Understanding the SPLA Agreement

While we often focus on specific products like SQL Server or Windows Server, the Services Provider License Agreement (SPLA) is the master contract that makes it all possible. It is the legal framework that allows you to stop being a "reseller" of boxes and start being a "provider" of services.

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Unlike standard Volume Licensing (where you buy software for internal use), SPLA is designed for a specific business model: hosting software services for third parties.

Below is your guide to the agreement terms, the reporting lifecycle, and how the Flexible Virtualization Benefit fits into the contract.

The defining characteristic of the SPLA contract is its financial model. There are no upfront costs and no commitment to a specific number of licenses.

• Monthly Reporting: You pay only for the products you made available to your customers during the previous calendar month.
• The Term: The agreement lasts for three years. It allows you to order parts, report usage, and provide services during this window.
• Eligibility: To sign an SPLA, you must be a member of the Microsoft AI Cloud Partner Program (MAICPP) (formerly MPN).

The SPLA agreement imposes strict operational requirements that are often missed until an audit occurs.

1. The End User License Terms (EULT) - You cannot just install software for a customer based on a handshake. The SPLA requires you to sign a written agreement with every End User.

• Content: This agreement must contain specific terms (provided by Microsoft) that protect Microsoft’s IP and limit liability.
• Compliance: If you don't have a signed EULT with a customer, their usage of the software is technically unlicensed, putting your entire SPLA status at risk.

2. The $100 Minimum SPLA is for active businesses 

• The Rule: After your first six months, you must report at least $100 (or 100 Euros) per month in license fees.
• The Consequence: If you report "Zero Use" or less than $100 after the grace period, Microsoft has the right to terminate your agreement.

3. Internal Use Limits - Service Providers often ask: "Can I use my SPLA licenses for my own email or CRM?"

• The Rule: Yes, BUT your internal use must be less than 50% of the total use of that product.
• Calculation: If you have 100 Exchange users total, only 49 of them can be your own employees. If you cross 50%, you must buy internal Volume Licenses for your staff.

1. The Reporting Cycle 

• Deadline: You must submit your use report (or Zero Use report) to your Reseller by the 10th day of the following month (e.g., report January usage by February 10th).

• Corrections: If you make a mistake, you generally have 60 days from the invoice date to submit a revision to reduce fees.

2. Price Protection - SPLA offers stability in pricing. Microsoft can generally only increase prices for existing products once per year, effective January 1st. This allows you to set your customer pricing for the year with relative confidence.

Historically, the SPLA agreement forced a binary choice: either you (the Hoster) provide the license via SPLA, or the customer uses "License Mobility" (which required specific forms and products).

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The Flexible Virtualization Benefit (FVB), introduced in late 2022, effectively modifies how you interact with the SPLA agreement regarding customer-owned licenses.

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How is this possible under FVB:

1. Authorized Outsourcer: As long as you are not a "Listed Provider" (Amazon, Google, Microsoft, Alibaba), you qualify as an Authorized Outsourcer.
2. BYOL Expansion: MegaCorp can bring their own Subscription Licenses or licenses with Software Assurance (SA) to your shared hardware.
3. No SPLA Reporting: Because the customer is using their own licenses under FVB, you do not report these instances on your SPLA monthly report.

Beyond "License Mobility": Unlike the old rules in the SPLA agreement that limited BYOL to specific server apps (like SQL), FVB allows the customer to bring Windows Server, Windows 10/11, and Microsoft 365 Apps.

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The Impact on Your Contract

You are still acting as a Service Provider, but you are monetizing the infrastructure and management, not the Microsoft licenses. This helps you avoid the $100 minimum termination clause only if you have other customers generating SPLA revenue, or if you report at least $100 of infrastructure (like CIS Suite) elsewhere.

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Don't let licensing complexity put your business at risk. Reach out to our team for a thorough analysis of your software assets and licensing position. Octopus Cloud helps service providers remain compliant, achieve licensing clarity, and avoid costly penalties.

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Learn more about our SPLA & SAM Baseline service here.