Anyone that has interacted with Microsoft would not be surprised to hear someone complain that Microsoft is one of the most difficult vendors to negotiate with. Microsoft is able to get away with this perception because Microsoft is well aware of their position in the market. For example, in most renewal situations, a customer approaching the negotiating table ready to play hardball will be laughed at by Microsoft. Here is how this typically plays out:
Customer: Listen, Microsoft, we’ve been a loyal customer for over 20 years. The pricing you’ve put on the table isn’t competitive. We demand further discounting!
Microsoft: (stifling laughter) How about this? Go get yourself quotes from all of the other vendors that sell similar products. Be sure that all of these products are compatible with ours, given that your affiliates, customers, retailers, and basically everyone else that interfaces with your infrastructure will be using them. Oh! One last thing, be mindful of the upfront and downstream integration costs of using products from multiple providers! Let us know how that all turns out.
(Dramatic recreation of nearly all Microsoft renewal negotiations)
Unfortunately, it is incredibly difficult to create leverage with Microsoft, especially if you try to go at it alone. More specifically, it is nigh impossible to achieve any pricing incentives. If used effectively, here’s a list of the most common reasons Microsoft may be willing to provide pricing incentives:
- Customer is buying additional products
- Customer is buying in greater quantities (due to organic or inorganic growth)
- Customer’s quantity is at the upper bound of the associated volume discount structure
- Customer is looking to adopt a new product/technology
- A non-EA customer looking to make the move to an EA
- Dropping the EA is a viable option for the customer
The last area above will be the focus of the rest of this article. Your initial thought is probably, “Great! Drop my EA! Where do I sign up?” The problem with dropping an EA is that it isn’t viable for many organizations. In order to determine if ridding yourself of an EA is possible, there are a number of boxes that must be checked.
First, a strong set of requirements is vital. Assuming you have this, the next step is having a good idea of what your future (1-4 years) set of requirements will look like. When determining your forecasted requirements, you must account for company growth (organic and inorganic), as well as your company’s Microsoft product adoption roadmap. Understanding your future company growth will help with shedding light on downstream incremental costs, and how the costs differ between licensing models. As for the product adoption roadmap, if your company typically skips a version or two, an EA may be licensing overkill. Paying for 4-6 years of Software Assurance basically adds up to paying for two licenses. Upon dropping Software Assurance, you still hold the perpetual license rights to products you’ve purchased, as well as the upgrade rights to the most current versions. With the right product adoption tempo, it may make more financial sense to drop the EA and then re-buy all of your licenses four or more years later.
Once you have a handle on your future, the next step is to understand your Software Assurance utilization. Software Assurance contains a litany of benefits, but only a handful of these benefits seem to be widely used. The first being upgrade rights, as previously discussed, followed by virtualization rights.
Determining the degree to which your server environment is virtualized requires a mature IT department that is up to speed, as well as discussions with your Microsoft Enterprise Software Advisor and Large Account Reseller (LAR). Without getting into too much detail, if your server environment is not heavily virtualized and you don’t have plans for further virtualization, Software Assurance may be unnecessary. Between third-party virtualization and the Virtualization Desktop Access subscription, cutting the cord on Software Assurance may be looking better and better.
The last thing to consider when assessing your ability to drop Software Assurance is what the rest of your IT roadmap looks like for the next few years. Software Assurance undoubtedly adds some simplicity to your everyday planning and executing with regard to your Microsoft environment. Removing that simplicity creates additional stress on those who run your IT environment as well as your procurement and vendor management offices. With mature, well-informed IT, procurement, and vendor management departments, those stresses may not be a worry. If so, you’re in the final stretch of freeing yourself from Software Assurance.
As you can see, there are several aspects to consider when trying to break free from Software Assurance. That is precisely the reason why most Microsoft customers experience vendor lock-in, and precisely the reason why Microsoft can be difficult to negotiate with. Ultimately, you don’t HAVE to drop Software Assurance. The point is to show Microsoft that you can live without it and it is truly a viable option. When this can be achieved, Microsoft may be more willing to work with you and your organization…at least until the next renewal.