Key Negotiation and Review Factors when renewing your Microsoft Agreement Optimizing and Empowering Volume Licensing Discussions

Software Licensing Advisors Senior Analyst: Steve Kelley• Senior Analyst at Software Licensing Advisors• Former veteran Microsoft Licensing and Large Enterprise Sales

out of Microsoft Seattle-area Headquarters.• Negotiated over 100 Enterprise Agreements, ranging from 500

seats to projects with over 100,000 seats and over $90M in US, Canada, UK and Europe.

• SLA has reduced customer licensing costs by total of $65 million for both mid-size and major corporations across industries to date.

• 25-year technology veteran with additional experience at Verizon Business and AT&T, Certified MCP-Licensing.

• BBA/MBA from the University of Wisconsin.

Some of the firms our consultants have worked with:

Experience with Microsoft Savings

Agenda for Today’s Call

• The Current State of Microsoft in IT• Implications for you at renewal.

• Setting the Stage for Savings• What our survey results say about Technology Adoption in the Enterprise

• Four P’s that influence Costs:• Programs, Products, Pricing, Pitfalls

• Five Negotiation Strategies that can save you big• Roadmap, Purchase Program Hybrids, User Profiling and App Metering, BATNA, Component EAs

Microsoft’s recent mistakes put them on the defensive• Cloud Services are being pushed, but

“bread and butter” is still on-premise licensing; Windows & Office– Cloud isn’t core business; Google

Apps & Amazon Web Services, it is.

• Missed the boat on mobile devices and insignificant (Windows mobile - 3.8% of mobile OS market share)– Android is leading.

• Damaged its expansive partner, reseller and OEM relationships worldwide:– % commission to channel– Competing w/ own hardware platform and

storefronts

See: “Microsoft Poisons its partners”, June 21, 2012)

Microsoft latest O/S : Windows 8 - Adoption

• Windows 8 adoption is half that of Vista in the first 5 months.

• Windows 8.1 doesn’t look any more promising.

Licensing Rules have been made more complex, not less• Understand Device access to company resources. …Licensing these scenarios is

complicated:

Licensing an iPad to Run Microsoft Office and Outlook Licensing an iPad

to Access Email

Licensing an iPadfor HVD Access

Licensing an iPad to Access Microsoft Servers

Yes, it’s THAT complicated!

Microsoft’s Response: If you can’t join them, beat them (down).

• Audits are ramping up. – 2 out of 3 companies this year will be “selected to participate” in a SAM

engagement. – Many more will get audit letters.

• Broad price increases continue. – User CAL Price increase 15%. – System Center Suite – 2x qty; can’t renew just the components of System Center that you use, you

must renew the entire Suite under SA whether you use it or not.

• Sales Growth through Licensing Obfuscation. – More licensing changes in last 2 years than in the last 10 prior years in terms of changes in the Product Use Rights (PUR)– Rules and editions change for each product release.– SQL 2012 Licensed per Core and conversion confusion.

Software Licensing Advisors: Technology Adoption in the Enterprise• In an October 2012 SLA survey to Mid- and Large- Volume Licensing Customers on

Technology Use and Adoption;

• 521 Individuals Responded from;• 238 Companies

• Purpose was to test the hypothesis that Companies pay for more Software than they use or deploy through Software Assurance.

• Survey was conducted via the web and respondent anonymity was maintained throughout.

• Results suggested significant overspending.

Technology Adoption in the Enterprise – Upgrade Cycle • How often does your company upgrade your computer’s Microsoft Software?

3%9%

29%

35%

24%

Every YearAbout every 2 yearsAbout every 3 yearsOnce every 4 years

59% responded that their company upgrades “every 4” or “more than 4 years”

Technology Adoption in the Enterprise – Years at current O/S

• How long have you been using this Operating System in your workplace?

Not surprisingly, then, 61% responded using their current O/S for more than 5 years!

1-2 Years

3 - 4 Years

5 - 6 Years

More than 6 Years

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

32%

7%

19%

42%

Low Adoption Velocity

Technology Adoption in the Enterprise – Current Office Version • Which version of Microsoft Office are you currently using at work?

59% of respondents have now standardized on Office 2010.

10%

Office 2007 23%

Office 2010 59%

3% 3%2% Office 2003Office 2007Office 2010Office365Google AppsOpenOffice

Technology Adoption in the Enterprise – Current Office Version • How long have you been using your current version of Microsoft Office?

