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End of Microsoft Select means smaller discounts for savvy shops

Microsoft will phase out Select license agreements this summer in favor of its Select Plus program. But Select Plus may not give customers the best discounts.

Microsoft will phase out its popular Select volume licensing plan in favor of its "Select Plus" program, which the company claims is a simpler option. Others say Select Plus will mean smaller discounts for buyers who truly worked the system and who could wangle bigger discounts from Select than other volume programs, including Microsoft Enterprise Agreements.

"Select is the funnest [sic] program to deal with because there are ways to game the system to get more than you're entitled to," said analyst Paul DeGroot with Directions on Microsoft, a Kirkland, Wash.-based consulting firm. Customers that are used to that process won't be happy with the shift to Select Plus, which bases discounts on actual purchases year to year versus forecast purchases in the first year.

Select vs. Select Plus

In the first year of the three-year Select agreement, a customer forecasts what it intends to buy that year and the discount is based on that forecast. "We always advise people to forecast level D, the highest level of discount, because at the end of the year if you actually buy more software than you expected -- and that happens 40% of the time -- there is no penalty. But if you end up buying less than you forecast, there is also no penalty," DeGroot said.

On the other hand, if a company forecasts less than it winds up buying in that first year, it is stuck with the lower discount. Put simply, there was no downside to over-forecasting your software demand.

DeGroot said Select ends up being the most efficient way for many companies to buy their server licenses. Select, unlike Enterprise Agreements, is a transactional contract and customers are not required to buy Software Assurance for each of the three years. They can, however, tactically buy SA for one or two years of the contract, depending on what upgrades they see coming down the pike.

"If I want to upgrade to the latest SQL Server, I could do that under my EA but I would be paying three years of SA to get that. Under Select, I pay 25% and get the upgrade."

It can also be best for desktop upgrades.

"If you were buying new PCs in 2009 and it was pretty clear that Microsoft was going to ship Windows 7 on Oct. 22 of that year, if you have a Select agreement in its last year, you would buy SA on every new PC you buy that year and then Windows 7 costs you $45 per desktop to upgrade to the [highest level] Enterprise Edition."

Many enterprises have both EAs and Select agreements running concurrently for different needs.

Select Plus bases discount on the amount of software actually purchased annually. "It makes things a lot more predictable for Microsoft," DeGroot said.

Stephanie Trowbridge, a software licensing specialist at Northeastern University in Boston, is watching these developments although most of the school is now on an academic site license and won't be affected.

There's a lot of chatter on this change on licensing bulletin boards, she said. "With Select Plus, things could get dicey because, with Select, you could true-up purchases and that's not the case with Select Plus."

However, those customers can re-sign their Select pacts before July 2, 2011, and will be able to continue on that path until 2017.

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