• Illustration: Select Agreement Consolidation

Microsoft will allow customers who have multiple Select 5 agreements to consolidate them into one Select 6 agreement. Consolidating agreements will reduce license management workloads for customers and could increase their volume licensing discounts.

Licensing 5 vs. Licensing 6

Select consolidation is designed to address some issues arising from the transition from Licensing 5 to the current Licensing 6 program, which was introduced in 2001. The most significant change between these programs was the introduction of Software Assurance (SA) upgrade rights, and the termination of most other forms of upgrade, such as version upgrades. SA is only available on new product licenses, and must be purchased at the time that the product license is purchased.

During a transition period, which ended July 31, 2002, volume licensing customers who wanted to purchase upgrade rights on older software had to purchase Upgrade Advantage (UA), which offered Licensing 5 customers the right to upgrade an older program to the most current version at any time within two years, or until the end of their volume licensing agreement, whichever comes first. After July 31, 2002, all upgrade rights purchased through UA were eligible for SA upgrades.

Because of the deadline, many customers used Select 5 programs to purchase UA on older software. To maximize the term of their UA rights, some customers started a new Select 5 agreement any time they made a major software purchase in the months before Select 5 was terminated. As a result, some customers have multiple Select 5 agreements which will expire at different times over the next year.

SA Rights at Risk

To ensure that they do not lose upgrade rights after their Select 5 agreements expire, these customers would need to renew them in a new Select 6 agreement within 90 days. For example, a customer who started a new Select agreement in July 2002 and purchased UA on an Office 97 license has the right to upgrade to any new version of Office released before Aug. 2004 (such as Office 2003). However, if that UA/SA license is not renewed within 90 days of July 31, 2004 (by purchasing SA in a new Licensing 6 agreement), SA will terminate, and the customer will lose the option to upgrade the license to any version of Office released after that date.

But renewing multiple Select 5 agreements into multiple Select 6 agreements is problematic, for the following reasons:

• Customers must continue to track multiple licensing agreements with different expiration dates
• Discounts available in a given Select agreement are based on a customer’s software purchasing forecast. Because the future purchases must be divided among multiple agreements, they cannot be aggregated to achieve a greater discount.

Consolidation Terms and Advantages

The Select Consolidation program (illustrated in "Select Agreement Consolidation") will let customers renew UA/SA licenses under multiple Select 5 agreements into SA licenses in a single new or existing Select 6 agreement.

Consolidation offers several advantages to customers, including the following:

• Fewer licensing agreements to manage
• Potential for larger discounts, as purchases from multiple smaller agreements are rolled into a single larger agreement
• A simple way to ensure that upgrade rights remain in force after the expiration of older agreements.

Customers must act by July 2004, by which time most Select 5 agreements will expire anyway. As an incentive for customers to make the shift earlier, some Microsoft regions will give them a 5% discount on the SA licenses that they purchase before Dec. 31, 2003, provided that the customer renews all Select 5 agreements prior to their natural expiration date.

Select Renewal Paths

In deciding whether to consolidate, customers need to consider whether their current Select 5 agreements contain any upgrade licenses, whether they want to continue SA, and when their agreements expire.

For example, a customer who has two Select 5 agreements, which will expire in Dec. 2003 and July 2004, has the following three options:

Don’t renew one or more agreements. If the customer has not purchased UA within a particular Select agreement, there is no need to renew that agreement to retain upgrade rights. The customer can start a new Select 6 agreement to gain volume discounts at any time.

Further, even if the customer has purchased UA in an agreement, they might want to let upgrade coverage lapse on some or all of the products covered. For instance, if the customer purchased UA on Office 97, Windows NT Server, and Windows Server Client Access Licenses (CALs) in the agreement expiring Nov. 2003, they already have the right to upgrade to Windows Server 2003 and Office 2003, both of which will have been released before that agreement expires. With the next upgrades for those products slated for late 2005 or sometime in 2006, this customer could elect to let SA lapse and pay full price for the next versions in 2006 or 2007, rather than paying for three years of upgrade rights on products that are not likely to be upgraded before 2006 anyway.

Renew agreements separately. Assuming that the customer wanted to continue SA coverage on products in both agreements, the customer could let each of the Select 5 agreements reach its full term and then start a new Select 6 agreement to renew SA in each agreement. The customer would need to manage multiple Select agreements and would need to divide purchasing forecasts among those agreements.

Consolidate both agreements into one. To reduce the number of licensing agreements they have in place and ensure that SA coverage in existing agreements is continued, the customer could consolidate both Select 5 agreements into a single Select 6 agreement. The customer would have to start a new Select 6 agreement in Nov. 2003, and could then purchase three years of SA for any licenses covered by UA/SA in the two Select 5 agreements.

Because a Select 5 agreement that is consolidated before its full term might contain licenses with unexpired SA coverage, Microsoft will prorate the cost of SA renewals, subtracting any remaining months of SA coverage in the old Select 5 agreements from the price of the SA renewal in the new or existing Select 6 agreement. Customers will pay the net cost of SA in equal payments over the remaining term of the Select 6 agreement.

To take advantage of this prorating, however, customers must roll SA from multiple Select 5 agreements into a new or existing Select 6 agreement at least 30 days before the Select 5 agreements expire.

Resources

Select consolidation is not available in all Microsoft regions (the Asia-Pacific region does not offer it), and the 5% discount for early consolidation is currently available in the North America and Europe, Middle East, and Africa (EMEA) regions until December 31, 2003.

Select customers who want to take advantage of consolidation should contact their Microsoft account manager or licensing specialist.