Research Spotlight: A Hybrid Approach to Microsoft's Volume Licensing Agreements Could Reduce Costs and Compliance Risks

12 March 2013 ID:G00246531
Analyst(s): Dolores Ianni


Due to Microsoft's licensing complexity, IT procurement managers often purchase inappropriate or more expensive agreements than necessary. Use this guide to choose the Microsoft Volume License Agreements that optimize ROI while maintaining software license compliance for your organization.


Primary Issues

Options Analysis

IT procurement professionals struggle to engage early enough with stakeholders and IT providers to explore, model and leverage which sourcing options best meet their desired business outcomes.

IT procurement professionals are tasked with selecting the most suitable Microsoft Volume Licensing Agreements (VLAs) at a time when the needs of the business continue to evolve at a fast pace. They are challenged to understand the complex set of licensing rules involved with each VLA, while these rules continue to change, and to choose only the products and services that are required — rather than what is suggested by Microsoft or the reseller.

As demand for user flexibility increases in the enterprise, IT procurement managers must weigh the criteria and options for their on-premises and hosted requirements to allow for a combination that meets the unique licensing needs of the business. In this Research Spotlight we will highlight the VLAs available and the decision criteria to use when selecting which of these would provide the best outcome for your licensing needs.

Select the Most Suitable License Programs for Your Needs

Choosing among the various Microsoft licensing programs should be done with planning and care. What we continue to advise organizations is that it doesn't have to be an "all or nothing" solution.1 You can license software under multiple programs. For example, you may want to license some products under an Enterprise Agreement (EA); and for those products on which you don't want Software Assurance (SA) enterprisewide, you can license through the Select Plus or Open License programs. When evaluating VLA options, we recommend looking at numerous aspects across a wide range of criteria — as described in this note.

Software Assurance Is Not an "All or Nothing" Decision

SA benefits (see Note 1) are one of the key factors in the preliminary decision process. SA is priced at: 29% of the license price (annually) for desktop products such as Office, Windows client OS and other desktop applications; and at 25% for server products and Client Access Licenses (CALs) in the EA or Select programs. The SA benefit of new version rights has always been a primary cost consideration, however additional SA benefits — such as Roaming Use Rights or Windows Virtual Desktop Access on the desktop or License Mobility on servers — will affect whether a customer should maintain SA benefits across all or a portion of its licenses to remain compliant with the product use rights and contract terms.

Review which of the SA benefits are of importance, calculate their value and determine if you will achieve your ROI by enrolling in SA. Purchasing SA does not have to be an all or nothing decision. If you are using only some SA benefits for a portion of your licenses (rather than across the enterprise), consider a hybrid approach: where you might have an enterprise commitment for some products (with SA in an EA) to leverage the reduced cost, and license a portion of your perpetual licenses for other products in a VLA (where SA is optional) such as Select or Open to maintain compliance. For an example of the ROI decision on Office refer to "Toolkit: How to Quantify the Value of Microsoft Office Software Assurance."

Use a Framework to Determine License Program Direction

The decision tree (see Figure 1) is an outline of some questions to ask that can help determine which program to license under. By answering a few basic questions early on in the decision process some choices can be eliminated. For Enterprise Enrollment (the desktop), you need to ask the questions for each of the three enterprise products: the desktop OS, an Office suite of applications and a CAL Suite. A number of clients have found the best option is to license under a hybrid approach, which includes both Select Plus or Open and an EA on a per product basis.

Figure 1. Gartner Flow Chart for Choosing License Programs
Figure 1.Gartner Flow Chart for Choosing License Programs

EA = Enterprise Agreement; EAS = Enterprise Agreement Subscription; O365 = Office 365; MOSP = Microsoft Online Subscription Program

Source: Gartner (March 2013)

Know the Differences Between Enterprise Agreements and Select Plus

Microsoft offers a perpetual and a subscription license model for its EAs for clients with 250 or more desktops. We find that the majority of our clients are enrolled in either an EA and or Select agreement.2 In "Choosing Between Microsoft's Select and Enterprise Agreements," Gartner identifies the primary differences between these two most popular programs by reviewing each of the general and product considerations in the evaluation process.

Based on the answers to the questions outlined in this note, you can create an efficient financial scenario to span six years or, alternatively, two refresh cycles. To determine the financial impact of your licensing agreement:

  1. Prepare an analysis of your software base and associated (agreements and) entitlements.
  2. Include contract details such as license type, pricing provisions, use restrictions, version release levels, and quantities.
  3. Develop a clear assessment of your future technology requirements.

Once completed, use this information to develop your specific baseline requirements rather than accepting Microsoft's predefined packages.

Revisit your software asset management programs to ensure that you can manage your licenses and entitlements appropriately, in whichever Microsoft program you choose. Before choosing between agreements, carefully consider the factors listed in this research. Remember that it is not an all-or-nothing proposition; many clients will find that a combination of agreements will be more cost-effective.

Are You Aware of the Changes to the Select Program?

In "Evaluating Microsoft's Select Plus Agreement" we distinguish between the details of the Select Plus agreement and the retired Select License program for customers migrating to Select Plus.

