Subscription License (SL)," he said. Providing upgrades from older editions makes more of a customer's PCs eligible for use under the SL model of E3 and E5 (which license per user, not per device).

That meshes with Microsoft's strategy of pulling as many customers as possible into a software-as-a-service model, whether to Office 365 or Azure, that generates recurring revenue through subscription payments.

Other motivations for the deal, Miller contended, include a desire to promote the partner-centric CSP, and to get customers onto the more expensive Windows 10 Enterprise.

Microsoft today confirmed that the Windows 7/8.1-to-Windows 10 Pro upgrade offer is a permanent addition to the benefits for subscribers to Windows 10 Enterprise E3 and E5, and not a time-limited pitch.

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