Understanding Microsoft’s Removal of From SA SKUs: Customer Impacts and Recommendations

In December 2023, Microsoft announced a significant change in its subscription model, particularly concerning the removal of the programmatically discounted From SA SKUs from any renewal moving forward. Unsurprisingly, this decision has raised questions and concerns among organizations currently subscribed to these SKUs.

Here, I will outline what From SA SKUs are, how their removal will impact Microsoft customers, and how customers can navigate this change as they prepare for their upcoming renewal negotiations.

What Are From SA SKUs and Why Are They Significant?

From SA SKUs, short for “From Software Assurance SKUs,” are specialized offerings aimed at Microsoft customers transitioning from on-premise licenses to cloud-based subscriptions. These SKUs came with a unique discount ranging between 12-15% compared to full subscription SKUs, making them an attractive option for organizations that were looking to migrate to the cloud in the past.

Microsoft is aware that most customers have already made that transition to the cloud. As such, Microsoft has made the decision to not only hit customers with base price increases at renewal but also remove the ability to maintain significantly cheaper licenses in their portfolios. This recent decision by Microsoft to discontinue the availability of From SA SKUs for renewal has sparked discussions about its implications.

What Impacts Will Removing From SA SKUs Have on Microsoft Customers?

To be clear, this change is not a decision that will come from the customers. This is a change that Microsoft is imposing on customers as an easy way to increase their ARPU (Average Revenue Per User). As an example, the removal of legacy From SA SKUs that an organization is accustomed to provides an easy way for Microsoft to potentially incentivize E5 adoption at renewal (i.e., come in at renewal with an offer that would offset the increase of an “As-is” renewal through removal of From SA).

The impact of this change is profound, particularly for organizations with a substantial number of From SA SKUs in their portfolio. Let’s consider an example: suppose an organization has a large population of From SA M365 E3 SKUs, and now must transition all of them to full subscription SKUs. As a result of this transition, the organization could face a significant increase in costs, often as high as 18% increases in total fees per year.

Such a financial burden could strain budgets and force organizations to reassess any future net-new adoptions because they will not have the money to do so. More specifically, organizations too strained for cash could need to reassess adoption of products that Microsoft may be interested in selling, such as Copilot for Microsoft 365.

How Can Microsoft Customers Navigate the Removal of From SA SKUs?

Our recommendation is for organizations to proactively engage with Microsoft to address this issue. It’s crucial to initiate discussions with Microsoft representatives sooner rather than later to explore potential solutions and mitigate the impact of the removal of From SA SKUs.

One key aspect to raise in these discussions is the disparity between the increased fees and the perceived value received from the products. Many organizations have invested in Software Assurance (SA) fees for on-premise products, and the abrupt removal of From SA SKUs without any corresponding increase in value could be perceived as a programmatic increase or even a cash grab by Microsoft.

We recommend leveraging this unexpected increase as a potential roadblock for any net-new adoption at renewal, especially for the products most important to Microsoft like an E5 upgrade, additional security pieces, or Copilot. It would even be fair to bring up to Microsoft that such a significant increase to a large population of users will lead to an inability to use funds for new products. After all, net-new adoption at renewal is very important to Microsoft.

Organizations should also evaluate their current licensing agreements and assess the feasibility of transitioning to alternative subscription models or negotiating custom arrangements with Microsoft. This may involve exploring different licensing tiers, optimizing license allocations, or leveraging bundled offerings to reduce costs while maintaining essential services.

The Bottom Line

Microsoft’s decision to remove From SA SKUs can create significant challenges for organizations navigating any net-new adoptions. While the immediate impact at renewal may translate into increased costs, proactive engagement with Microsoft and strategic adjustments to licensing and net-new adoptions at any time can help mitigate these challenges. By understanding the implications of this change and taking proactive steps to address them, organizations can navigate this challenge effectively and ensure continued success in their Microsoft journey.

UpperEdge’s Microsoft advisors are experts in helping organizations navigate the ever-evolving product landscape. Explore our Microsoft Advisory Services to learn how we can help your organization navigate your renewal negotiations amidst these product changes.