Microsoft Select Plus is a three-year volume licensing program designed for customers with 250 or more desktops and mixed product and purchasing requirements. Perpetual licenses can be purchased on an ad hoc basis, with or without SA. Select is more suited to organizations that do not want to standardize on a single platform across the enterprise and still facilitate a centralized purchasing structure across multiple entities or geographies. The ability to aggregate purchases and pay monthly in arrears (licensing each installation at the end of the month in which it is installed) can assist with forecasting and managing volume license requirements. The Select Plus option of choosing or not choosing SA on a case-by-case basis enables customers to license only a subset of their desktops in an EA, if they so desire, rather than all of them.

Consider Open License for Volume Licensing for Small or Midsize Businesses (SMBs)

The Open License is a two-year program targeted at SMBs (see Note 2), and provides customers with a small discount compared to retail pricing. "How to Evaluate Microsoft's Open Program Licensing Options for SMBs" highlights the main differences between the Open License and Open Value agreements, so customers can evaluate the program choices based on the need for SA and perpetual rather than subscription licensing. Discounts in the Open Value program are slightly better than in the Open License Program; however, the requirement to purchase SA may negate the additional discounts.

Education Clients Can Leverage the Campus User-Based License Model

School and higher education institutions can license desktop applications through head-count-based subscriptions rather than device- or user-based programs. In "Microsoft Enrollment for Education Solutions: Do Your Homework" we review the Enrollment for Education Solutions (EES) terms and conditions and eligibility criteria. Although easy to administer, this blanket license coverage doesn't always represent the least-cost option. Organizations outside the education sector may also want to license desktop software by head count or per user, but this may only be possible when subscribing to an online service.

Weigh the Options for Cloud Hosting

Historically, Gartner analysts have not seen clients license their cloud services through the Microsoft Online Subscription Program (MOSP), but rather as part of an EA that includes some on-premises licenses in addition to hosted services. However, we believe this will change as some of the new online service offerings (within Office 365 and Windows Intune) will only be available in EA, EES and MOSP. "Three Approaches to Maximize Your Use of the Microsoft Online Subscription Program" reviews this underutilized alternative.

The MOSP is 30-day or one-year hosted cloud subscription license program for organizations of any size. Customers currently licensing in Select or Open programs that may want to move to the cloud, would need to use another license program such as MOSP to license those services. In addition, licensing Office 365 in an EA can become quite complex when factoring in the transitions for moving from on-premises licenses to subscription licenses. The implications for licensing the Office 365 products under the EA must be carefully considered (see "Contractual Issues When Subscribing to Microsoft Office 365").

Regardless of which VLA program you license cloud services through, we suggest you consider this carefully and negotiate favorable terms because they apply to areas of security, liability, privacy, service levels and future renewal costs. Customers that do not want to commit to a three-year term may prefer, at least initially, to license through the MOSP.

Use Caution When Licensing External Users to Remain in Compliance

IT procurement managers need a way to license external IT collaborations, joint ventures, acquisitions, divestments and bring-your-own-device programs with business partners and customers. In "Don't Sleepwalk Into an Unintended Microsoft Service Provider License Agreement" we describe the scenarios in which using a Service Provider License Agreement (SPLA) is appropriate as a means to license external users or to commercially host Microsoft software for other organizations it doesn't own, and when it does not make sense. Few end-user organizations plan a SPLA, but many unintentionally drift into noncompliance and unbudgeted service provider licensing costs. Use this analysis to evaluate options, verify licensing requirements and optimize software costs within the Microsoft SPLA.


For on-premises licensing, review your need for SA — and other terms and conditions within each VLA — to determine if you would be best suited to a full platform enterprise commitment or a mixed hybrid approach. For online services, again, by asking just a few questions you can eliminate certain choices early on. The collection of notes in this Research Spotlight helps to develop financial and architectural models to help choose among license programs to determine which products should be licensed under which agreement.

Acronym Key and Glossary Terms

CAL Client Access License
EA Enterprise Agreement
EES Enrollment for Education Solutions
MOSP Microsoft Online Subscription Program
SA Software Assurance
SMB small or midsize business
SPLA Service Provider License Agreement
VLA Volume Licensing Agreement


1 Gartner's IT asset management and procurement analysts fielded 3,097 inquiries from clients related to Microsoft licensing in the 24-month period ending December 2012.

2 Gartner's survey of attendees at the September 2012 IT Financial, Procurement & Asset Management Summit, asked the question: What type of agreement(s) or enrollment(s) does your organization currently have with Microsoft and/or which ones are they planning on initiating over the next 12 months? Out of 107 total responses, 72% chose Enterprise Agreement and 37% chose Select Agreement.

Note 1
Microsoft Software Assurance Benefits

The "Microsoft Volume Licensing, Software Assurance" website contains detailed information on the various SA benefits, and instructions on how to activate benefits.

Note 2
Microsoft's definition of SMB market

Microsoft defines the SMB market as follows: small business as fewer than 250 desktops, and mid-market as 250 to 500 desktops.