License agreements for Data Center Serivce Providers

Nowadays, large Service Providers (or more exactly Data Center Providers) need more flexibility
when licensing different software.

The most important thing Data Center customers are paying attention lately is delivery time.
Delivery time has become practically the most relevant element people are paying attention to,
since infrastructure requirements vary every hour. Data Center customers need to create new
virtual instances on a regular basis and if the Data Center Providers need to perform a Purchase
Order for software, delivery times increase significantly.

Software providers have aligned to the market needs and developed a business model in order to
provide an On Demand Software Licensing Model.

Microsoft has been dealing licenses under this model for many years now. The SPLA (Service
Provider License Agreement) has some great features but also has some downsides. Microsoft
licenses are mostly made up of per Processor licenses. In some cases, there are the so called CAL
licenses which can be used in very particular situations. There are also the per Processor Data
Center licenses both for Windows Server and SQL which are really aligned to our Cloud Computing
reality: if you have a 2 physical processors server and you pay for 2 Windows Server Data Center
per Processor License you can create as many Windows Server Standard or Enterprise virtual
machines as your physical hardware permit. The same goes for SQL.

One important characteristic of SPLA is that the Service Provider must report usage every month
by means of an online Microsoft tool called MOET.

Let’s describe some important cautions one has to consider when dealing with Microsoft SPLA.
First of all do not be wrong when reporting usage. Reporting wrong or not reporting on time
represent great danger for your business.

If you report wrong, Microsoft folks will choose you randomly (just by chance!) to audit your and
your customer’s servers. If they find out you have reported less licenses that you actually use, you
will get a hard-to-say-no fine. Microsoft speech will be like this: “You have failed reporting your
real software licenses and so you are fined for 1 million USD, but if you pay in the next 10 days you
can forget about this, regulate your situation against Microsoft and continue with your business as
usual.”

Believe me when I say it’s a hard-to-say-no fine. Microsoft SPLA contract is impossible to
negotiate; you have no other alternative than agreeing with every term. So if Microsoft fines you

to pay 1 million USD, either way you’ll pay for it, so it’s always better to happily accept the fine.

On the other hand, if you fail to report on time, you will receive horrible mails saying your account
is cancelled and all of your licenses will expire in the following 10 minutes, it’s like a 10 ton train
hitting against your business. So be patient and report on time: before the 15th of every month.

Moreover, MOET website is maximum expression of Microsoft software. Slow and complicated
which only good feature is working when copying and pasting your report spreadsheet.

But not all is bad news!

Supplying Microsoft licenses under an On Demand model is a great differentiator for your
business. You will be able to provide your customer almost any Microsoft license, for example
Microsoft Windows Server or Microsoft SharePoint, and charge the license together with the MRC
(monthly fee). ROI (Return Over Investment) increases, TCO (Total Cost of Ownership) decreases
and everybody does business happily ever after.

Next time we will talk about VSPP: VMWare On Demand licensing model.

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