58% of respondents have used this version for 1-2 years, in alignment with 59% of respondents choosing Office 2010 – a common standard image.

1-2 Years

3-4 Years

4-6 Years

More than 6 Years

0%10%

20%30%

40%50%

60%58%

10%27%

5%

Lync & Other Clients can be purchased separately for some or all users for much less cost than licensing Office Professional Plus for everyone.

Technology Adoption – Use of Office Applications• Which of these Office Applications do you actively use for at least one hour per week?

Microsoft WordMicrosoft Excel

Microsoft PowerpointMicrosoft OutlookMicrosoft InfopathMicrosoft OneNote

Microsoft AccessMicrosoft Publisher

Microsoft Lync Communicator

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Office Standard Version would be adequate for most Companies User Communities

Negotiation Impact: Build your Technology RoadmapHow much Windows 9 and Office 2016 will you deploy in 2017, 2018?

• These are the products you’re actually buying if you have a full-platform EA today. If Windows and Office are on your EA, you already own Windows 8 and Office 2013 NOW and they can’t be taken away from you.

• Develop a reasonable budget for purchasing licenses for software in your roadmap.• Customers who standardize on their current Windows 7 and Office 2010 images for

the next three years should re-examine the value of an EA.• Given this, you are well-positioned to demand a proposal from Microsoft that reflects

your real needs and offers you greater flexibility than the all-or-nothing EA approach.

• Consider moving your Software Assurance to SelectPlus for a subset of users where it is required.

•

The Microsoft Enterprise Agreement Contract LanguageKey changes to be aware of:

• Agreement structure changes mean every new Agreement enrollment can now change your responsibilities, accountabilities and relationship with Microsoft.

• The new language changes the way Microsoft holds you responsible for paying for in the EA!

• Serious Bring-Your-Own-Device and Tablet implications.

• Timelines are tightened.• Grace Periods are eliminated.• Audit exposure increases: Punitive language replacements

• (125% of the price for license deficiencies)

Microsoft Updated Enterprise Agreement: What are you counting? Dangerous New Language• Change of one word blows compliance

risk wide open:

QUALIFIED DESKTOP to QUALIFIED DEVICE.

“A Qualified Device means any personal desktop computer, portable computer, or similar device that is used by or for the benefit of the Enrolled Affiliate’s Enterprise.”

• Employee-owned iPads brought into the office for the benefit of the company (the enrolled affiliate) count as Qualified Devices.

New “30-year” Master Business and Services Agreement • Microsoft will downplay this as a “routine update” of your contracts at renewal time – good for 30 years!

• Compliance has been moved to theMaster Agreement with punitive clauses:

• If found to be out of compliance by more than 5%, you’ll be getting the bill from Microsoft’s selected auditor.

• Penalized for non-compliance by having to pay 125% of the then current price for the license.

Technology Adoption in the Enterprise – BYOD Implications

• Do you personally own a tablet?

Agreeing to the new Qualified Device language knowingly or unknowingly widens the window of compliance risk.

Yes 77%

No 23%

Yes 42%

No 58%

• If you own a tablet, do you bring it into work?

Microsoft Updated Enterprise Agreement: Other Important Changes• Eliminates the within 15 day of anniversary True-Up Period

• Now requires true-ups 30-60 days PRIOR TO anniversary date• Eliminates 30-day Renewal Extension Allowance

• Takes away negotiation leverage for June renewals by eliminating the right to exercise 30-day extension into Microsoft’s next fiscal year. (runs July – June)

• Removes One-Year Renewal OptionKNOW THAT YOUR CURRENT EA MIGHT ALLOW A 1-YEAR RENEWAL/EXTENSION Use it as leverage to get another year of product upgrades for only 1 year of additional SA commitment.• Adds more stringent compliance language:The true-up clause now says, “Microsoft, at its discretion, may validate the customers true-up data submitted through a formal product deployment assessment using an approved Software Asset Management (SAM) Partner."

Negotiation Impact: What this means to you• Start your negotiations process early in order to allow adequate time to scrutinize and

negotiate onerous language.• Review and understand the recent changes in User CALs vs. Device CALs, Roaming

Rights and Qualified Devices. Determine users who need Virtual Desktop Access and obtain specific exclusionary language around iPads and other employee devices, rather than assuming you don’t have to count them.

• Negotiate audit languages: limit to self-audit, mutual agreement on an INDEPENDENT auditor, tools, techniques auditor experience, and/or time period between audits.

