Calculating Step-Up Pricing

This illustration shows how step-up pricing is calculated for a server product. Customers will rarely have to calculate the cost of a step-up purchase themselves—they will be able to consult a table for the applicable price for their product and the number of years remaining in their license agreement—but this illustration shows how Microsoft creates the table. The illustration assumes the following:

• The Standard Edition of the product costs US$1,000
• Software Assurance on the Standard Edition costs US$250 each year
• The Enterprise Edition of the product costs US$4,000
• Software Assurance on the Enterprise Edition costs US$1,000 a year
• The customer purchases the step-up SKU at the beginning of the second year in a three-year license agreement
• The customer is spreading the license payments over the three-year term of the contract.

Every year the customer pays one third of the cost of the Standard license, or US$333, plus the annual SA fee of US$250 for the Standard license, for a total of US$583 each year.