A Global Cloud Provider Closes a Microsoft SPLA Audit, No Penalty, No Auditor Fees

The client runs a globally distributed cloud platform, renting bare metal and virtual infrastructure to enterprise and developer customers on a monthly IaaS basis. Its SPLA compliance team reports usage to Microsoft every month, through an automated, PowerBI-driven process. The Microsoft software its customers use is supplied under an SPLA agreement through the client's reseller.

None of that stopped the letter arriving. Microsoft appointed an external auditor to run a formal SPLA compliance review, covering a defined reporting period. A Microsoft-initiated SPLA audit is not a small event. The shortfall a provider is found to owe can carry a 25 percent penalty on top, the auditor's fees can be passed on, and settlement can be pushed at pricing with an uplift. The exposure stays open-ended until someone defines it. SAMexpert was engaged to run the defence across the audit lifecycle.

Anonymity guarantee. We never give our clients away to the wrath of Microsoft. To protect this client and its business, its identity and any identifying detail, including jurisdiction, sector specifics and named third parties, have been removed or generalised. Everything else is a true account of the engagement.

Diligent, and still exposed

The estate itself was clean in intent. Monthly reporting was in place, the process was automated, and the compliance team knew its numbers. The risk did not sit in negligence. It sat in interpretation, in what a Microsoft-appointed auditor would make of a hosting model it did not initially understand, and in what the client might volunteer without meaning to.

An auditor working from the wrong model

The auditor opened by mischaracterising the business. It raised questions about bare metal server deployments, appearing to conflate physical server shipment, which the client does not do, with IaaS-based bare metal rental, which is the entire model. Left uncorrected, that misreading could have redefined the scope of the audit against the client.

Two more pressure points sat alongside it. Billing records through the reseller carried line items for RDS SALs, SQL Server Web and SQL Server Standard, each of which needed a clear, defensible account. And the auditor wanted to understand how end-customers signed up and subscribed, which risked the client handing Microsoft its full customer list in the name of cooperation.

Controlling the narrative and the data

SAMexpert ran the defence across three fronts.

The first was communication discipline. SAMexpert coached the client on every interaction with the auditor: what to say, how to frame it, and what not to say. When the client drafted a response, SAMexpert reviewed and approved the language before it went out. Ahead of the formal two-way call with the auditor, Daryl Ullman briefed the team with a simple instruction set: do not acknowledge findings, ask clarification questions only, and request a minimum of two weeks to review anything put in front of them.

The second was the technical narrative. The bare metal question was resolved by articulating the IaaS rental model clearly, so the auditor was working from how the business actually operates rather than an assumption about shipped hardware. The disputed line items, the RDS SALs and the two SQL editions, were addressed by confirming that customers had stopped using those products before the audit period closed. On data provision, SAMexpert advised on exactly what to hand over to prove the client billed only for Windows OS under its SPLA, how to present it, and what did not need to be volunteered. On the customer-privacy question, the answer was to demonstrate compliance by screen share rather than disclose full customer lists to Microsoft directly.

Signing without accepting the numbers

The decisive move came at the Effective Licence Position. When the auditor issued its ELP, SAMexpert reviewed the draft and advised the client on whether to accept it or push back. Alexander Golev's counsel was specific: if the client wanted to preserve negotiating room with Microsoft, the sign-off language should be deliberately vague. It should acknowledge that the technical phase had exhausted reasonable efforts, rather than explicitly accepting the numbers.

The client's leadership chose to accept the updated position, at a quantified shortfall of around $78,000. SAMexpert confirmed the figure sat below the 5 percent threshold, which meant no auditor fees and no 25 percent penalty would apply.

Closed with no penalty, no auditor fees

A three-way call between the client, the auditor and Microsoft took place. The outcome matched what the client had been positioned for: only genuine shortfalls assessed, at current-year pricing, with no uplift and no penalty. The final shortfall invoice, around $77,000, was issued through the reseller. The client's General Counsel and COO were kept informed throughout. The engagement closed formally, with an amicable end to the advisory agreement.

The outcome

"We would like to thank you for all of your consulting services!"

Client leadership

If you are facing a Microsoft SPLA audit, or want an independent view of your licensing position, get in touch. We don't sell Microsoft licences or cloud services, so our advice is always independent.