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An Independent View of Microsoft Software License Agreements

Overview of commercial Microsoft licensing agreements, first in a series on Microsoft Volume Licensing Agreements.

By Cynthia Farren on Mon, 11/08/10 - 12:59pm.

Microsoft has a number of volume software license agreements available for its commercial customers. Each of these agreements has different benefits and different restrictions - understanding these can help you at the negotiating table. This overview will provide you with a high level summary. I will be doing a deeper dive into each in subsequent postings (check back for updates or subscribe to the RSS feed of my blog).

Microsoft Enterprise Agreement (EA):

The EA tends to be a favorite sell for both resellers and Microsoft because it involves recurring revenue since it is a three year agreement with maintenance, known as Software Assurance (SA) built-in.

Basically this is the agreement where you decide to standardize on Microsoft products for your business productivity software and your server software because each "qualified" desktop will be licensed for the following Microsoft products: Office Professional Plus, Windows Server Client Access Licenses (CALs), Exchange Server Standard CALs, SharePoint Server Standard CALs, System Center Configuration Manager 2007 R2 Client Management License and Windows 7 Enterprise (upgrade only, you still have to own a base license for each device). 

There are a couple of different flavors of the EA: a full-platform EA as described above, a full-platform Enterprise EA which includes the Enterprise edition of each of these products or a component EA whereby you only license components (such as only Office or only Core CAL and Operating System). 

EA's are designed for companies with 250 seats or above who want to have the rights for the most current version of the software and only need to account for additional seats once a year. Be careful of this once-a-year "true-up" as it can cause quite a surprise for companies since it requires that you pay in total for new products for the remaining life of the agreement (a one-time lump sum versus pro-rated annual payments).

Pricing for EA's is set by Microsoft so there is no price difference between resellers (although not all resellers can sell the EA). Be sure your reseller is "earning" your EA business by providing you with discounts on your other purchases! 

Additional reading on EA's.

Tips when considering exiting an EA.

Microsoft Enterprise Subscription (EA Subscription)

Typically licenses acquired through an EA are for perpetual use licenses (once the agreement is over you own the license), however; the license grants through the Subscription agreement are not perpetual use licenses so at the end of the agreement your right to use the software ends (although you can negotiate a buy-out for the end of the agreement).

While based upon the EA program, the EA Subscription is different in that it allows you to modify your totals up or down on an annual basis. While the "pay for what you use" or "leasing software" concept has always been attractive to me, unfortunately the pricing on these programs has yet to evolve to a point where I can strongly endorse it. However; things change so might be worth checking out if you're looking at a new agreement.

Additional reading on Subscription licensing.

Microsoft Select Agreement (Select):

This agreement type is being phased out and replaced with Microsoft Select Plus Agreement (Select+). However; until July 1, 2011 you can still sign a new Select Agreement and might find it advantageous to do so before it is phased out. Once in a Select Agreement you will have the right to continue in that program (at least for a while).

The Select is a three year agreement that allows you to choose to purchase either license only (L) or license and maintenance (L/SA). It is a forecast program with a qualifying minimum buy-in and annual quotas that need to be reached (great for when you are doing a sizeable purchase but you know you'll have more to come). The pricing tier is set by the amount of purchase you forecast you will be doing over the three year life of the agreement.

The Select is built on product pools (systems, applications and operating system) and you need to qualify under each pool that you will be purchasing under on your Select. Like the EA it is geared towards companies with 250 seats or more. Pricing for the Select is determined by Microsoft with a markup by your reseller (so might make sense to check around on pricing as it will vary) based upon the level of your forecast (A, B, C or D). The EA has better price points for the same level but the Select is more flexible and depending on your forecast you might find yourself in a higher level than you would on your EA.

The Select is a "buy as you go" program so you need to stay on top of your licensing needs throughout the year. If you are buying L/SA then there are options to spread payments over the life of your agreement. Unlike the EA, your additional purchases of L/SA do not require a lump sum payment but can instead also be pro-rated over the remaining term of the agreement.

All Software Assurance (SA) benefits expire at the end of the agreement regardless of when they are purchased (making it easier to manage but potentially decreasing the value on mid-year purchases).

Additional reading on Select Agreements (PDF download).

Microsoft Select Plus Agreement (Select+):

This agreement type came about in 2008 for a couple of reasons (1) complaints by customers about not receiving the full three years of SA on their new purchases and (2) the number of customers who worked the system by having two separate Select's so that they could time their purchases (Microsoft's interpretation was they were "gaming the system" if that's even possible, LOL!).

The Select+ is similar to the Select with the following differences: (1) it is not a term agreement. (2) SA benefits go for a full three years from time of purchase {update as of May 2011, to avoid monthly expirations of SA, all SA expiring in a given year will do so on the month/day of your anniversary}. (3) It is not a forecast program - pricing is determined based upon your initial purchase and increases as your purchases increase. (4) It eliminates any need for multiple agreements so can view licensing and SA benefits across all affiliates covered by the agreement. 

Additional reading on Select+.

Microsoft Open Value Program:

The Microsoft Open licensing program is designed for smaller organizations to benefit from simple methods of purchasing software at a savings. While it is designed for organizations with 5-250 computers, there is no maximum. The Microsoft Open Value program has three options:

Microsoft Open Value:

This is an agreement allowing for smaller organizations (as small as 5) to purchase under a volume licensing agreement. The Open Value automatically includes Software Assurance on all purchases (unlike Microsoft Open Business). It is a three year agreement that allows for annual payments.

Microsoft Open Value Company Wide:

This agreement is for smaller organizations that intend to standardize on Microsoft technology. It is based upon the Open Value agreement but (as the name indicates) applies to all qualified desktops in the organization (much like the EA described above).

Microsoft Open Value Subscription:

Typically the licenses acquired through an agreement are for perpetual use licenses (once the agreement is over you own the license), however; the Subscription agreement license grants are not for perpetual use so at the end of the agreement your right to use the software ends (although you can negotiate a buy-out for the end of the agreement).

While based upon the Open Value Company-Wide program this option is different in that it allows you to modify your subscription totals up or down on an annual basis. As I mentioned earlier, the "pay for what you use" or "leasing software" concept has always been attractive to me, but the pricing on these programs has yet to evolve to a point where I can strongly endorse them. However, again want to stress that things change, so it's worth understanding the Subscription options, and maybe even considering them if you're looking at a new agreement. 

Additional reading on Open Value.

Microsoft Open Business (Open):

This is a two year transactional program for purchasing quantities starting at a minimum initial purchase of 5 licenses (or 1 server license) additional purchases can be made for the next two years without minimum quantities. It is based upon product pools (applications, OS, server) and allows the option of adding Software Assurance but does not require it. Discounts are based upon your initial purchase and continue for two years for purchases made under the initial authorization number. Pricing is managed by the reseller (based upon base pricing from Microsoft).

Additional reading on Open.

Obviously there is a lot to add to each of these topics - check back for subsequent postings!