How to Choose the Right Microsoft Licensing Agreement
- Understand your business size: Small businesses may prefer retail licenses. Larger businesses may need volume licensing.
- Consider cloud needs: Microsoft 365 offers a subscription-based model with cloud access.
- Pre-installed software: OEM licensing is best for new devices.
- Look at resellers: CSP is a reseller-based model for cloud-centric needs.
How to Choose the Right Microsoft Licensing Agreement
Choosing the right Microsoft licensing agreement is critical for organizations looking to optimize costs, ensure compliance, and meet their software needs.
Microsoft offers various licensing options for organizational sizes, infrastructures, and budgets. Navigating these programs can seem overwhelming.
However, understanding the available options, key considerations, and best practices can help organizations make informed decisions and choose the right licensing agreement for their unique needs.
Microsoft Licensing Programs
Microsoft provides several licensing programs tailored to different organizations based on size, usage, and infrastructure.
The main licensing types include:
- Retail Licenses: These are typically individual licenses purchased through retailers. They are suitable for single-user needs and usually come with basic support.
- OEM Licenses: Original Equipment Manufacturer (OEM) licenses are pre-installed software on new devices purchased from hardware manufacturers. These licenses are often less flexible than others and are tied to the hardware they come with.
- Volume Licensing: This program is designed for organizations needing multiple licenses at discounted rates. It allows for centralized management and offers a range of options depending on the organization’s size and requirements.
- Subscription Licenses: These are cloud-based services, such as Microsoft 365, that provide ongoing access to software on a subscription basis. These services typically include updates, support, and cloud services.
Each licensing type has advantages and limitations, and the right choice depends on the organization’s size, growth trajectory, infrastructure requirements, and budget.
Enterprise Agreement (EA)
The Enterprise Agreement (EA) is often the most suitable choice for larger organizations. Microsoft’s flagship volume licensing program is designed for organizations with 500 or more users or devices.
Below are key details about the EA program:
Eligibility and Terms
- Size Requirement: The EA program is ideal for organizations with 500 users or devices.
- Commitment: It involves a three-year agreement with annual payments.
- Volume Discounts: Organizations benefit from significant volume discounts based on the number of licenses they need.
- Software Assurance: Included in the agreement, Software Assurance provides benefits like access to new features, product support, and training resources.
Key Benefits
- Cost Savings: Organizations can save up to 45% compared to traditional licensing models.
- True-Up Facility: This feature allows organizations to adjust their license counts throughout the agreement term, delaying payments for additional licenses until needed.
- Access to Latest Features: The licensing agreement gives EA customers access to the latest software versions.
- Comprehensive Support: Software Assurance includes 24/7 support, deployment planning services, and other resources to help manage Microsoft products effectively.
The EA offers a robust and cost-effective solution for large enterprises with complex needs that helps manage software assets and compliance while providing the flexibility to scale as the organization grows.
Read about Microsoft Licensing terminology.
Options for Small and Medium Organizations
Organizations with fewer than 500 seats (users or devices) can consider alternative Microsoft licensing programs that offer similar benefits to the Enterprise Agreement but at a smaller scale. Below are three common options for smaller organizations:
Open License Program
The Open License Program is ideal for organizations needing a straightforward, cost-effective licensing solution. It is designed for smaller businesses and offers the following features:
- Minimum Purchase: Organizations must purchase at least five licenses to qualify for this program.
- Two-Year Agreement: The agreement lasts two years, after which the organization can renew or adjust its licensing terms.
- Pay-as-you-go: Organizations can purchase additional licenses as needed and are billed accordingly.
This program provides a simple, pay-as-you-go solution without a long-term commitment. It’s best suited for smaller businesses that require a small number of licenses and want flexibility in purchasing.
Read our beginners guide to Microsoft Licensing.
Open Value Program
The Open Value Program offers more flexibility for organizations seeking to standardize their software and manage their IT infrastructure more easily.
Key features of this program include:
- Spread Payments: Open Value allows organizations to spread payments for their software licenses over time, making managing cash flow easier.
- Software Assurance: Included with the program, Software Assurance offers updates, training, and 24/7 support.
- Flexible Licensing: Open Value is ideal for businesses that require comprehensive licensing solutions but aren’t large enough to meet the requirements for an EA.
The Open Value Program is ideal for organizations seeking a comprehensive, cost-effective licensing solution with predictable payments.
Microsoft Products and Services Agreement (MPSA)
The Microsoft Products and Services Agreement (MPSA) is ideal for organizations that want a more modern and flexible licensing approach. MPSA offers a streamlined approach to managing licenses for both on-premises software and cloud services.
The benefits of MPSA include:
- Consolidated Purchasing: MPSA allows organizations to consolidate the purchasing of software, cloud services, and Azure under a single agreement.
- Flexibility: MPSA is suitable for organizations of varying sizes and offers flexible licensing terms.
- Simplified Management: The agreement provides a unified approach to managing licenses, making it easier for organizations to scale and adapt to changing needs.
MPSA is a great choice for organizations that want the flexibility to mix cloud and on-premises solutions while maintaining a simple and streamlined licensing process.
Cloud Solution Provider (CSP) Program
The Cloud Solution Provider (CSP) Program may be the best option for organizations focusing primarily on cloud services.
The CSP program offers flexible subscription-based licensing for cloud products like Microsoft 365, Azure, and Dynamics 365.
