Many enterprises are finding a new clause that states that if their Cloud consumption grows 5% or more in a given year, they must true up at the end of that particular year.
Audience: Microsoft Vendor Management | IT Procurement & Sourcing | Enterprise CIOs
Cost containment and predictability are the marching orders for Enterprise procurement teams around Microsoft Enterprise Agreements (EA) and Unified Enterprise Support agreements.
Locking in rates with Microsoft hedges against inflation and better protects the enterprise if the economy enters into recession.
Microsoft is equally motivated to lock in Unified customers for 3 or more years as third-party alternatives to their offering mature and gain market share.
The new Unified contract clause states that if their Cloud consumption grows 5% or more in a given year, they must true up at the end of that particular year.
This multi-year Unified agreement language would make it possible for an enterprise to have 2 Unified cost increases during the term and not be able to exit the agreement until the 3rd Unified price increase was levied. The timing of the introduction of this selling tactic is particularly eyebrow-raising given the retirement of Premier Support on 6/30/22, removal of SAB credits, continued high interest rates, and threat of recession in 2023.
Why would Microsoft introduce this devil into the details of multi-year Unified contracts? Analysts offer 2 motives.
1) Mid-contract true ups increase the Unified revenue in the current Microsoft fiscal year.
2) As third-party alternatives to MS Unified mature and gain market share, Microsoft is able to slow the attrition rate by locking in customers for 3 or 5 years.
One clear exception is an organization with mostly on-premise Microsoft licensing spend and no plans to grow their MS cloud consumption by more than 4% in the next 3 years.
Otherwise, organizations would be better advised to commit to a single year Unified contract and keep your options open to explore third-party Microsoft enterprise support if Unified costs mushroom or support quality at Microsoft deteriorates.