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Microsoft Customer Agreement: The way forward?

Earlier in 2019, we saw the introduction of the “Microsoft Customer Agreement” (MCA) – a new agreement aimed at customers buying Azure directly from Microsoft, but that also featured a new type and style of agreement.

Microsoft Customer Agreement

It was then announced that the Microsoft Customer Agreement (MCA) will replace the Microsoft Cloud Agreement (MCA), the underlying agreement for CSP (Cloud Solution Provider) relationships.
Following a session run by Hani Rachidi, Director of Commercial Licensing, at Microsoft’s Inspire conference in July, we have more information on what the MCA looks like.

Vision

Microsoft’s aim is that the MCA will be a single agreement for all customers, and it will provide a smooth, totally digital process for organisations of any size – an agreement that starts small (at just 11 pages initially) and grows to cover just those areas relevant to each customer.

The agreement will “follow the customer”, meaning there should be no need to re-sign agreements simply for moving to a new partner.
One of the most interesting things here is that it will cover “third-party products”, that is those products available via the Microsoft marketplaces – such as within Azure for example.

Structure

The structure of the MCA will be:

Microsoft Customer Agreement structure

General Terms

These cover the legal relationship between the customer and Microsoft, across locations, purchase types, business sector etc.

Purchase Terms

These will vary depending whether the customer is purchasing directly from Microsoft or via a partner, calling out who is doing the billing etc.

Additional Terms

Any additional terms, specific to certain products/programs etc., will be presented here as required.

CSP to MCA

As mentioned above, the new Microsoft Cloud Agreement is superseding existing agreements in place for CSP relationships, but this doesn’t have to happen immediately for existing customers. The ability for partners to select “Customer has accepted the latest Microsoft Cloud Agreement” will be disabled on January 31, 2020.

For customers wishing to take advantage of the new “Azure Plan” offer via CSP, the MCA will be required immediately upon its availability on October 1, 2019.

Audit Clause

What does the Microsoft Customer Agreement say about audits? Here are some relevant extracts:

“Verifying compliance. Customer must keep records relating to Products it and its Affiliates use or distribute. At Microsoft’s expense, Microsoft may verify Customer’s and its Affiliates’ compliance with this Agreement at any time upon 30 days’ notice. To do so, Microsoft may engage an independent auditor (under nondisclosure obligations) or ask Customer to complete a self-audit process. Customer must promptly provide any information and documents that Microsoft or the auditor reasonably requests related to the verification and access to systems running the Products. If verification or self-audit reveals any unlicensed use, Customer must, within 30 days, order sufficient licenses to cover the period of its unlicensed use. Without limiting Microsoft’s other remedies, if unlicensed use is 5% or more of Customer’s total use of all Products, Customer must reimburse Microsoft for its costs incurred in verification and acquire sufficient licenses to cover its unlicensed use at 125% of the then-current Customer price or the maximum allowed under applicable law, if less. All information and reports related to the verification process will be Confidential Information and used solely to verify compliance.”

In brief – 30 days’ notice for an audit and then, if a shortfall is found, 30 days to purchase the necessary licenses. It also contains the clause that if a difference of 5%+ is discovered, the necessary licenses will be charged at 125% of current price.

Other points of interest

Late Payment. Microsoft may, at its option, assess a late fee on any payments to Microsoft that are more than fifteen (15) calendar days past due at a rate of two percent (2%) of the total amount payable, calculated and payable monthly, or the highest amount allowed by law, if less.

Cancellation fee. If a subscription permits early termination and Customer cancels the subscription before the end of the subscription or billing period, Customer may be charged a cancellation fee.

Conclusion

Any attempt to simplify agreements and to streamline the process of interacting with them should be applauded, and it certainly seems like these changes are coming from the right place. However, what does this mean in practice? Not being all to see all the elements of a contract when you sign it doesn’t necessarily sound like the best idea! Two things that jump out at me:

  • Each time an event occurs that requires new terms to be added to the MCA, will the customer be given the opportunity to review and sign/decline these new terms?
  • As a living document, must organisations continually check the MCA to ensure no terms have changed or been added?

Although currently slated for just CSP agreements and the afore-mentioned direct Azure program, there are clauses in the MCA that indicate it will eventually become the base for all agreements. For example, clause “h” in General terms refers to license transfers of “fully paid, perpetual licenses” – something which doesn’t exist in CSP.

It will be interesting to see how this new approach to agreements proceeds and what it ultimately means for Enterprise Agreements, MPSA etc.

Further Reading

Download the MCA: https://www.microsoft.com/licensing/docs/customeragreement

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About Rich

Rich has been in the world of IT and software licensing since 2003, having been a software sales manager for a VAR, a Microsoft licensing endorsed trainer, and now an ITAM analyst looking at software licensing and cloud.

A Northerner renowned for his shirts, Rich is a big Hip-Hop head, and loves travel, football in general (specifically MUFC), baseball, Marvel, and reading as many books as possible. Finding ways to combine all of these with ITAM & software licensing is always fun!

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