Microsoft makes changes to Select Plus – Improves Discount and Software Assurance Rules

This is a 2 Part Series:    The Select Plus volume licensing program received two updates that preserve discount levels and ease license tracking and management.

Two changes to Select Plus will benefit customers by helping to preserve discount levels and making license and Software Assurance purchases easier to manage

Part 1,  By John Cullen

The Select Plus volume licensing program has improved incrementally with two updates effective in Mar. 2011. One enables more companies to carry over earned discounts from year to year, and another provides more favorable terms for purchases of licenses with Software Assurance (SA) coverage, which offers version upgrade rights and other benefits. The updates make Select Plus more similar to the Select “classic” program that it replaces, and they will offer most customers better discounts that are less sensitive to purchase timing and that provide easier SA tracking and management.

What Is Select Plus?

Under the Select Plus program, customers license products at discount pricing based on the number and type of licenses purchased. License purchases yield points that determine price levels for each of three product pools: systems (mainly Windows), applications (Office and similar PC products), and servers. Of the four discount levels, A through D, level D offers the greatest discount.

Select Plus is aimed at midsize and large organizations with 250 or more PCs that want transactional, pay-as-you-go license purchasing. Select Plus offers the widest spectrum of business software of Microsoft’s volume licensing programs. Furthermore, the purchase of SA is not required with Select Plus license purchases, compared to other programs such as the Enterprise Agreement. (SA is Microsoft’s subscription-based software maintenance plan that provides version upgrades and other subscription services.)

Rollover Points for Discount Levels

The Select Plus rules for accumulating points from purchases have changed to enable customers to roll over points from year to year, which will lead to more favorable discounts and make customers less dependent on purchase timing.

At each Select Plus agreement anniversary, a compliance check is done by Microsoft to determine whether the annual points earned for each product pool still qualify the customer for their current price discount level. If the points are not sufficient, the discount level is adjusted downward by a maximum of one level (for instance, from Level B to Level A pricing).

Until now, points have not been carried over to the following year. Each customer’s agreement year began with zero points earned. For example, a Select Plus Level A customer who earned 600 points in year one (100 points more than the minimum threshold for Level A) would stay at Level A for year two and would need to earn another 500 points in year two to maintain Level A for year three. The excess 100 points earned in year one do not carry over to year two and are not applied against the 500-point minimum requirement for Level A pricing in that year.

Under the policy introduced in Mar. 2011, after an annual compliance check, points in excess of the minimum threshold for a specific price level (for example, Level A requires 500 annual points) are considered “rollover” points. These are carried over to the next agreement year. At each anniversary, the compliance check will account for any rollover points to determine whether the minimum threshold for the current price level of each product pool has been met. The Select Plus Level A customer cited above would need to earn only 400 points in the second year to maintain that price level, not 500, because the customer would benefit from 100 rollover points earned in the first year.

Unlike frequent flyer points, rollover points cannot be used whenever the customer chooses. Rollover points are always applied to the following year. Rollover points do not expire: If a customer does not select a year to use them, the points can carry over for a number of years. They will assist customers in retaining their current discount levels, thereby saving them money on license costs. This will also make discounts less sensitive to purchase timing. A customer who has already met a given discount level for the year will have no incentive to postpone additional purchases until the following year to help maintain the discount level for that year.

  Part 2 will be out early next week.

About the Author: John Cullen is a Research VP at Directions on Microsoft, an independent publisher of information about Microsoft technologies, product roadmaps and licensing rules and programs. For more information, visit www.DirectionsOnMicrosoft.com

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A Strategy for the Right Service Levels

by Joe Auer

Service levels are an important part of any results-oriented contract where specific supplier performance is required—and where it must be measured. Service levels are especially important in outsourcing and telecommunications deals in which the customer becomes vulnerable because he depends on the supplier. A results-oriented contract with meaningful service levels and remedies is an effective mechanism to help customers actually get what they’re paying for and minimize exploitation by opportunistic suppliers.

Establishing realistic service levels and remedies for supplier nonperformance can be very difficult. With some pressure from a prospective customer, suppliers are generally willing to contract for service levels and, sometimes, remedies to go along with them. But suppliers usually try to make service levels as broad and as loose as possible, which makes them easier to achieve—and tougher to measure. Meanwhile, customers want service levels to be as tight as possible to ensure maximum and measurable performance. The challenge manifests itself during contract negotiations.

As a customer, remember that the supplier is always trying to minimize its risk by placing as much of the burden of proof on your shoulders as possible. Here’s a recent example:

During negotiations for a global telecom deal, a customer was faced with the service-level challenge. Several prospective suppliers proposed their standard service levels. The customer believed those levels were too broad for some critical components of its network. The suppliers stuck to their standard rhetoric, stating that their service levels were reasonable and consistent with industry practice.

The customer didn’t fold and argued that while the levels may be consistent with industry practice, they weren’t sufficient for the company and some parts of its network. The customer’s procurement team focused the prospective suppliers’ discussions and proposed solutions on the actual network. The team presented its network map and pointed out there were certain locations that were critical to operations. The supplier-proposed service levels weren’t adequate for these critical locations because they left the customer vulnerable to too much downtime in the event of a network failure. (But the proposed service levels were acceptable for some other noncritical locations.)

The customer then stressed the need for location-specific service levels to guarantee the robustness and serviceability of its network as well as the continuity of operations. This argument seemed to be new to the suppliers and was met with some initial skepticism.

The customer pulled an ace out of its sleeve by saying, “This is a way to distinguish yourself from your competitors. It’s an opportunity to excel and gain an edge. It’s an opportunity to win a global deal without assuming an inordinate amount of risk. We’re willing to accept your standard offering for most locations if you give us a display of confidence in your ability to perform for the critical ones. These locations are critical for us, and we need to more fairly allocate the risk of network failure.”

Two suppliers agreed and proposed their best location-based service levels. That’s just what the customer needed to be competitive and maintain negotiating power. Isn’t that what it’s all about? Suppliers with real confidence that they can do the job shouldn’t be afraid of performance guarantees. What’s more, having supplier competition on service levels helps both the evaluation and negotiations processes for the customer.

The difficult task ahead is actually agreeing on the specific metrics that ensure that all three critical service-level components—time, money and quality—exist and are meaningful. In other words, every performance factor must be measurable, including how long it will take, what the maximum cost is and how acceptable (to the customer) quality will be verified.