Redmond Negotiator

The Truth About Microsoft Software Billing Mistakes

Billing mistakes for Microsoft software happen more often than you might think. And when things go wrong, it's not just the price -- compliance can be affected as well. Here's what to watch out for.

When recently working with a consulting client, I discovered yet another case of a very common problem: The client's resellers had been incorrectly quoting and billing the company for a variety of Microsoft products.

Purely accidental mistakes, I'm sure -- but mistakes that cost my client several hundred thousand dollars over the past few years. These are mistakes that I've seen many other times with many other customers (and yes, I've even made mistakes myself).

It's not surprising: Last time I checked there were over 43,000 unique items in Microsoft's price list. And when you combine the complex array of licensing options and programs and special offers and terms, it's relatively easy to quote and order the wrong item.

That's why your friendly reseller is there to help, right? Well, yes – but as the example above shows, resellers (and even consultants!) make mistakes, too. But the real problem is not that you might be overpaying for a few licenses and underpaying for others. The real problem is license compliance: If you have license confirmations that don't match the actual use, or if you weren't eligible for that particular license (but the reseller invoiced anyway), then you have a compliance problem.

So, first thing I want you to accept is that you, not the reseller, and not Microsoft, are responsible for making sure you've ordered (and received appropriate proof of license for) the correct licenses.

At this point, some of you are saying "Duh!" and others are saying, "Waaah ...but my reseller is different... we get reports... their support is great..." Those of you in the second group have my sympathy, because eventually you will receive an unpleasant surprise. You have to keep your eyes open. Following is a quick overview of items to watch out for.

Wrong Price Level
If your Select Agreement is for Level C, your pricing and part numbers should reflect that. The problem is Microsoft re-uses the same part number for differing price levels, so 021-06291 is Office 2003, but it could be Select price level A, B, C or D. The letter is the key. The solution? Double-check your price lists, quotes, purchase orders and especially invoices for the correct price level (included in the item description) and price.

Correctly Billing Software Assurance (Or Not)
One of the nice features about Software Assurance (SA) is the ability to spread the cost over three years in equal installments with no interest charges. But the tricky part, again, is Microsoft's part numbering system. For example, Windows Server, Standard Edition including License and SA is Microsoft Select part number P73-00205, list price (Select Level C) of $1,066 for customers with 3 years remaining on their agreements.

Again, you have the price level problem to watch out for. But also, you have three more things to check, because you're dealing with SA:

  1. Confirm that the Part Number is correct for the number of years remaining in your Agreement. You see, Microsoft uses this same part number for 1, 2, and 3 years remaining. Check the descriptions and the master price list to be sure.
  2. Decide how you're going to pay for this $1,066: All at once, or on the installment plan? Make sure your reseller quote and item description reflects that. If you go for the installment plan, you simply divide the $1,066 by 3, and your first invoice should be $355.33.
  3. Make sure your records are set up to handle the next $355.33 invoice, when it lands on your desk next year. Also make sure you set a reminder in case your reseller forgets to bill you! Remember, compliance is your responsibility, not theirs.

User Versus Device Client Access Licenses (CALs)
When you're dealing with CALs, make sure you understand the difference between "User" and "Device" licensing rules as they apply to your environment, and that your PO, invoice and license confirmation includes the correct part number.

In the case of SQL Server and CALs, be sure to also analyze whether you're better off buying "per processor" server licenses instead of CALs.

Incorrect Product Type
If there wasn't enough complication in these situations, here's a list of the various “Product Types” that are available from Microsoft.

  • License/Software Assurance Pack
  • Monthly Subscriptions
  • SA Step Up
  • Software Assurance
  • Standard
  • Upgrade
  • Upgrade/Software Assurance Pack
  • Work At Home

Of course, not all of these are available for every product, and many of them are only available for limited time periods or under limited circumstances, so you need to understand exactly what you're ordering and why.

Want More?
Confused? Frustrated? Well, help is on the way. You see, I'm speaking at the upcoming TechMentor conference in March, and I want to make sure you get the info you want. Take a minute to tell me what topics you'd most like to see me cover in a three-hour "Crash Course in Microsoft Licensing" session by clicking here and taking a quick, three-question survey. I'll send you a free “thank-you” gift.

About the Author

Scott Braden has helped more than 600 companies negotiate Microsoft volume license deals. For a free case study, "How a Mid-size Company Saved over $870,000 on a $3 million Microsoft Enterprise Agreement, in Less Than Three Weeks," visit www.MicrosoftCaseStudy.com.

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