SPLA & Virtual Desktops

My goal here is to get feedback from other experts regarding Microsoft's current policy on Licensing Windows 7 as a virtual guest under SPLA licensing. 
I am a consultant who encourages my small/medium business clients to seek out hosted remote office providers. In many cases, their core business applications do not work in Terminal server, Citrix, and PCoIP. There is a school of thought that virtually
all of these problems can be overcome by modifications and workarounds, there are still some softwares that simply won't work. Also, sometimes the issue is not technical but rather licensing.  In summary, many software vendors simply won't provide support
or allow for their software inside these environments. This is indisputable.  
Nevertheless, many businesses that use "terminal unfriendly software" would still benefit immensely from a hosted virtual office solution.  One obvious option is to create virtual machines running an OS and configuration supported by the software vendor.
This is less elegant, and less efficient (resource wise) than a simple terminal server configuration, however it would be supported which is critical.  It also carries several other advantages. 
The bottom line is that Microsoft currently allows for this with windows licensing if the company does it in house. However, it specifically forbids that such a solution be hosted by a third party, as third party hosts are restricted specifically to the
SPLA terms for virtualization hosting which is documented here.  
http://download.microsoft.com/download/F/5/8/F58E786D-529D-438A-8625-4948205D8BA5/Windows_Hyper_V_Licensing_Whitepaper_v2_0.docx
<quote>
Scenario 5: Running Desktop Systems as Hyper-V Guests
This scenario is currently not allowed under SPLA.
</quote>
Questions: 
Does anyone else see the value in the virtual desktop model?
Does anyone else see the value in having it hosted by a third party?
Can anyone think of a reason why they would outright deny this functionality like this only for SPLA?
Can anyone suggest a method for making a request to Microsoft to have this policy revisited?
I understand that maybe it seems like a waste of time, and I do respect Microsoft's right to permit/deny the use of their software as they see fit. I just think they've specifically cut out a good idea and business model here, and basically said "If terminal
server or citrix won't do it, then it won't be hosted in remote office (by a third party)".  I'd at least like to make my point and be heard. 
Thanks for anyone who provides their opinion:
-Jerry

Below are copies of two emails l I sent in October 2010 to an individual at Microsoft who works directly with the Director of U.S. Licensing, who in turn reports to the VP of Operations that manages Volume Licensing for North America.  The ONLY response
I've received to this and subsequent messages is that they're talking about it internally:
<!-- [if gte mso 10]> <mce:style> <!-- [if gte mso 10]> <mce:style>
October 2011:
At the joint Microsoft/Citrix Virtualization Licensing webinar back on September 14, 2010, I asked about SPLA licensing for virtual Windows desktops hosted in an ITaaS model, and you said Microsoft has no plan on their licensing roadmap to provide for this. 
You indicated in your brief response that you were unclear as to why this would be an issue. 
It is, in fact, a critical and serious issue for ITaaS (HaaS/SaaS) providers – a business model that we are intent on implementing.  Please allow me to explain:
At present, Microsoft SPLA licensing enables provider-hosted licensing for EVERY component of a Microsoft-centric SMB network environment
EXCEPT the Windows desktop licenses .  VDA licensing (or Software Assurance added to Windows OEM, Retail or Open licenses) provides for CLIENT-OWNED VDI licensing, but
makes no provision for provider-owned VDI licensing, and in fact, FORBIDS such licensing in a SPLA environment.   SPLA licensing forbids mixing with non-SPLA licensing, and yet no SPLA license EXISTS for virtual desktops.  Surely,
you see how that leaves us stymied.                                       
This is an impossible licensing disparity for ITaaS providers that leaves us, effectively “dead in the water.” 
We can’t successfully implement a fully-hosted hardware/software environment WITHOUT virtual desktop licenses, yet Microsoft provides no way for us to implement such an environment WITH virtual desktop licenses!   If I’m missing
something here, please let me know. 
I understand that SPLA is the fastest-growing license category at Microsoft.  I can assure you that it would grow even faster if you make the rules consistent across your product line so that ITaaS providers aren’t having to figure out how to
do magic in order to arrive at compliance with Microsoft’s arcane, self-contradictory licensing approach. 
