The move is part of the licensing concessions the company has been forced to make to comply with the landmark anti-trust settlement with the US government.
The world's largest software maker said on Friday it would simplify the licensing terms needed for competitors to use its computer code to make server software work with its Windows operating system.
Brad Smith, Microsoft senior vice-president and general counsel, said the changes to Microsoft's licensing terms would make it "more appealing to software developers."
Microsoft also said it would cut the royalty it charges in advance to $50,000 from $100,000 and adopt a new royalty structure that would be based on 1 percent to 5 percent of the licensee's product revenue.
Unreasonable licensing terms
As part of the settlement approved last year, the company promised to license its software code on "reasonable and non-discriminatory" terms.
But rivals have complained that Microsoft's licensing terms are unreasonable, with few signing up for licenses to gain access to Microsoft's software protocols needed to create products that work with Windows.
Microsoft said that companies such as EMC Corp., Network Appliance Inc. and VeriSign Inc. have become licensees of Microsoft's software protocols.
Microsoft also expanded the versions of Windows that are included in the licensing programme for rivals to include the legacy Windows 95 and Windows 98 operating systems, in addition to Windows 2000, Windows XP and future operating systems.