Microsoft

Mastering Microsoft SPLA Audit – How to avoid penalty fees

A Microsoft SPLA audit is:

  • Microsoft initiated a review to verify a service provider’s compliance with SPLA terms.
  • Conducted by an independent auditor to scrutinize the service provider’s hosting services and licensing adherence.
  • Focused on ensuring accurate monthly licensing compliance.
  • This can lead to penalties or agreement termination for non-compliance.
  • Involves multiple stages, including data collection, draft report review, and commercial negotiations with Microsoft.

Understanding SPLA Audit

microsoft spla audit

When you sign the SPLA agreement, you grant Microsoft the right to audit your compliance. The audit terms are detailed in two key documents:

  1. Microsoft Business and Services Agreement (MBSA)
  2. Services Provider License Agreement (SPLA)

The MBSA outlines universal terms and conditions, while the SPLA extends and clarifies these terms.

Definition of SPLA Audit

An SPLA audit is a comprehensive review process initiated by Microsoft to confirm that a service provider is adhering to the Services Provider License Agreement stipulations.

This audit scrutinizes the service provider’s hosting services, ensuring they align with Microsoft’s licensing requirements.

The Role of Microsoft in SPLA Audit

Microsoft plays a pivotal role as the licensor in the SPLA audit. They are responsible for initiating the audit, appointing an independent auditor, and interpreting the audit results.

The audit’s outcome can have significant implications for the service provider, ranging from penalties for non-compliance to potential termination of the agreement.

The Difference Between SPLA and Other Audits

spla audit vs microsoft audit

While the fundamental purpose of an SPLA audit is similar to other compliance audits, there are key differences.

An SPLA audit is unique because it verifies license compliance monthly rather than at a single point.

Any discrepancies found in past data can contribute to the service provider’s monthly shortfalls for that period, making the SPLA audit a continuous compliance check rather than a one-off event.

SPLA audit triggers

The primary triggers for SPLA are your monthly reporting and how much you report.

  • If you are slow in reporting your monthly consumption reports, that may trigger an audit.
  • If you are not reporting monthly, you may be audited.
  • If your reporting is too low, you may be audited.

The SPLA Audit Process

microsoft spla audit process

The SPLA (Services Provider License Agreement) audit is vital to ensure compliance with Microsoft’s licensing terms and conditions. Here’s a breakdown of each phase for better understanding:

1. The Initiation Phase

  • Notification from Microsoft: The process starts when Microsoft formally informs the service provider about the upcoming audit.
  • Details Included: This notification typically outlines the audit’s scope, the appointed auditor, and the expected timeline.

2. Data Collection and Provision

  • Provider’s Responsibility: After the initiation, the service provider must gather and provide detailed data about their hosting services.
  • Auditor’s Role: The auditor thoroughly examines this data to spot any areas of potential non-compliance.

What Data Will Be Requested?

  • Active Directory machine and user listings.
  • Information from virtual environments.
  • Comprehensive software inventory.
  • Evidence supporting SPLA reporting figures.
  • Billing details between the provider and customers.
  • Agreements with customers.
  • Software assurance verification forms.

3. Draft Report Presentation

  • Preliminary Findings: Once the data review is complete, the auditor shares a draft report, highlighting initial findings, especially non-compliance issues.

4. Review and Defense by the Service Provider

  • Opportunity to Respond: The service provider can examine these findings and defend their practices, possibly providing extra evidence or explanations.

5. Final Report and Commercial Negotiations

  • Conclusion of the Technical Phase: After reviewing the service provider’s defense, the auditor finalizes the report.
  • Negotiations with Microsoft mark the beginning of commercial discussions, determining the audit’s outcome, including any penalties or future licensing adjustments.

Additional Context

  • Independent Auditors: Microsoft may hire an independent auditor, such as one from the “Big Four” (EY, PwC, KPMG, Deloitte), for this process.
  • Consequences of Non-Compliance: Failing to comply can lead to significant penalties or even termination of the agreement.

By understanding each stage of the SPLA audit process, service providers can better prepare and ensure compliance with Microsoft’s licensing requirements.

he agreement.

Important SPLA Audit Insights

Keep in mind the following points during an SPLA audit:

  • Service providers often underestimate shortfalls by 80%.
  • User licenses (SALs) account for 50-80% of shortfalls.
  • Shortfalls in Windows Server licenses are challenging to mitigate.

Critical Takeaways for a Successful Microsoft SPLA Audit

To navigate the SPLA audit process effectively, remember these crucial tips:

  • The auditor’s role is technical, focusing on data analysis.
  • Microsoft, not the auditor, determines financial figures.
  • Present your business case and appeals during negotiations with Microsoft.
  • The auditor’s report is not final; continue defending your claim during negotiations.

By understanding the SPLA audit process and implementing these strategies, you can improve your chances of a favorable outcome and maintain compliance with Microsoft’s licensing terms.