I and every other Microsoft Partner I’ve talked with about this (which is a sizeable number of Partners)
are completely baffled by this situation , and we need some kind of intelligible response from Microsoft so we’ll know how to proceed .  This is now a pervasive topic of discussion among your Partners, so I hope
you see it as important for Microsoft to address with something more than the “Here’s what you CAN’T do” responses we’ve gotten thus far.
Here’s my question to you in a nutshell , and I would earnestly appreciate it if you would help me to get an answer from someone at Microsoft:                                                                                                                                                                                                    
Does Microsoft have ANY license model or combination of license models that allows an ITaaS provider to do the following:
1.     
Host the Microsoft server-side products on equipment owned by the ITaaS provider
(which is already straightforward to do with SPLA);
2.     
AND  AT THE SAME TIME, Host Windows Virtual Desktops and Microsoft Office running on equipment owned by the ITaaS provider.
If not, is there any plan at Microsoft to make this possible.  And finally, if not, why not.
I’m sending this follow-up to our emails from last week in an effort to further pin down some of the detail regarding the Microsoft licensing hurdles we’re encountering for fully-hosted ITaaS in Virtual Desktop environments.  If you can
forward this internally in either HTML or Rich Text format, it’ll ensure that my colored highlighting is preserved (but I’m sure you already knew that!).
I have no confidence that I’m reading and interpreting all the licensing requirements and restrictions exactly correctly, so I wanted to try to explain my own feeble understanding of those requirements and restrictions as they apply to the ITaaS scenario,
and to let you and your team correct whatever I’m misunderstanding.
But first, let me describe our objectives with regard to ITaaS
– how this would work in a perfect world – so your team will understand as clearly as possible what we (and MANY other longstanding Microsoft Partners) are hoping to arrive at:                                                                          
1.     
We, the ITaaS provider, will own the server hardware infrastructure (a high-performance, highly-available server environment) and
will locate the physical server-side equipment either at the client site (what we call Local Cloud Computing)
or at an offsite data center .
2.     
We will “own” (be the license-holder for) all licensing for the Microsoft server operating systems and Microsoft server-side applications
used by our customer’s end-users (e.g. Windows Server, SBS, Exchange, SQL,  SharePoint, etc.)
and we will charge a predictable monthly fee to our customer for the use of this licensing . [I realize that software licensing isn’t technically “owned” by anyone other than the software creator, but allow me to use the term
“own” for purposes of this discussion, so we’ll be clear about who holds the licenses.]
3.     
We will own all licensing for the Microsoft Desktop operating systems
(e.g. Windows 7 Pro) and Microsoft client-side applications (e.g. Microsoft Office, etc.)
and will charge a predictable monthly fee to the client for the use of these licenses.
4.     
We will host, and run on our server infrastructure, all the Desktop VMs accessed by our customer’s end-users .
5.     
The end-users will access the Desktop VMs hosted by us EITHER from existing PCs/laptops
owned by the customer , OR from dedicated thin clients, PCs or laptops
owned by us .   THIS IS WHERE IT GETS REALLY STICKY WITH MICROSOFT’S CURRENT LICENSING RESTRICTIONS, particularly SPLA restrictions about mixing license types in a given network environment.
Over time, we expect that all existing PCs/laptops owned by the client will be replaced by thin clients, PCs and laptops
owned by us , since the ultimate goal here is to convert everything to a hosted model.  But in the beginning, we expect that many of the desktop endpoints accessing hosted Desktop VMs will be PCs or laptops that are already in place and are
owned by the end customer .  We can conceivably buy these existing devices from the client to arrive at a 100% provider-owned equipment model, but that will have some real challenges, especially where a given user’s primary device for accessing
a VM is a handheld device (iPhone, iPAD, etc.) rather than a PC or laptop.  And it also creates an additional capital cost for us that will make it tougher to get an ITaaS approach in place.
