Analysts at Info-Tech Research Group are warning clients to read their Unified agreements carefully if they are considering a multi-year contract.
Many 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 | CIO
With inflation projections for 2022 ending at 6.5% and economic recession warnings hitting CEO and CFO desks, locking in vendor rates has become a priority for IT sourcing and procurement.
Cost containment and predictability are the marching orders for Microsoft vendor management around Enterprise Agreements (EA) and Unified Enterprise Support agreements.
It makes perfect sense for Microsoft Vendor Management teams to seek out multi-year support agreements with Microsoft during these volatile economic conditions. 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 5 years as third-party alternatives to their offering mature and gain market share.
Analysts, professional negotiators, and vendor procurement teams have discovered a new clause in their multi-year Unified proposal 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.
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 during Microsoft’s hectic year-end and retirement of Premier Support on 6/30/22.
3-year Microsoft Unified Enterprise support contracts that don’t lock in rates have little benefit to the buyer. Why would Microsoft introduce this devil into the details of multi-year Unified agreements? 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.
Analysts recommend not signing 3 or 5 year Unified Support agreements to the vast majority of enterprises. 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.