• Understand your SELECTPlus alternative to renewing your EA. An EA Renewal is buying futures in products whose features and benefits are largely unknown. Know what your needs are and that you likely don’t need an EA, and therefore don’t need to agree to these terms.

SLA Formulas: Identifying Anomalies in License CostAt EA Renewal, you’ve retired the License cost portion, so your EA Renewal prices dropped quite a bit to Software Assurance only prices. It’s cheaper now!

Yes, but look past the drop in costs... It’s cheaper but is it ACCURATE? (It should be EVEN LESS!)

…Don’t take our word for it:

• Get a Preliminary Renewal Customer Price Sheet (CPS) from your Large Account Reseller (LAR) or Microsoft Licensing Specialist (LS) and run the numbers yourself.

• We’ve seen it a hundred times, but prove it out for yourself.

Disclaimer: Not every product is as insane a price hike as Windows, but did you know Microsoft was jacking up the License cost on which your SA at renewal was computed by this much?

Negotiation Impact: What this means to you• Establishing what the License Price on which your SA is computed at renewal under

the Enterprise Agreement Program allows you to compare true costs to other programs like OPEN and SELECT PLUS, which offer more flexible desktop coverage and terms.

• Start the conversation of EA Renewal around what your “Sticker Price” is. What’s our license price on these products on our renewal. Then, compute your own SA. Finally, get a Price Sheet from your LAR or Microsoft and establish the percentage in price hike. Ask them to back out the price hike to a reasonable level since the License cost on your last EA CPS.

• Now that you’ve established the more reasonable “sticker price”, talk discounts if you’ve determined your roadmap requires that you continue Software Assurance on that product.

• Remember, Software Assurance Upgrade rights means…

YOU OWN ALL THE LATEST PRODUCT RELEASES COVERED IN YOUR EA PRICE SHEET – YOU’RE NOW LOOKING AT INVESTING IN FUTURE

PRODUCTS

Three factors to consider when moving to the cloud

• Existing Investment in On-Premise Software• You’ve sunk a lot of money into existing licenses.

• Loss of Control• Over your data – who will most strenuously defend you against subpoenas and

investigation.• Over Service Levels provided to your users• Over Upgrades – you always get the latest, but do you want it?

• Moving to Office365 dictates on-premise license upgrades with cloud server upgrades, whether you want to or not. Will these upgrades co-exist with your other vendors and systems?

• MS O365 designed to co-exist and cross-sell the fat client.• No other cloud apps do this.

Build your Roadmap or your Roadmap will be MicrosoftsKnow the best way to license your required software elements before entering

negotiations

EA Renewal Process

Negotiation Impact: Stop buying software you don’t use. (Shelfware)Paying for Licensing that won’t be deployed

• Your Technology Adoption Velocity may mean some or all components in the Professional Desktop bundle should be re-evaluated, and a component EA (or No EA) may be more rational.

• Customers who standardize on their current Windows 7 and Office 2010 images for the next three years should re-examine the value of an EA, which would mean paying for more software than you need or plan to deploy.

• Given this, you are well-positioned to demand a proposal from Microsoft that reflects your real needs and offers you greater flexibility than the all-or-nothing EA approach.

• Consider moving your Software Assurance to SelectPlus for a subset of users where it is justified.

•

Technology Roadmap: Microsoft’s Plan for YouMicrosoft’s Structured and Prescriptive Plan for Account Managers to Drive their Roadmap to growth in your next EA Renewal:

EngageEXECUTIVE BRIEFINGStart the conversation.

EnvisionSTRATEGY BRIEFINGCreate the right sales

opportunity.

Architect ProvePROOF-OF-CONCEPT

WORKSHOPDrive the deal home.

DeployServices/Partner led

ENVISION/PROTOTYPE WORKSHOP

Drive deployment.

ARCHITECTURE DESIGN SESSION

Deliver the details.

Letting Microsoft lead the Roadmap Discussion allows them to set the agenda, build the price sheet, build gradual acceptance along the way, and circle the wagons around key political players and constituencies. Before you know it, they’ve gotten executive and line-of-business leadership support to renew the EA, and you’re just there to process the paperwork. Build your cross-departmental team now!

Your EA Renewal Plan: (DART) Discover, Analyze, Report, Tactics• Consider SLA’s process in preparing for EA Negotiations. Start at least 6 months prior to EA expiration.

