Should you purchase an OEM license version of XP?

Thinking of saving some $$ by purchasing an OEM license of XP? Here is some food for thought.

I found this discussion by Danial McDanial on one of the MS newsgroups a pretty fair summary of the issues. I have added boldface to emphasis some issues that are generally ignored when looking only at $$ issues:

ALL OEM copies can only be installed clean: (that is, the hard
drive must be formatted before XP OEM can be installed). They cannot be
used to perform an upgrade of an existing Operating System so make sure
you back up all necessary data and files BEFORE installing XP OEM, since
the format of the Hard Drive will erase ALL data on it.

There are two types of OEM CDs:
1) an OEM version created by a system manufacturer. These copies are
usually "BIOS-locked", and can only be used on the exact machine they
were created for.
2) a "FULL OEM", or "FULL OEM DSP". These may be installed on any IBM-
compatible machine. These may or may not be provided with a factory-
built machine, but are usually purchased separately for installation a
home-built machine.

You will be making a trade-off in buying an OEM version. YOU will trade
the ability to upgrade an existing installation of Windows (and save
your data and programs) and the legal right to install the copy on a
new machine, (if you should change your old machine for a new one), for a
big savings in the initial cost of Windows XP.

Some examples of the price trade-off:
XP Home Edition (Retail)-- can be used to upgrade an existing
installation of Windows....$159-$199
XP Home Edition ("Full OEM", "FULL OEM DSP" -- cannot upgrade an
existing installation of Windows....$88-$110
XP Professional (Retail) -- can be used to upgrade an existing
installation of Windows...$239-$299
XP Professional ("FULL OEM", "FULL OEM DSP: -- cannot upgrade an
existing installtion of Windows....$139-$179

NOTE: OEM versions must legally be sold along with a hardware item, but
in many cases this hardware item may be a power-cord (usually a $1) or
mouse (they might even give you the mouse to satisfy Microsoft's
licensing requirements)

Having bought two "FULL OEM" versions of XP, Home Edition and
Professional, I do miss the ability to upgrade, keeping my programs and
data in place. Sometimes, it is really a lot of hassle to wipe my HD
each time I install the OS, then reinstall and reconfigure all my
software and desktop. However, many "in-the-know" users will tell you
that a "clean" install is the best type, since you will start with a
fresh hard drive, and clean Registry, and the machine will operate at
its peak efficiency, until it once again gets weighted down by repeated
changes.

My own additions:

Three other issues that need to be emphasized about an OEM license:

1. You will receive no support from Microsoft. You will be referred to the original OEM licensee.
2. You cannot upgrade the FULL OEM DSP version. When longhorn or whatever appears this will not be a qualifying license.
3. Currently you can transfer (no, not two copies) a non-OEm license to a new machine. You remove XP from the first machine and the license will transfer to the new machine. You call Microsoft and they will issue you a new activation code. You cannot do this with the OEM license. It is for one machine only, the original machine. You will not be issued an activation code for a new machine.
4. You can upgrade the RAM, hard disk and other devices. And use the phone option to re-activate. The question is whether the OEM installation is fundamentally the same after the upgrade. Alex Nichols, MS-MVP provides the best guess as to how the issue is counted: http://www.aumha.org/win5/a/wpa.htm

Note that there are time considerations involved. Changes made over in excess of three month periods will benefit from the reset "clock" on allowable changes.

So what if you buy an OEM license, and it turns out it is a pirated copy?

Microsft will probably replace it for free if you call them.

Best wishes,
Bill Castner