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If you link a GPO to an OU that is designed to push out say, Excel 2007, and half of the computers in that OU already have that software installed, will the GPO be smart enough to notice, or will it force the install to all computers in the OU regardless?

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Afaik it depends on the previous installation. If it's the exact same one as published by the GPO it will be smart enough. In all other cases there could be problems.

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It does depend on the smartness of the MSI. The installation is triggered in any case, no matter if the software is already installed or not (with the obvious exception that it will not be triggered if it was installed by the very same group policy). In most cases you should see a repair install / reinstall of the application happening.

If you need something with more sophisticated checks, you could take a look at WPKG - it is a scripting engine for software rollouts and allows you to choose whether to install depending on check results.

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