The Service Provider License Agreement (SPLA) is one of the best ways for third parties to create a revenue stream using Microsoft products. If we take into account that the company’s global revenue reached a global high of more than $168bn in 2021, the SPLA turns into a lucrative profit for organizations using Microsoft products for their customers.
While a large segment of Microsoft users gets the products for their use, a significant part gets them to offer their products and services. And this is where the Service Provider Licensing Agreement, commonly known as SPLA or SPLA license, comes in.
Let's examine what an SPLA license is and what it involves.
What is an SPLA license?
Microsoft offers an SPLA license to service providers and independent software vendors (ISVs), who in turn offer Microsoft products to their customers. For example, suppose you’re hosting websites or applications on Windows Servers or using Microsoft products on the hardware your organization is managing. In that case, you can use an SPLA to act as a middle person between Microsoft and your customers or clients.
The license differs from an MSPA in which the licensee would be an authorized reseller for Microsoft products.
The model works pay-as-you-go, meaning that if you’re an SPLA holder and your clients or customers use only 2 licenses, you only pay for those, but if they use a 100, you pay for 100.
Microsoft SPLA license doesn’t mandate any minimums for resellers; it lets them do zero user reporting.
9 benefits of the Services Provider License Agreement
- Pay-as-you-go model - Resellers only have to pay for what their customers or clients use.
- Offer the latest product versions - SPLA license holders get the newest version of the Microsoft products they can offer their customers.
- Offer free demos to end-users - SPLA allows resellers to offer free demos to up to 50 users for a maximum of 60 days.
- Free trial for resellers - License holders can download the latest product versions for testing and evaluation before offering them to their users. This lets resellers and their employees learn the product well without incurring costs.
- Quickly deliver the product to end-users - With the SPLA license, Microsoft lets resellers offer their products to end-users across the globe as long as there are no regulations prohibiting them. And Microsoft provides solutions for license holders to install these products at end-user facilities easily.
- Microsoft's assistance to grow your business - Microsoft will help you create demand for your products. For example, they have unique price offerings for end-users who are academic institutions.
- Freedom to focus just on your application - If you want to build and deliver just your application, you can use IaaS from any other vendor or even Microsoft Azure.
- Outsource elements of your service to others - You can let a third party manage servers and other aspects while you build and deliver your product to the end-user.
- Simplified licensing - Affiliates selling your products don’t have to sign a different SPLA, even if they’re indirectly selling Microsoft products; your SPLA is enough to cover all of them. And you can further simplify SPLA by licensing with Microsoft Business and Services Agreement (MBSA).
How does SPLA licensing work?
A Service Provider Licensing Agreement works like a subscription for Microsoft products, except that the subscription won’t be for the end-user.
Imagine you’ve developed a game, and you’re letting users play it on your Microsoft Windows devices. In this case, you don’t pay for the Windows versions installed on all your devices, just the ones your customers end up playing your game on. And you don’t necessarily own the machines; you may be renting them out too.
PC rental companies are one of the few categories of resellers eligible for this program. Others include web hosting companies, application provider companies, and independent software vendors.
Every SPLA is for three years, after which you can renew or let the agreement expire. SPLA holders can also terminate the agreement with a 60-day notice period.
Microsoft offers the SPLA in three different pricing models:
- Subscriber Access License (SAL)
- Processor License, and
- Core License (CL)
A Subscriber Access License is for one user or device, so the reseller has to pay for every device. For a Processor License, resellers are charged per the number of processors on a server irrespective of the number of users, while SLPA core license holders are charged per the number of physical cores in a server.
License holders must report the number of monthly licenses their customers or clients use. If the answer is none, don't forget to submit a zero usage report anyway — this will be crucial to face a software audit (which, in this case, typically happens every three years)
How to get a service provider license?
The first step to getting an SPLA is to join the Microsoft Partner Network. This will give you access to all the tools and resources to leverage Microsoft products to grow your business.
Next, you'll have to sign a Microsoft Businesses and Services Agreement (MBSA). If you are just renewing the license or have already signed an MBSA for other Volume Licensing Agreements, you should get that MBSA linked with the SPLA.
Once you’ve completed the above steps, you need to work with an authorized SPLA reseller.
To continue to comply with the SPLA license, you must comply with Service Provider User Rights (SPUR). Plus, you must submit monthly usage reports and provide technical support to end users.
Microsoft SPLA vs. CSP licensing
The main difference between SPLA and CSP is that CSP or Cloud Services Provider is only for Microsoft Cloud or Azure, but you can’t use an SPLA license with Azure. And while the SPLA model is more for resellers who add more value on top of a Windows product, CSP is more for resellers who want to sell Windows Cloud products for a profit.
However, Microsoft requires that the end-users in the CSP program receive 24/7 support. And just like an SPLA, CSP is a pay-as-you-go model, with no long-term commitments for the end-user.
Another difference is that while the SPLA lets you sell Microsoft products anywhere in the world, the CSP licensing model limits your market based on your company's location.
And with an SPLA, the organization will be working directly with Microsoft, while with CSP, you get two different models: an indirect model and a direct bill model.
With the direct bill model, you’ll act as the middle person between Microsoft and the end user. So, you’ll be taking care of the end user's billing, sales, and support. With the indirect model, on the other hand, the CSP license holder would work with an indirect provider who will take care of billing and support.
Final thoughts
Similarly to OEM Software Licensing, SPLA or Service Provider License Agreement allows license holders to offer value-added services to their customers built on top of Microsoft products.
The program works in a subscription model; license holders don’t have any long-term commitments and only have to pay for what their customers have used in a month. There are no fees for joining the program either.
The program has three different models of payment: per subscriber, per processor, and per core.
If you'd like to join the program, don't forget that you must be part of the Microsoft Partner Network and sign a Microsoft Business and Services Agreement.
Frequently Asked Questions
What does SPLA stand for?
SPLA stands for Service Provider License Agreement. It is an agreement that lets license holders offer value-added services built on Microsoft products.
How do you become an SPLA?
To become an SPLA, you must first join the Microsoft Partner Network and sign the Microsoft Business and Services Agreement. After this, you must work with an SPLA reseller to sign the agreement.
What is an SPLA audit?
An SPLA requires that license holders submit monthly reports on the licenses their customers or clients are using. An SPLA audit is performed by Microsoft to ensure that the number of licenses reported to be used is accurate. Typically, organizations holding an SPLA can expect an audit once every three years, though it can be more frequent.
What are the types of Microsoft licenses?
Microsoft offers four different types of licenses:
- Open License: For getting perpetual or subscription licenses with or without Software Assurance (right to future versions and support). Designed for small to medium-sized organizations.
- Select plus licenses: For getting perpetual licenses with or without Software Assurance. The license also allows organizations to purchase online services.
- SPLA or Service Provider License Agreement: For providers and ISVs who want to offer services on top of Microsoft products. The license usually has a three-year term and billing gets done every month.
- Enterprise Agreement Licensing: For organizations that want perpetual or subscription licenses to online services with or without other software products, with or without Software Assurance. Subscriptions are generally for three years.
Can you use the SPLA license in Azure?
While SPLA allows acquiring infrastructure from Azure, this is limited to only specific products marked with “DCP Eligible” or “Eligible to be used in Data Center provider’s environment.”
