Some of Microsoft's biggest customers face extra costs because of licensing changes introduced with Windows Server 2003.

Organisations using Microsoft Terminal Server software to access central applications will be affected by the changes.

Windows 2000 users were able to connect to Terminal Server for free. But with the newly launched Windows Server 2003, customers will have to buy a Terminal Server Client Access Licence for every user device whether it is a PC or a thin client.

Westminster buying arm the Office of Government Commerce is concerned that the changes will mean a "significant cost increase".

"Some departments run centralised applications and there appears to be an increase in this trend. For these departments, there is potentially a significant cost increase," said a spokesman.

"While we understand that holders of Enterprise Agreement licences will be provided with Terminal Server Client Access Licences at no extra charge, we are concerned at the potential cost to the government. As such, we are reviewing the overall impact of the introduction."

The move will create more bad feeling among users, according to David Rippon, chairman of the BCS IT directors group Elite.

"This is a fairly typical situation in that most users will not have budgeted for the price increase and will be unable to do anything about it," he said.

"The bigger the customer's organisation, the more people will get upset because it will have a measurable impact."

Microsoft argued that thin-client users have always had to buy per-device licences, and that the only change is that customers using normal full-function workstations will have to pay a fee for every device they use.

Existing Software Assurance holders with upgrade rights will receive the new licences for free.

The changes have been made because of increased functionality in the new product, and to ensure consistency with the licensing framework, according to Microsoft senior consultant Alex Balcanquall.

"Any government department is quite at liberty to run only Windows 2000 server. There's nothing forcing them to upgrade to Server 2003," he said.

Microsoft chief executive Steve Ballmer added that customers can expect more changes to the vendor's licensing policies.

"We're going to continue to tweak things, and be responsive to the kind of input we're getting from customers," he said.