As I see it, a straightforward solution
to the existing Microsoft Desktop VM licensing restrictions that would resolve all the issues above would be to create a true SPLA license for Desktop VMs, and to
tie the SPLA VM license to the Desktop Virtual Machine itself rather than to a primary physical endpoint.  To my mind, what is making this whole thing
so excessively complicated is Microsoft’s intransigent insistence on tying Desktop operating system licenses to PHYSICAL devices.
Isn’t it time to truly open the door to a licensing approach that matches the reality of Virtualized operating systems by tying the OS licenses to the VMs?  Let the physical OSes (including
embedded Windows for thin client terminals) be tied to the physical devices, and let the virtual OSes be tied to the VMs. 
6.     
We will provide comprehensive (all-in) managed services for our clients under this model, including troubleshooting and remediation, Help Desk, patch management, malware protection, and consulting.
ALL of the above deliverables will be included as a predictable monthly fee to our customers .  Since Microsoft SPLA licensing includes constant eligibility for the latest versions of the Microsoft products (as well as downgrade
rights for users that aren’t yet ready to move to latest versions), one of the huge business benefits to this ITaaS model will be “latest and greatest” versions of Microsoft product.  Because SPLA licensing and server/desktop virtualization
make it so much easier to do software upgrades/migrations, we plan to also include labor for major version upgrades of Microsoft products within the monthly ITaaS fees paid to us by the customer.  We will also include scheduled hardware refreshes as part
of the monthly fee paid to us by the customer under this model.
That’s our vision – now we have to figure out how to make it work with Microsoft licensing, if at all possible.
IF Microsoft allowed us to use SPLA for Windows 7 VMs accessed by desktop endpoints
that WE OWN , that gives us one possible solution.  It would mean that if we want to let the end-users continue to use the PCs/laptops they currently have in place for accessing the Desktop VMs we’re hosting on our servers,
we would have to BUY all of those end-customer’s user endpoints (PCs and laptops) in order to be able to be covered by SPLA for the VMs accessed by those machines.  That creates a financial hurdle in terms of our capital costs to
implement ITaaS, but it’s not necessarily insurmountable.
However, the problem with that scenario is that SPLA licensing presently
includes specific prohibitions against MIXING SPLA licensing with other licensing models in the same environment
.  So even if we DO BUY ALL the customer’s endpoint equipment AND we provide and own all the server equipment, we STILL can’t use SPLA licensing if there’s
any other license type installed on any equipment in the environment.   This appears to be what the SPLA licensing says at this point, to the extent that I can understand it.  I’m anxious to be told that I have this wrong!  
Again, it seems to me that ONE MODIFICATION would solve a multitude of different complications : 
In effect, TIE THE DESKTOP WINDOWS VM LICENSE TO THE VM ITSELF, not to the endpoint device
.   Since existing VDA licensing ALREADY allows for unlimited secondary endpoints (e.g. PDAs, traveling laptops, kiosks, etc.) to access a given VM, I don’t see where it materially
changes the “spirit” of the licensing if you create a SPLA VM license and tie that license to the hosted VM itself rather than to the  primary physical endpoint.
As things stand right now, this much is clear:  Microsoft currently
considers the Desktop VM license to be tied to the primary physical
ENDPOINT (Desktop device), NOT to the VM running on the server
.  So the only way we can possibly use SPLA for Windows Desktop VMs is if WE OWN the actual Desktop devices along with all other Microsoft endpoints that run any version of Windows, Office, or any other MS software. 
Again, I’m more than willing to be proven wrong about my assessment of the hurdles involved with Microsoft’s existing licensing options for hosted Desktop VMs!
I remain hopeful that you’ll be able to get the right people involved at MS to identify one or more workable approaches for implementing a comprehensive ITaaS model, and if necessary, to modify SPLA licensing as it applies to hosted Desktop VMs so
that it is simpler and more viable for ITaaS providers to cover all the bases.
Please keep me posted on what you hear from your team.
And thanks again so much for your assistance!

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    Thanks.
    Dharmesh Solanki

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    Thanks.
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    Hi,
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