Last month, we talked about OnLive and its virtualized Windows 7 desktop on the iPad coming under fire by Microsoft for improper licensing. Other virtualization companies complained that the five dollar per month paid service offering Microsoft Office 2010 and Windows 7 on the iPad was a price impossible to meet when paying Microsoft licensing. Microsoft later confirmed that OnLive was licensing the software incorrectly.
OnLive and Microsoft began talks to get the service legit and now apparently licensing has been made. OnLive's services are now in compliance with Microsoft's licensing agreements according to a report. Rather than hosting Windows 7 virtually, the service has switched to a hosted instance of Windows Server 2008 R2. Microsoft's licensing rules stipulate that Windows 7 can only be hosted virtually if each user has a license for the OS from Microsoft.
Office can't be provided as a service at all unless hosted on Windows server and Remote Desktop Services. OnLive is expected to tweak Windows Server 2008 R2 to look like a Windows 7 desktop. What's not clear at this time is if the price of the service will increase based on the new licensing terms. If OnLive's competitors were correct in that the five dollar monthly fee was a price that loses money, it would seem pricing would have to increase. That is assuming Microsoft isn't going to cut a better deal for On Live than competitors have simply to get its services on the iPad.