Step-by-step guide on how to prepare for a Microsoft SPLA Audit:

  1. Understand the SPLA Audit: The first step is understanding what an SPLA audit is and why it’s essential. An SPLA audit is a process that ensures your compliance with Microsoft’s licensing terms and conditions. Non-compliance can result in penalties or even termination of the agreement.
  2. Know the Differences between SPLA and Regular Audits: SPLA audits differ from regular Microsoft audits in that they evaluate your licensing position monthly due to the “pay-as-you-consume” nature of the agreement. This means the auditor will assess multiple monthly licensing positions, making it crucial to maintain accurate historical data.
  3. Prepare Your Legal Department: Train your legal department on SPLA and Microsoft’s legal framework. They should know the audit terms detailed in the Microsoft Business and Services Agreement (MBSA) and the Services Provider License Agreement (SPLA).
  4. Organize Your Agreement Paperwork: Ensure all agreement paperwork is securely stored and easily accessible. This includes your SPLA agreement, MBSA, and any other relevant documents.
  5. Establish Emergency Processes and Tools: Emergency processes, tools, and trained personnel are in place to respond effectively to the audit. This includes having a system for data collection and a team ready to respond to auditor requests.
  6. Understand the SPLA Audit Process: The SPLA audit process includes an initiation phase (receiving the audit letter and the kick-off meeting), data collection, review of the draft report, defense of your position, final report, and commercial negotiations.
  7. Prepare for Data Collection: The auditor will request various data, including Active Directory machine and user listings, data from your virtual environments, software inventory, data backing up your SPLA reporting numbers, the billing information you and your customers, agreements between you and your customers, and Software Assurance Verification Forms. Be ready to provide this information.
  8. Understand the Auditor’s Role: The auditor’s role is technical, focusing on data analysis. Microsoft, not the auditor, determines financial figures. Therefore, you should be prepared to present your business case and appeals during negotiations with Microsoft.
  9. Review and Defend Your Position: After the auditor presents a draft report, you must review it, defend your position, and provide the necessary evidence. The auditor’s report is not final; continue supporting your case during negotiations.
  10. Engage in Commercial Negotiations: After the technical phase concludes with the signing off on the final report, you’ll engage with Microsoft to negotiate the outcome. This is your opportunity to present your case and negotiate any penalties or fees.

FAQs on SPLA Audits

What is an SPLA audit?

An SPLA (Services Provider License Agreement) audit is a process where Microsoft verifies a service provider’s compliance with the terms and conditions of the SPLA.

An independent auditor, usually one of the “Big Four” (EY, PwC, KPMG, or Deloitte), is appointed by Microsoft to gather data related to the service provider’s hosting services.

Who has the right to conduct an SPLA audit?

Microsoft has the right to conduct an SPLA audit. This right is granted when a service provider signs the SPLA agreement.

The audit terms are included in the multi-year licensing contracts of all major software publishers.

How does an SPLA audit differ from regular compliance audits?

An SPLA audit differs from regular compliance audits in that it verifies license compliance per month rather than at a single point in time.

This means that an error in past data will add to the service provider’s monthly shortfalls for that period.

What is the process of an SPLA audit?

The SPLA audit begins with an initiation phase, followed by data collection and provision.

The auditor then presents a draft report, which the service provider reviews and defends its position. After the final report is signed off, the technical phase ends and commercial negotiations with Microsoft begin.

What happens if the auditor finds a past error in the data during a SPLA audit?

If the auditor finds a past error in the data during an SPLA audit, it will add to the service provider’s monthly shortfalls for that period.

This is because SPLA audits verify license compliance per month rather than at a single point in time.

What are the potential outcomes of an SPLA audit?

The potential outcomes of an SPLA audit include penalties or even termination of the agreement, depending on Microsoft’s findings.

However, Microsoft often prefers to look into the future and may be interested in the service provider committing to increase its Azure consumption.

hat happens after the final SPLA audit report is signed off?

After the final SPLA audit report is signed off, the technical phase ends and commercial negotiations with Microsoft begin. The service provider may still defend their case and negotiate the outcome.

What is the role of the auditor in an SPLA audit?

SPLA audit? The role of the auditor in an SPLA audit is technical. They deal with data and data only and typically take Microsoft’s side when there’s an ambiguous situation.

The auditor won’t present any financial figures, as this is Microsoft’s prerogative.

What is the importance of historical data in an SPLA audit?

Historical data is crucial in an SPLA audit because it helps to “demonstrate a different scope and duration” when necessary.

If a service provider doesn’t have robust data for a specific month, the auditor will extrapolate it from the data they managed to collect.

How can a service provider prepare for an SPLA audit?

A service provider can prepare for an SPLA audit by having all agreement paperwork organized and available, training their legal department on SPLA and Microsoft’s legal framework, and having emergency processes, tools, and trained personnel in place.

They should also have reliable, near-real-time data from all the servers in their hosting estate.

Need Help with a Microsoft SPLA Audit? Contact Redress Compliance Today!

Navigating a Microsoft SPLA audit can be complex and challenging. But you don’t have to do it alone.

At Redress Compliance, we specialize in providing comprehensive SPLA audit preparation, detailed analysis of your current licensing status, and expert guidance on understanding and navigating SPLA audit requirements.

Our services include:

  • Assistance in Gathering and Organizing Required Documentation: We help you prepare all the necessary paperwork for the audit process.
  • Identification of Potential Compliance Gaps and Mitigation Strategies: We analyze your current situation and suggest practical strategies to address any potential compliance issues.
  • Representation and Communication with Microsoft and Third-Party Auditors: We act as your representative, ensuring clear and effective communication throughout the audit process.
  • Negotiation Support for Audit Settlements and Dispute Resolution: Our team of experts will support you in negotiations, helping you achieve the best possible outcome.
  • Post-Audit Guidance on Maintaining Ongoing SPLA Compliance: After the audit, we guide you to help you maintain compliance and avoid future issues.

Don’t wait until you’re facing an audit.

Contact Redress Compliance today and let our team of experts guide you through the Microsoft SPLA audit process.

Author

  • Fredrik Filipsson

    Fredrik Filipsson brings two decades of Oracle license management experience, including a nine-year tenure at Oracle and 11 years in Oracle license consulting. His expertise extends across leading IT corporations like IBM, enriching his profile with a broad spectrum of software and cloud projects. Filipsson's proficiency encompasses IBM, SAP, Microsoft, and Salesforce platforms, alongside significant involvement in Microsoft Copilot and AI initiatives, enhancing organizational efficiency.