Microsoft Select Agreements Due For Renewal? Convert Them To Select Plus

Microsoft announced on Friday that it will stop selling new Select licenses from 1 July, 2011. Customers with existing agreements can renew them for another 36 months, as per their agreements, but the replacement Select Plus program is likely to be a better option. Microsoft launched Select Plus on 1 July 2008, and I wrote at the time that it was an improvement on the basic Select structure: Microsoft Simplifies Its Volume Licensing.

However, Microsoft's pricing team struggled to persuade its LARs to promote Select Plus over the more familiar Select agreement, and customer adoption was disappointing. So the decision to drop the older program makes sense for Microsoft, because it will force its channel partners to embrace the new model. And its no bad thing for buyers - you've one less choice to make, and there's little negative impact.

The biggest advantage of Select Plus for sourcing managers is that they no longer need to submit a three-year spending forecast - this is extremely difficult for central teams buying on behalf of autonomous business units that won't havent planned Microsoft technology adoption that far out. Instead, pricing works like an airline loyalty program, on the current and previous years' actual transactions, as the figure below from my report illustrates. My report explains some more  advantages, such as the flexibility to opt tactically for software assurance on individual purchases.

Anyone with a Select agreement expiring in the next three months should seriously consider upgrading it to Select Plus. You can still renew the Select, but it probably makes sense to switch now. Those with Select agreements ending after June 2010 have longer to make the decision, but can upgrade earlier if they want to. That might make sense if you're not going to achieve your current forecast, or have multiple contracts that you'd like to aggregate into one.


Select Plus Price Tier Is Based On Historic Actual Volumes

Select Plus Price Tier Is Based On Historic Actual Volumes


Rush to or from Select Plus?

Very strong endorsement of Select Plus in this article but it definitely seems to overlook some of the drawbacks to the Select Plus.

First, managing Software Assurance benefits expirations will be challenging for IT asset managers. Instead of all SA benefits expiring on the same date they will instead all expire 3 years from date of purchase - makes renewals a constant job rather than a once every three years job.

Additionally, purchasing discounts set by forecast rather than historical purchasing. Under Select if you know you will have significant purchases over time you can benefit from those on all of your purchases from day one. Under Select Plus, you need to have your significant purchases be your initial purchases or you will pay more on your initial purchases (once you hit the higher level future purchases will be discounted and you can attempt to go back and re-adjust for earlier purchases but only time will tell if that ever actually happens).

There's a reason Select Plus hasn't gained traction in the years since it was introduced...procurement specialists might want to make sure they get into Select before the expiration instead of the other way around (obviously dependent upon their own organizational needs).

Select plus drawbacks

Thanks for your comments Cynthia. I know the non-contemporaneous renewal issue has deterred LARs from pushing Select Plus, but it doesnt really affect customers that much, compared with the advantages. Having a common end date is a disaster if it just precedes the next release (e.g. April 2010 with Office 2010 coming out in May). The renew/ dont renew decision is a systemic one that you make, and revisit only periodically. So right now you might tell your LAR "don't renew SA on Office until further notice". Then when you see the next version is sufficiently close and you know you'll want to upgrade to it, you can change that to "renew, until further notice". Its more work for the LAR, but not for the customer. Plus both parties save the need to renew the contracts every 3 years.

I disagree with you about your forecast versus historical point. You have to buy 1/3 of your forecast in year 1 anyway, under Select, so its really no different. Under select plus you merely have to aggregate the transactions into one initial purchase, but you end up with the same spend over the year.

There may well be some companies for whom Select is better, but they'll be the minority.

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Successfully Negotiating Your Microsoft Licensing Agreement October 7, 2010 London, United Kingdom
Successfully Negotiating Your Microsoft Licensing Agreement December 1, 2010 Cambridge, MA
See for more details.