If you have a relationship with Microsoft, your sales representative has likely been pushing to discuss the benefits of Microsoft 365 and why your upcoming renewal is the perfect time to sign up and adopt. In fact, many organizations receive renewal proposals that include an additional “highly recommended” alternative option beyond simply renewing your Office 365 subscription, that centers around Microsoft 365 and its adoption even after the sales representative was told there was no interest at this time.
As you may expect, this alternative option typically includes appealing one-time additional discounting beyond the volume discount to further entice the enterprise to at least consider jumping more into Microsoft’s cloud. Most organizations are also provided a presentation that addresses how a move to Microsoft 365 cloud bundle will save them a significant amount of dollars (sometimes even millions) over the next few years through cost avoidance compared to alternative hosting and collaboration solutions under consideration or already being used but are far too expensive.
Like most things in life, if it seems too good to be true, it is often best to take a closer look at the details and read the fine print before making any decision and/or commitment. It is always good practice to look before you leap.
Here are some of the key motivators behind Microsoft’s calculated approach to achieving increased adoption of Microsoft 365.
1. Products within Microsoft 365 bundle align with Microsoft’s strategic direction and corporate vision
Microsoft 365 is comprised of the following:
- Office 365
- Windows 10 Enterprise
- Enterprise Mobility + Security (EM + S)
Microsoft has communicated to the market that overall company success is dependent on the success of each of these key areas of focus. Satya Nadella, since taking office as Microsoft CEO, has stated on numerous occasions that Microsoft’s innovation agenda and overall pursuit is to bring end users, developers, and IT professionals together with platforms and applications in the mobile-first, cloud-first world. Microsoft has also been focused on security, knowing that it is part of most, if not all, discussions they are having with CIOs and CISOs as well as CEOs for that matter. Microsoft is proud to demonstrate how their solutions address the concerns raised during these discussions.
With Microsoft 365, a bundle of products that addresses the demand for cloud/mobile and includes Windows 10 Enterprise (Microsoft’s most up-to-date and secure operating system), Microsoft has created a bundle that would enable simultaneous success in all areas of its strategic focus if adopted.
2. You don’t own the cloud, you rent it
Microsoft realizes that the more cloud products an enterprise adopts, the more “sticky” their products become, as does the revenue that comes with it. By pushing a solution that is essentially a group of cloud products, Microsoft can move an enterprise further away from their old on-premise model and on to a subscription-based cloud model.
Subsequently, this move will replace ownership rights and the ability to walk away with renter’s rights where you have the right to use as long you meet all your obligations along the way.
When it comes time to renew, typically three (3) years down the road, you will have very little leverage and will have little choice but to renew all of products that make up the Microsoft 365 cloud bundle even if you no longer need or have never actually used a particular product (like EM + S) to date. What other choice would you have? Stop using the products you just ramped your entire enterprise up on?
Walking away is unlikely, and Microsoft knows this. Microsoft also makes it difficult for enterprises to break up the bundle at renewal. Often, enterprises are forced to stay in the bundle through the application of significant price increases to the pieces that remain, significantly increasing the go-forward annual spend. With increased pressure to reduce IT spend from the C-Suite of most enterprises, this becomes very problematic and Microsoft knows this.
3. With a bundle, the need for one drives adoption of all
By creating a cloud bundle like Microsoft 365, and offering enticing upfront discount that makes adopting each part separately no longer the most cost-effective option (now or later), Microsoft has found a way to promote adoption of three key cloud solutions all at once even if the enterprise is not fully sold on adopting each part at the same point in time. It is always better for an IT vendor, especially when dealing with cloud products, to expedite expansion of their footprint within an enterprise.
Product bundling also prevents competitors from grabbing market share both upfront and downstream. This is no different than the approach Verizon takes with their cable, phone, and internet package. Also, since Office 365 and EM + S both include multiple key products, Microsoft is pushing even more products into enterprises while further reducing the opportunity to lose market share even if only tied to a small business requirement being fulfilled by a competitor’s solution.
The prime target for the Microsoft 365 bundle is an enterprise that has already adopted Office 365 but hasn’t shown much interest in EM + S to date. By including EM + S as part of a bundle rather than continuing to push it on its own, Microsoft can lower the barrier to adoption and reduce the often-expensive sales cycle by making EM + S a part of a heavily discounted bundle that includes Office 365 (which must be renewed anyway).
Microsoft will go as far as to say they have essentially “thrown in” EM + S for free should an enterprise adopt Microsoft 365. Microsoft’s “sell” is the enterprise can adopt EM + S later during the term when the business case arises if there is not one now and not worry about it since it is essentially “free.” What does the enterprise have to lose? As mentioned above, they lose leverage at renewal and EM + S was absolutely not “free.”
What to do if your proposal includes a “Microsoft 365 Option”
It is important to point out that many enterprises believe the benefits of the Microsoft 365 bundle are worth exploring. Most specifically, enterprises appreciate the enhanced ability to protect data and manage environments that now include growing mobile device usage. There is also the ability to drive productivity through collaboration across various devices with various applications through Office 365.
If your enterprise does consider Microsoft 365 a viable option worth exploring, ensure that:
- Microsoft provides the necessary level of transparency and investments (how about a migration or “adoption” credit?) to earn your business and willingness to adopt an all-in cloud bundle like Microsoft 365
- Microsoft provides down-stream, long-term price assurances in the form of renewal term price protections (i.e., what is the per unit price going to look like when it comes time to renew?).
It is also worth challenging Microsoft to further explain what commitment they would be willing to make if the savings, business benefits, and business outcomes expected to be achieved (because Microsoft set the expectation) through adoption are not achieved. This is always a difficult conversation for Microsoft and one that will likely not result in any form of a warranty or strong contractual commitment. Even so, it is a conversation that usually flushes out the marketing material and “fluff” and drives more productive discussions around value that can be called upon later should things not exactly go as Microsoft said they would. It is critical that these discussions take place at an executive level both within the enterprise and within Microsoft. Microsoft executives from both the sales and product sides of Microsoft should be involved and engaged throughout.
Overall, Microsoft 365 may be the right option and choice for an enterprise. But since moving to a cloud bundle like Microsoft 365 comes with ownership forfeiture (i.e., there is no ball to take home should Microsoft start to not play nice) and significantly reduced downstream leverage, enterprises should not fall head over heels for enticing upfront discounts being put on the table. Understanding how Microsoft will benefit from your enterprise adopting Microsoft 365 and being able to effectively communicate your understanding to them can help you create leverage in your renewal negotiations because when it comes to Microsoft any many large IT vendors, the story often matters most…
- Alphabet Q1 FY 2018 Earnings: Google Wants Microsoft’s Enterprise Customers
- SaaS Matters: Key Caveats for SaaS Contracting
- Oracle’s Cloud Transition: What’s in it for Them?
- How to Make Your SLAs Meaningful in SaaS Cloud Subscription Agreements