HEAD IN THE CLOUDS: Microsoft’s Up-selling Practices and the #1 Cloud Negotiation Killer

This week’s issue discusses Microsoft’s up-selling practices and the often-found and detrimental inconsistent messaging enterprises communicate to their cloud vendors during cloud negotiations.

Microsoft Executive Speaks About Up-Selling Customers

Kirk Koenigsbauer, the man in charge of running the Microsoft 365 business, spoke during last week’s JP Morgan Global Technology, Media and Communications Conference in Boston.  Microsoft 365 is Microsoft’s all-in cloud bundle that includes Windows 10, Office 365 (Microsoft’s productivity app suite) and Enterprise Mobility and Security (EM+S).  Microsoft 365 came out a couple years back, but the cloud bundle was previously offered as the Secure Productive Enterprise (SPE) and the Enterprise Cloud Suite (ECS) prior to that.

It goes without saying that Microsoft, like all other major IT vendors (SAP, Oracle, etc.), has been extremely focused on getting customers to move away from being an on-premise product purchaser to a cloud solution subscriber.  The subscribed functionality is not owned and if you want to continue to use it, you need to renew your subscriptions and renewing is highly likely.  There is no ball to take home if things don’t go the way you want (for example, unexpected price increases) and Microsoft knows it.

The ultimate goal for Microsoft is to get their enterprise customers to jump into their all-in cloud bundle, ideally one of the more robust plans like E5 or the firstline worker plan (F1) for the untapped (and currently non-revenue stream for Microsoft) deskless workforce within enterprises.  As Koenigsbauer pointed out during the conference, Microsoft calls Microsoft 365 the “world’s productivity cloud” and it is sold as part of their modern workplace go-to-market initiative which is centered around productivity and collaboration.

As we have covered in the past, Microsoft was clearly attempted to motivate — and in some cases force — such desired movement to the cloud through sun-setting of support and security updates to their on-premise products and offerings.  If you are a Microsoft customer, you are probably aware that Microsoft will stop providing Windows 7 support and security updates in January 2020 and support for Office 2010 ends in October of 2020.

Microsoft understands that modern enterprises can’t move forward along a digital transformation without such support and updates, specifically security updates.  And as Koenigsbauer pointed out last week during the JP Morgan conference, Microsoft plans to take full advantage of this.  He said:

“It is an important year for modernizing the desktop, and the Windows 7 end of support, the Office 2010 end of support, that is all within the [sort of] next fiscal year, [the] next 12 to 18 months of growth for the company.  Again, that’s important for customers, it’s also important for us to get customers modern.  It allows us to do a better job of upselling to higher tiers of service, and so forth.”

If you are a Microsoft customer that has yet to make the jump to the cloud or have jumped but only for parts of your business and user community, it will be important to take into account the end of life that is fast approaching for both Windows 7 and Office 2010 support as you prepare for your renewals.  Microsoft will aggressively push the Microsoft 365 bundle as “the option” to move forward with.  It may be the right option, and perhaps the only option, after careful evaluation, but that does not mean there is not still opportunity to negotiate the right deal for your business.

Inconsistent Messaging – The Cloud Negotiation Killer

One of the great and fortunate things that comes with getting to do what it is we do at UpperEdge, is having the opportunity to interact (almost on a daily basis) with enterprise executives representing various departments within the enterprise (e.g., technology, procurement, sales, finance, legal, etc.).  It is through these very interactions that it has become abundantly clear (more now than ever) that one of the top reasons enterprises are not effectively negotiating with their chosen cloud vendor(s) and achieving highly competitive outcomes, is the failure to deliver a unified and consistent message with the established cloud vendor points of contacts — and there are often many.  Cloud vendors, as you have probably experienced, are really good at taking advantage of the inconsistent messaging and the non-unified approach.  In fact, many approach enterprises with the goal of creating silos within the enterprise to positively impact the outcome they are looking for.

The first issue I come across is simply failing to keep the various team members in the enterprise that interact with these cloud vendor(s) aligned on the ultimate goals or objectives of any current or upcoming negotiations, like a year-end renewal on the horizon.  Having an internally circulated memo that concisely outlines the current state of any negotiations with updates as necessary has definitely proven to be helpful (bullets of key items are best).  Having a place to share notes from interactions would also be a good idea. This will certainly help (but may not completely resolve) the issue of inconsistent messaging being communicated to the cloud vendor as everyone should at least have the ability to understand the current state.

A perfect example of inconsistent messaging having an impact would be the situation where procurement (in an attempt to create leverage) approaches the incumbent cloud vendor letting them know that they may need to consider competing alternatives if the negotiations don’t go as expected. Often at the same time, a line-of-business executive is working to set up a meeting with an executive from the cloud vendor to discuss how their solution could help transform the enterprise and meet its long-term goals.  Under this scenario, the procurement department not only loses credibility, but the enterprise loses leverage (if they had any to begin with) while the cloud vendor is only increasing its leverage through this misalignment.

Needless to say, it is often easier said than done in a large enterprise scenario, but in order to effectively negotiate your cloud subscription, the first thing you need to ensure is that everyone understands your current state and your goals and objectives, and is ultimately on the same page.