When a SPLA audit closes with a demand, the figure that lands looks like a single, intimidating total. It is not. It is two different things added together, and they behave in opposite ways. One is fixed and not worth fighting. The other is variable and is the entire reason to negotiate. Hosters who treat the demand as one number either overpay by conceding the negotiable part or waste effort attacking the part that will not move. This article separates the two so you know where the leverage actually sits.
The two parts of a SPLA demand
SPLA is pay as you consume, and you report SAL or processor counts each month under the Services Provider Use Rights, the SPUR. When an audit finds that you under reported, the demand has two components. The first is back fees: the license charges you would have paid for the consumption you did not report, calculated at the price file rate for the relevant months. The second is a penalty uplift applied on top, a percentage that reflects how Microsoft views the severity of the under reporting.
Back fees are not negotiable
Back fees at the price file rate are not negotiable, and it is important to accept that early. They represent consumption that genuinely occurred and was genuinely licensable, priced at the published rate for those months. Arguing the rate itself is not where defense happens. What can change back fees is the underlying count: if the audit overstates how much you actually consumed, or attributes consumption that does not belong to you, then correcting the count corrects the back fees. So the lever on back fees is accuracy of the measured consumption, not negotiation of the price.
The uplift is where the negotiation lives
The penalty uplift ranges from 25 to 125 percent depending on the severity, duration, and nature of the under reporting, and unlike back fees, it is negotiable. That range is wide on purpose. A modest, short lived, clearly inadvertent reporting gap sits at the low end. Sustained under reporting that looks systematic sits at the high end. The work of a SPLA settlement is largely the work of moving your situation, with evidence, toward the lower end of that band.
This is why reporting discipline pays twice. Clean monthly records do not only reduce the count that drives back fees. They also characterize any gap as an honest, narrow error rather than a pattern, which is the single strongest argument for a low uplift.
A worked illustration
Consider an indicative case where an audit identifies under reported consumption with back fees of a given amount. The figures below are indicative and chosen only to show how the two parts combine, not to quote any real outcome.
| Component | Worst case | Defended |
|---|---|---|
| Back fees, price file rate | fixed amount | same, count corrected |
| Uplift applied | 125 percent | 25 percent |
| Negotiable share | maximized | minimized |
| Total demand | back fees plus 125 percent | back fees plus 25 percent |
Indicative illustration of how the two parts combine, not a quoted outcome.
Where to put your effort
Reading the demand correctly tells you where to spend your defense.
- Verify the measured consumption, since this is the only thing that moves the back fees
- Correct any consumption wrongly attributed to you or double counted across months
- Assemble evidence that any genuine gap was narrow, short, and inadvertent
- Use that evidence to argue the uplift toward the low end of the 25 to 125 percent range
- Do not waste leverage arguing the price file rate itself, which will not change
How the under reporting happened still matters
The character of the gap shapes the uplift, and the most common causes are reporting accuracy issues and unreported parts of the estate. Both are defensible when you can show how they arose. The reporting accuracy angle is covered in the SPLA Audit Defense Guide, and defending estate that never made it into a SAL report is set out in defending unreported customer estates. For why the monthly structure makes all of this different from an end customer audit, see why SPLA audits are different from normal audits.
The next step
The SPLA Audit Defense Guide walks through how a demand is built, how to verify the count behind the back fees, and how to argue the uplift down. Download the guide and read your demand as two numbers, not one.
It is two numbers, not one.
Download the SPLA Audit Defense Guide to verify the count behind the back fees and argue the negotiable uplift toward the low end.
Download the SPLA Audit Defense GuideIf the timeline is already running, our SPLA audit defense team challenges the counting before back fees are set.