Microsoft's licensing of internal versions of software vs their online counterparts won't penalise users for buying on-premises licences and then switching to online hosted software, according to CEO Steve Ballmer.

Ballmer, in a meeting at the annual SharePoint Conference, said moving between enterprise applications like SharePoint and Exchange deployed internally to versions of that software operated in the cloud by Microsoft will be "seamless."

"Customers are saying give me some credit here, this is more like an upgrade than it is like a new buy, give us a little credit,"he said.

Users have been questioning whether they can move licences online without having to take a credit and renegotiate with Microsoft on licensing terms.

"I know it will take them time to get it straight; it is really complicated," said Guy Creese, an analyst with the Burton Group. "They claim software plus services as a mantra and if that is true they need to make it so these two environments are seamless [from a licensing perspective]."

Ballmer said users need to break it down by separating Internet and intranet deployments from cloud and on-premises.

"Internet stuff we do is all priced basically per application or per server and it will be priced that way whether it is offered in the cloud, as a service or on-premises," he said. "I think that is pretty clean and I think that is the way that people would like to see things licensed." He said intranet applications are essentially priced by the number of users and that fact is true whether it is in the cloud or on-premises. "So one is user based and one is application based."

But Ballmer said Microsoft will be flexible in the way the company prices cloud versus on-premises.

He said users that want to come to the cloud can buy the service and use the licence they own or they can start in the cloud and buy an integrated licence that pays for both the service Microsoft operates and the licence. "We designed it to be seamless, in a sense it looks more complicated now because you have two choices."

"We have a big enough install base of people that bought licences that say, 'Hey, when we buy your service we don't want to be re-buying what we have already paid you for in terms of software.' We have to recognise that our customers expect a transition step where we give them credit for the software that they already own," he said.

For example, if a user has a client access licence for SharePoint running internally but decides he wants Microsoft to run SharePoint in the cloud, the customer only pays to have Microsoft operate the SharePoint service.

"You don't need to convert, you can use your on-premise licence and just buy the service capability," Ballmer says. "If you want to transition you can do that too, but most of our customers say just let me use the licence that I already bought and have you operate this thing for me."