Microsoft has sweetened the Windows subscription pot by letting enterprise IT dispense with the traditional wipe-and-image OS deployment method in favor of an automatic-on-reboot metamorphosis from Windows 10 Pro to Windows 10 Enterprise.
The new feature, dubbed "Subscription Activation," works with Windows 10 1703 - the April 2017 feature upgrade - or later, and requires access to Azure Active Directory (AAD). (The more common, on-premises Active Directory will serve in a pinch, as long as it's synced with AAD.) It also, more obviously, demands a subscription to Windows 10 Enterprise, such as those included in the Windows 10 Enterprise E3 and E5 plans, or the newer Microsoft 365 E3 and E5 deals.
Wes Miller, an analyst with Directions on Microsoft, saw one sure-fire advantage to Subscription Activation. "The place that is interesting [to me] is for businesses repaving PCs when they get them," said Miller in a recent interview. "Say you get a new Surface, but it's just running [Windows 10] Pro, because OEMs [original equipment manufacturers] cannot ship Enterprise."
Typically, IT personnel take that new device, wipe the Windows 10 Pro operating system from the system, then load the corporation's customized Windows 10 Enterprise image onto the personal computer. Subscription Activation makes all that moot.
Instead, armed with a subscription-based Windows 10 Enterprise license, IT assigns that license to the new device's user through ADD, or alternately, a synced-to-ADD Active Directory. When the user logs onto the new device, Windows 10 Pro, the factory-installed OS, automatically transforms into Windows 10 Enterprise without any monkey business - like one or more reboots, or those 25-character activation keys.
How Subscription Activation works
The morphing is possible because Windows 10 Pro actually contains all the components for the Enterprise SKU (stock-selling unit); proper authorization unlocks Enterprise's features. Removing the authorization returns the operating system to Windows 10 Pro.
"From a step-up perspective, certainly no IT involvement required," said Michael Niehaus, director of product marketing for Windows, during a session at last month's Ignite conference. "You don't need to touch that machine at all. As soon as you sign onto that machine, it will become [Windows 10] Enterprise."
Subscription Activation also eliminates the need for devices to periodically connect to a company network to validate the product activation key used, for example, to upgrade a PC from Pro to Enterprise. Instead, the new approach uses the Internet - devices must go online at least once every 30 days - for activation validation. According to Niehaus, that accommodates devices that "roam around, on the Internet, maybe never making a VPN connection back to the corporate network."
But the biggest benefit from Subscription Activation is one that Microsoft, not its customers, will reap: It eases the path to Windows-as-a-subscription, the shift from one-time licensing purchasing to an ongoing payment, with a resulting regular revenue stream for the company. Microsoft has aggressively promoted Windows subscriptions for enterprises, but the concept could just as easily be moved downstream to small businesses, sole proprietors or even consumers.
Anything that smooths a customer's transition from traditional licensing to subscription-based will be, by definition, a benefit to Microsoft. Subscription Activation ably fulfills that requirement, since it eradicates former IT chores like wipe-and-image for new devices and eliminates the need to maintain on on-premises activation server (called a KMS, for Key Management Server). Niehaus put it plainly when he said that the feature is "all about activating a subscription, not about activating the underlying operating system."
[Note: Microsoft often uses the same term for multiple purposes, which can be confusing. Subscription Activation doesn't really validate the OS as genuine - the purpose of Microsoft's anti-counterfeit product activation technology - but instead "steps up" to a more capable SKU of the operating system when a subscription is in place.]
Subscription Activation will, the company announced at Ignite, be offered by next summer to customers who want to step up devices to Windows 10 Education. That implies Microsoft will, before then, offer subscriptions to Windows 10 Education - essentially an offshoot of Windows 10 Enterprise - before then, likely in multiple SKUs such as Windows 10 Education E3 or Microsoft 365 Education E5.
But the technology makes possible subscription-based licensing for other flavors of the OS.
Subscriptions for all?
Windows 10 S will use Subscription Technology to upgrade a device running that cut-rate OS to the more capable Windows 10 S in Enterprise Mode when the latter arrives in April or May 2018. That's one reason the Microsoft 365 F1 subscription, which provides that upgrade path, requires AAD. Other subscriptions could easily be equipped with the capability to change Windows 10 S into Windows 10 Enterprise in S Mode, like Windows 10 Enterprise E5, to integrate the lower-priced Windows 10 S devices into a managed environment.
There's nothing to stop Microsoft from expanding the subscription concept to, say, small business and consumers. By selling OEMs the lowest-priced operating system in its stable - Windows 10 S - for factory installation, Microsoft could upsell customers by offering subscriptions to Windows 10 Pro or Windows 10 Home. Subscription Activation would automatically unlock the appropriate SKU's features - after all, the code for every SKU would be present on the device -- and transform the OS sans a reboot.
One conceptual problem with Windows subscriptions has always been how Microsoft would account for expiration. In other words, assuming it pushed subscriptions to non-enterprises (which had long been acquainted with the idea through payments for the annuity-like Software Assurance), what would happen when the sub lapsed? Wouldn't customers revolt over the thought that, having paid for the device, it became unusable when the owner declined to subscribe or let the subscription expire?
On devices where Subscription Activation has transformed Windows 10 Pro to Windows 10 Enterprise, a lapse returns the PC to Windows 10 Pro, again without a reboot or action on the part of the end user. The next time a person logs on, Windows 10 Pro is the operating system, not Enterprise.
On a Windows 10 S laptop targeted at consumers, the additional functionality of Windows 10 Home or Windows 10 Pro would be activated with an annual or month-to-month subscription. If the customer later stopped paying for the subscription, the notebook would automatically revert to Windows 10 S. The PC would still operate as it did out of the box. Renewing the subscription would return the laptop to its Home or Pro status.
Customer grace periods
Subscription Activation cuts customers some slack regarding expired subs. "When a user's subscription expires or is transferred to another user, the Windows 10 Enterprise device reverts seamlessly to Windows 10 Pro edition, after a grace period of up to 90 days," Microsoft stated in a support document. A similar grace period, probably one not so gracious, would ease the transition for consumers and small businesses stepping up from Windows 10 S.
"I think Microsoft will get better at this over the next couple of years," said Miller, referring to Subscription Activation, not to the likelihood that the Redmond, Wash. developer would only offer subscriptions to its OS. Instead, Miller meant the out-of-box experience of new device owners, especially the hands-off direction exemplified by Automatic Pilot.
But he might as well have been talking about subscriptions in broader terms. Microsoft has made it clear it wants to "subscription-ize" as much of its product portfolio as possible. That's evidenced by the march of Office 365 and the launch of new plans, like Microsoft 365, which bundles the OS with Office and management tools and services.
And with Subscription Activation, Microsoft has the tool to implement that strategy.