I used to work at Microsoft in headquarter sales and licensing in Redmond. We received copious amounts of training on the latest “solution selling” approaches, but the reality is that revenue and bonus commitments remained paramount in account teams’ minds. In the end, any actual listening to the customer’s roadmap or requirements were ignored. Unfortunately, we still see this today where the prescriptive answer to everything Microsoft is Office365, Microsoft365, Azure…in short, Microsoft Office 365 Cloud Agreements are what they’re selling.
I doubt we’ll see account teams become honest, open, and truly consultative any time soon. In our experience negotiating Microsoft Enterprise Agreements, Microsoft has never been realistic in their proposals (reflecting your needs), offered consistent levels of discounts, acknowledged the superiority of competitors offerings (Windows Phone is still superior, Microsoft?), or been rational in cloud-rollout migration plans.
Unfortunately, this is not how Microsoft worked, works, or will likely work in the future. Sales teams are now compensated on cloud (EMS), more cloud (Office365 “E” Plan) and even more cloud (the whole Microsoft365 E5 enchilada). They care little about your SA spend or you buying perpetual licenses, and they don’t seem to recognize waste. We’ve had too many clients sign up for an enterprise-wide Office365 EA (with a great discount) only to find it took 2 ½ of the 3 years of their EA to actually migrate all the services to the cloud and receive value for their spend. (what good is the discount if you’re not using it!).
With Microsoft sales quotas ramping up like a hockey stick in the second half of their fiscal year, here are six (6) considerations as you enter your next agreement negotiations to become a more knowledgeable buyer.
1. EA Discount Amnesia: If you bought into the cloud last go-around and received a hefty discount (We’ve seen extreme cases of over 50% to entice a move into the cloud) and you didn’t get a price-protection amendment in your EA, you could be looking at costs increasing by 20-40% at renewal. If you’ve moved the majority of your workloads into the cloud, it can be difficult to exact similar discounts the next time around. There are ways to push back and you’ll want to hold your ground and really examine the value you’re getting. In one case, our customer was signed up for Office365 E3 and Microsoft said “No discounts at renewal!” But, the reality was, they were only using Exchange Online. I bet you didn’t know that there’s a SKU for just Office365 Exchange Online Plan 1 (just exchange). Threatening to dump E3 plan, Microsoft acquiesced and started talking discounts again.
2. Microsoft is trying to remove your leverage…forever!: Microsoft Account teams aren’t paid to encourage perpetual license purchases or Software Assurance any more. All roads lead to cloud and it’s an ongoing subscription – And, like a car lease, you’ll never own it again. That’s not inconsistent with the rest of the software industry. But, in looking at the deployment patterns of over 70% of our clients, they had used pricey software like Office for 5 years or more. When they own the product, their cost in those later years is zero. Microsoft doesn’t get recurring revenue that way, so they’re driving everyone like cattle to the slaugh…(I mean, cloud…let’s keep things pleasant.) Make sure you’ve piloted and are ready to deploy before you subscribe, and remember, there are still perpetual options – even with Office 2019 coming out! Think about how much leverage you may concede.
3. Suites, and Suites of Suites: Microsoft is all about obfuscation, confusion and suites. First, there was the Enterprise Cloud Suite (ECS), then a renaming to play on corporate fears and hopes, the “Secure Productive Enterprise” (everyone wants to be secure and productive, right?). There’s the EMS suite and Window is now a subscription with E3 and E5 flavors. There’s the Office365 and Microsoft365 Suites, and boy are they getting expensive. In the last 3 years, Microsoft has changed both the names and the makeups of these suites more times than I have fingers on one hand. Make sure you know what is in the suite they’re promoting, whether you see any value in those components, and then identify a clear timeline on when you’ll actually use them.
4. Windows Phone, Lync, Skype, Cortana and Clippy: Microsoft has a long history of being late to market, acquiring good technology firms and killing them, pushing novel ideas that don’t catch–on and going after areas that they’re no good at. The latest for Microsoft is telecom. While many of our clients happily chat away and use presence features in Skype standard, few have an enterprise-wide need for Skype for Business Meetings, Telephony or PSTN calling plans. Cisco is pretty good at this, and so are a myriad of telecom providers at providing…*ahem* telecom. Dial tone ain’t all that easy Microsoft and I’m not sure I’d bet the farm on Skype. That rules out a lot of Office365 E3 plan and certainly buries Microsoft E5 plan if you’re not going to switch the whole company to Microsoft for your telecom.
5. Itemization Obfuscation: Not too long ago, you could go to Microsoft’s site and see all the components of Office365 E3 and E5, EMS Suite E3 and E5 and Windows with all of their piece part a–la–carte pricing. Also, not long ago, Microsoft’s MPSA (Microsoft Products and Services Agreement – the alternative pay-as-you-go purchase plan vs. the EA) had a well-documented landing page with all kinds of case studies and graphics. Individual pricing is non-existent anymore and the MPSA site has been relegated to the interns, looking like it has about as much corporate support as the Microsoft Flight Simulator team does. (i.e. none). That’s what they want you to believe. But, the MPSA is still going strong, the CSP (cloud solution partner) program is gaining ground and the EA, one-size-fits all contract should have been reimagined long ago, along with its latest ugly cousin, the Server and Cloud Enrollment (SCE).
6. Lost Tribal Knowledge: When I was at Microsoft, tenured managers, licensing experts and account managers were leaving in droves. They had a good career and had made a decent income with some beefy stock options. As they left, so went 15 or 20 years of licensing context, product knowledge, programs and evolution to where we are today. New employees lack the training and perspective of these weathered ‘softies. Ask three different Licensing Specialists a question today and you’ll likely get three different answers. But, if your account team, LS, or reseller license something wrong, the onus is on you to have licensed it correctly in an audit. Fair? Hardly. But, we live in a world where you’d better double check that bag of food before you leave the drive through. (with one exception, Chick-Fil-A has always gotten it right. Thanks for tasty chicken sandwiches, Truett! I wax nostalgic here as I used to cover the Chick-Fil-A account in my early days at Microsoft. )
In Summary, Microsoft account teams are eager to get you locked into the cloud and keep paying them forever for things you may never fully deploy. As all former Microsoft sales and licensing execs, our team of consultants have consistently achieved an average of 43% in Microsoft Volume Licensing spend reduction since we started this gig in 2012. In fact, we’ve just proudly surpassed ½ a BILLION in savings for our customers by rationalizing license requirements with a proven model that empowers companies to control the negotiation dialogue with Microsoft. Get help negotiating Microsoft Office 365 Cloud Agreements with Software Licensing Advisors expert staff.
To learn more, contact another former ‘softie, Brian Stumpf at 404-680-3881 or firstname.lastname@example.org
About the Author
Steven Kelley is the principal consultant and president of Software Licensing Advisors, Inc., a team of former Microsoft employees who now provide impartial, independent advisory on Microsoft Licensing and Agreement Negotiations since 2012 for over 200 clients.