Review Adoption Velocity & Build Future Roadmap(Current/Desired

State)

Compare Desired State vs.

Entitlements & Use Rights;

Identify Gaps

Optimize User Desktop Product

Profiles

Determine Licensing

Program Mix

Build the Walk-Away-from-the-

EA BATNA & Negotiate.

Build Cross-Departmental Team & Communicate Progress & Intentions

Ensure General Awareness of your Effective Licensing Position to Mitigate Audit Risk

Discover Analyze Report Tactics

Know Your Technology Roadmap and Adoption Velocity

Review Adoption Velocity &

Build Future Roadmap(Current/

Desired State)

ImproveCustomer

Engagement

• CRM System• Sharepoint Client

Collaboration Sites

Expand Markets

• Business Intelligence Tools

• Talent acquisitionThru modern tools

RepurposeIntellectua

l Property

20% GrowthIn Profitability

Map Business Goals to Technology Requirements

• Enterprise Search• Collaboration• My Sites, Team

Sites• Fast Resource

Locating

Gap Analysis for Required TechnologiesPossible Microsoft Technologies

No Additional Needed

Determine User Communities for Planned Technologies in your Roadmap that support business goals

• Compare your Technology Needs to current entitlements, Understand what your requirements are and the User Community who needs them.

Compare Desired State vs.

Entitlements & Use Rights; Identify Gaps

Microsoft Product Licenses

Do I own the feature set?

Do I need the feature set or articulated future version?

Microsoft CRM No Yes

Microsoft Lync Yes, Standard

Yes, Enterprise

Microsoft Sharepoint

Yes, Standard

Yes, Enterprise

SQL Yes, Enterprise

No

Gap Analysis for Required Technologies

Entire Enterprise User BaseSales, Marketing, Customer Service

No Additional Needed

All Employees

Marketing Only –Enterprise CAL No Additional Needed for Standard

Optimize Desktop User Profiles with Application Usage Monitoring• SoftWatch not only looks at what’s installed, but also records

application launches, percentage of user focus time in the application and level of user interaction with the application to find money-saving alternative desktop bundles

Optimize User

Desktop Product Profiles

Deploy SoftWatch Agent

Get your Data

Use your Technology Roadmap and SoftWatch User Profiles to Review Licensing Program Alternatives • The EA is rarely the only program you should consider and often isn’t

appropriate at all.

Determine Licensing

Program Mix

Know just what you need and the optimum licensing program requirements to get you there.• Using your Technology Roadmap, User Profiles and Licensing Program

Mix to build your “Walk-Away-from-the-EA” Alternative, and negotiate savings of up to 50%.

Build the Walk-Away-from-the-EA BATNA &

Negotiate

Top Enterprise Agreement Negotiating Tips • Use our Formulas in our blog to identify stealth price increases from

your current Enterprise Agreement on your Renewal Price Sheet. Use formula prices as the starting point for price negotiations – not the pricing on the renewal CPS!

• Consider a component Enterprise Agreement if the full platform does not meet your Roadmap requirements. Utilize SoftWatch to create User Profile Exceptions on your Enterprise Agreement. If Microsoft won’t work with you, license these profiles in SelectPlus and get out of the EA.

• Understand that your Account Manager’s goal is to grow the renewal agreement 15-20% over your previous one and that cutting your EA may make concession requests even more difficult. Build a “WALK AWAY FROM THE EA” plan.

• Be Ready to defend your Effective Licensing Position against audit threats, especially if you don’t renew your EA…Have an internal SAM process.

Top Enterprise Agreement Negotiating Tips • Microsoft’s fiscal year end is June 30th; EA’s expiring around this time will

be able to garner exceptional concessions. However, know that On-Time-Renewal-Rate (OTRR) metrics provide similar compelling levers. IF your Roadmap suggests renewing the EA, then present your EA Alternative early and commit to completing renewal by Microsoft’s On-Time Renewal Date (by your expiration date) in order to retain leverage.

• Consider Pitfalls like MDOP and the Home Use Program, which require Software Assurance on Windows and Office respectively and be mindful of these very costly dependencies.

• Ensure contract addendums list all agreed upon points before signing, as anything agreed to verbally or by email will be voided by the contract. Side Agreements, emails and verbal approvals are non-agreements.

Get help and get empowered with Software Licensing Advisors• Free consultation to discuss your specific licensing scenario.

EMAIL info@msftadvisors.com to schedule an initial call

THANK YOU FOR ATTENDING!