Features of the CSP program include:
- Flexible Subscription Options: CSP allows monthly or annual billing, depending on the organization’s preferences.
- Direct Relationship with Microsoft Partners: Organizations work directly with CSP partners who can help manage their licenses and provide technical support.
- Higher Billing Premium: Monthly billing is available but comes with a 20% premium compared to traditional agreements.
- Limited On-Premises Options: The CSP program primarily focuses on cloud services and may not offer the same flexibility for on-premises infrastructure as other programs.
The CSP program is an excellent choice for organizations that are using Microsoft’s cloud services and maintaining a flexible subscription model.
Making the Right Choice
When selecting a Microsoft licensing program, organizations must carefully consider several factors to determine which option best meets their needs. Here are some of the most important factors to evaluate:
1. Organization Size
- Enterprise Agreement: Best for organizations with 500+ users or devices.
- MPSA: Ideal for organizations with 250+ users.
- Open Programs: Suitable for organizations with five or more users.
2. Infrastructure Requirements
- Cloud vs. On-Premises: Consider whether your organization’s infrastructure is cloud-based, on-premises, or a hybrid of both. This will impact which licensing program is most appropriate.
3. Budget and Payment Preferences
- Upfront vs. Subscription: Some organizations may prefer to invest upfront in software, while others may want to spread payments over time or opt for a subscription model.
- Volume Discounts: If your organization plans to purchase many licenses, programs like the Enterprise Agreement or MPSA offer significant volume discounts.
4. Future Growth
- Scalability: Consider how your organization’s needs may evolve over the next few years. A flexible and scalable licensing program, such as the Enterprise Agreement or MPSA, can accommodate future growth.
5. Compliance and License Management
- Audit Risk: Microsoft licensing agreements are typically subject to audits, so ensuring compliance by accurately tracking license usage and maintaining good records is important.
Best Practices for Selecting Microsoft Licensing
When selecting the right Microsoft licensing agreement, organizations should follow best practices to ensure they make an informed decision:
- Assessment Phase: Evaluate your software usage, projected growth, and budget constraints. Consider whether your needs are primarily on-premises, cloud-based, or hybrid.
- License Management: Regularly monitor your license usage and adjust as needed. Many programs offer the flexibility to scale up or down, but staying on top of your usage patterns is crucial to avoid non-compliance or unnecessary costs.
- Hybrid Licensing: Consider a hybrid licensing model that combines different licensing options (e.g., a mix of cloud subscriptions and on-premises licenses) based on your organization’s infrastructure.
- Regular Reviews: Schedule regular reviews of your licensing needs to ensure they remain aligned with your evolving business needs and compliance requirements.
Special Considerations for Specific Organizations
Microsoft offers special pricing and licensing options for certain types of organizations:
- Educational Institutions: Microsoft provides academic pricing for educational institutions and special discounts for qualifying students and staff.
- Non-Profit Organizations: Microsoft offers discounted and even donated licenses through its Philanthropies program.
- Government Organizations: Government entities can access specialized pricing, compliance-focused solutions, and secure deployment options.
FAQ: How to Choose the Right Microsoft Licensing Agreement
What is Volume Licensing?
Volume licensing allows businesses to purchase multiple licenses at discounted rates, which is ideal for organizations with many users.
Who should choose Microsoft 365?
Microsoft 365 is perfect for businesses or individuals who need subscription-based access to software with cloud services.
What is OEM Licensing?
OEM licenses are pre-installed on devices and are typically non-transferable. They’re ideal for individuals or small businesses buying new PCs.
How does Retail Licensing work?
Retail licenses are purchased individually, usually by consumers or small businesses. It’s the traditional software licensing method.
What is the CSP licensing model?
CSP (Cloud Solution Provider) is a reseller-based model where businesses get cloud solutions through third-party resellers.
How do I know if I need Volume Licensing?
If your business has multiple users or devices needing licenses, volume licensing is cost-effective.
Can Microsoft 365 licenses be transferred?
Microsoft 365 licenses are tied to users and cannot be transferred to others.
Which model is best for a small business?
Retail or Microsoft 365 subscriptions are generally best for small businesses, offering flexibility and lower upfront costs.
Are Microsoft Volume licenses only for enterprises?
No, Volume Licensing can be used by any business, nonprofit, or educational institution with a certain number of users or devices.
What are the benefits of CSP licensing?
CSP offers flexible billing, the ability to scale services, and reseller support for cloud-based solutions.
Can I switch licensing models later?
Yes, businesses can switch licensing models as their needs change, though it may involve certain administrative steps.
What’s the difference between OEM and Retail licenses?
OEM licenses are tied to hardware and can’t be moved, while Retail licenses can be transferred between devices.
How do I choose between Microsoft 365 and Volume Licensing?
Microsoft 365 is subscription-based and ideal for cloud services. Volume Licensing is better for businesses with many users needing on-premise software.
What if I only need software for a short term?
Subscription models like Microsoft 365 are ideal for temporary needs, as they don’t require long-term commitments.
What happens if I exceed my license count in Volume Licensing?
Exceeding your license count can lead to compliance issues, so track and manage licenses carefully.
How do I manage Microsoft licenses effectively?
Tools like the Microsoft Volume Licensing Service Center help businesses track and manage licenses accurately.
