A true-up is a periodic reconciliation, defined in some enterprise software agreements, in which the customer counts the growth in licensed use since the previous reconciliation and orders licenses to cover it, at prices and terms agreed when the agreement was signed. Between true-ups the customer may deploy additional copies or add users without placing an order each time. A true-forward is a related mechanism, used by Cisco, in which growth found at a periodic review is billed prospectively for the remainder of the term and the entitlement is raised to the new level.[4]
True-ups are features of particular programs and enrollments, not general licensing law. Where no true-up mechanism exists, the default in many agreements is that additional entitlements must be acquired before use increases; IBM’s Client Relationship Agreement, for example, says so expressly.[8]
History
The origins of the term are not documented in the vendor sources cited here. Its most fully documented use is in Microsoft’s Enterprise Agreement, a three-year volume licensing agreement for organizations with 500 or more users or devices, in which the true-up is the annual inventory of products, services, users and devices added during the year.[3][1] Other vendors use comparable mechanisms under their own names: Adobe lists an annual renewal and true-up order for its Enterprise Term License Agreement, and Cisco’s Enterprise Agreement 3.0 uses True Forward for software and cloud services and True Up for hardware services.[6][4]
Scope and definitions
| Term | Direction | Charging basis | Example |
|---|---|---|---|
| True-up | Backward-looking count of growth since last reconciliation | Licenses for additions, at agreed prices | Microsoft Enterprise Enrollment[2] |
| Annual Order | Count may go up or down | Subscription counts for the next year | Microsoft Enterprise Subscription Enrollment[1] |
| True Forward | Growth found at review | Invoiced prospectively through the rest of the suite term; entitlement raised | Cisco EA 3.0, software and cloud services[4] |
| Grace period | Short window after self-provisioning | Order must follow within the window | Adobe VIP, 14 days after adding products in the Admin Console[7] |
A true-up differs from a software license audit in who initiates it and when. It is a scheduled obligation of the customer under the agreement, whereas an audit is initiated by the licensor under a verification clause. Both rest on the same calculation: an effective license position for the products covered.
How it works
Microsoft Enterprise Agreement
Microsoft’s program guide describes the true-up as an annual reconciliation. Customers may equip additional users, devices or hardware with products they have already licensed under the agreement and account for them at the next anniversary. New products or cloud services not already on the agreement are ordered through the reseller when needed.[1] The true-up guide adds that such new products must be purchased in the month they are first used.[2]
Timing and content, as stated in Microsoft’s documents:
- The annual true-up order must reach Microsoft between 60 and 30 days before the enrollment anniversary. The program guide states that the final true-up order is due within 30 days of the enrollment end date.[2][1]
- A customer with no increase must still submit an Update Statement, also called a zero-usage order, signed by an authorized signatory.[2]
- For enterprise products licensed by qualified user or device count, the order covers the difference between the current count and the last reported count. Microsoft’s own example is 1,000 current qualified devices and users against 950 last reported, giving a true-up of 50 of each enterprise product.[2]
- For Server and Cloud Enrollment and additional products, the order covers licenses for anything used or installed at any time since the last true-up, even if no longer in active use.[2]
- Online services provisioned through License Reservation during the year are reported and ordered at the anniversary. Transitions from on-premises licenses to subscriptions, and eligible license reductions, are also recorded in the true-up.[2]
Under the subscription option of the agreement, the annual reconciliation is called the Annual Order and allows subscription counts to be increased or decreased.[1] The catalog rows for the Enterprise Agreement, Enterprise Subscription Agreement and Server and Cloud Enrollment record the related program terms.
Cisco Enterprise Agreement 3.0
Cisco’s EA 3.0 Program Terms define True Forward as periodic reviews, invoices and adjustments of entitlements for increases in consumption above the then-current entitlement for software, cloud services or software services. If consumption exceeds entitlement at a True Forward, Cisco may invoice the increase prospectively through the rest of the suite term, and the entitlement and the customer’s EA commitment are raised accordingly. True Forward and True Up are conducted by default at the annual anniversary shown in the Cisco EA tool, and the EA commitment cannot be decreased.[4]
Three further features of the Cisco terms bear on the calculation:
- Consumption includes software that is downloaded, installed, activated or merely available, even if not actively used.[4]
- Exceptional Growth. If consumption of a suite or add-on exceeds 115% of the then-current entitlement, Cisco may run an additional off-cycle True Forward at the next semi-annual point.[4]
- Value Shift and Migration. At a True Forward or True Up, where eligible, the pro rata value of purchased but unconsumed items may offset amounts owed for increased consumption, within a suite or across eligible suites.[4]
Hardware services are reconciled through True Up rather than True Forward, priced from the hardware service list price fixed at the service start date.[4] The catalog’s Cisco Enterprise Agreement row and its rules for the initial growth cap, growth allowance and services true-forward and hardware true-up record suite-level details from Cisco’s Buying Program offer descriptions, which Cisco indexes on its offer descriptions page.[5]
Adobe
Adobe’s buying programs page lists, for the Enterprise Term License Agreement, a three-year term, an annual renewal and true-up order, and a required minimum annual purchase. The amount of the minimum and the true-up counting method are not published there.[6] Under the Value Incentive Plan, members may add and deploy products in the Admin Console for immediate access, but Adobe must receive an order within a grace period of 14 days; otherwise the member cannot add more products until all added products are paid for. Licenses renew on an anniversary date twelve months after Adobe accepts the initial order.[7]
Practice
Preparing a true-up is an internal compliance exercise. Microsoft’s true-up guide suggests reviewing changes such as growth in devices and users, acquisitions, added or clustered servers, virtualization, disaster-recovery servers and pilots moved into production.[2] Microsoft’s program guide describes the true-up as including an annual self-assessment of licenses and services in use.[1] GAO’s recommendation that agencies regularly compare license inventories with purchases describes the same underlying control.[9]
Relationship to other disciplines
The true-up links license compliance to procurement and budgeting. The quantities reported become entitlements for the rest of the term, and in agreements that bundle support, such as Software Assurance in the Microsoft Enterprise Agreement, they also set maintenance and support charges.[1]
Criticism and challenges
Because some programs count anything installed or available at any point in the period, a true-up can require licenses for deployments that were short-lived or never actively used.[2][4] Commitments that cannot be reduced during the term, as in Cisco’s EA commitment, limit the benefit of later optimization.[4] Some vendors publish the existence of a true-up but not how it is counted, as with Adobe’s ETLA page.[6]
Out of scope
This article does not cover pricing, discount levels or the negotiation of true-up terms, and it does not describe true-up provisions that are not in published vendor documents.