1. Gather Granular Utilization Details
Having a complete (and organized) understanding of your company’s entitlements, on a line-item basis, along with the actual levels of utilization, is a critical dataset to have when discussing actual value received versus fees paid with Microsoft.
Ideally, you want to be able to communicate the dollar value associated with any under-utilization to show the lost value. As obvious as this may seem, far too many companies fail to effectively pull this level of detail together and thus lose out on an opportunity to pull a significant negotiation lever with Microsoft that could reduce spending on your Microsoft license.
Being able to remind Microsoft of the heavy sales-pitch they made explaining why you needed to include the cloud bundle Microsoft 365 (formerly Enterprise Cloud Suite or Secure Productive Enterprise) in your last renewal, and then showing Microsoft that you never used all the features of the Office 365 component of the bundle or any of the other key components, like EM+S, is a strong negotiation motivator.
This is especially the case when Microsoft is looking to add more new products to your portfolio or moving you to the next plan (e.g., Office 365 or Microsoft 365 E5), while also significantly uplifting the fees associated with the products you already have adopted.
2. Complete a Software Assurance Benefits Assessment
When you renew non-subscription cloud products (SQL server, etc.) licensed under Microsoft’s enterprise agreement, you are effectively renewing (and paying for) Software Assurance (SA) since you already own the underlying license and the most recently released version. Given this, it is important to assess whether you have realized the full value of SA and whether you will realize the full value moving forward.
Software Assurance benefits are organized into four major categories:
- Deploy and Manage (new version rights)
- Specialized (spread out payments)
But very few companies receive the full benefit of Software Assurance and some don’t even know the full scope of benefits that are included. The issue with Microsoft is that you don’t get to pick and choose the SA benefits you will be using and pay for only those particular benefits — it is an all or nothing option. Software Assurance is Software Assurance.
If positioned correctly, though, there is an opportunity to present to Microsoft the limited value previously received along with the value you expect to receive from SA moving forward, to achieve valuable concessions in other areas of your negotiation that can offset your concern for the lack of value. This includes, but is not limited to, achieving additional Microsoft discounting beyond the standard volume discount.
3. Evaluate Products that Are Valuable to Microsoft
Microsoft’s new selling strategy and ambitions are very clear — they want to build and sell best-in-class platforms and products to align with the needs and requirements of organizations embarking on their necessary digital transformations.
They also consistently communicated to the analyst and investor community fairly aggressive product adoption goals, and therefore, Microsoft’s share price is also impacted by their ability to sell more Microsoft products and solutions to existing and new customers. They, just like most (if not all) IT vendors, especially cloud-focused vendors, are interested in increasing the annual run rate through successfully executing to their ‘land and expand’ playbook.
Although we would never recommend buying products you don’t need just for the sake of trying to get a “good” deal, companies evaluating new products or who have more robust plans for products already in use have an attractive story that can influence the ability to achieve concessions from Microsoft. This is especially the case when the products under consideration have competitive alternatives and represent strategic products directly tied to Microsoft’s go-forward strategy and ambitions.
Most specifically, a company seriously considering adopting one or a combination of one of Microsoft’s key cloud offerings (Microsoft 365, Azure, and Dynamics 365) as part of an upcoming renewal has a significant amount of leverage, and if used correctly, can achieve a best-in-class deal with Microsoft.
4. Develop a Strategic Timeline
Developing a holistic Microsoft negotiation strategy is key to your success. In order to effectively negotiate your Microsoft license agreement, you need to level the playing field and take control of the EA negotiation process to benefit your organization at least as much as it does Microsoft.
This is essential if you wish to safeguard your company’s financial performance, improve your strategic relationship with Microsoft, optimize your SA benefits, protect your IT infrastructure, and keep your license compliance management status quo.
5. Air Your Frustrations Tactfully
We’re not suggesting you flip a table (despite how satisfying that might be), but be prepared for this situation to be exasperating. Microsoft will use all of the corporate structures as justification for drawing out the process and as a way to avoid legitimate business requests.
Make sure you let Microsoft know how irritated you are with this process and talk to them frequently. It will be helpful to move things along if you set up, early in the process, a weekly meeting with Microsoft and present them with small tasks to do during these meetings. This will allow you to track their progress.
6. Anticipate That You May Need to Purchase More Licenses Than You Use
It may seem counter-productive if you’re looking to save money and cut spending, but Microsoft is known to reward those who buy into their strategies early. Sometimes, you can get concessions that may be worth the purchase, even if you end up buying things you don’t need, such as E5 licenses and LinkedIn services.
Make sure you have a strong understanding of what a reasonable price would be for the bare minimum you require for your company. This is done through understanding your company’s usage regarding these Microsoft products. A 20% discount will still mean losses if it turns out you’re overspending by 45%, so keep that balancing act in mind if you decide to scale up.
7. Know Your Options and Be Assertive
Microsoft will push you to get things done quickly, and to increase your spending, so you have to be prepared to push back.
You may need to be prepared to move beyond the expiration date in order to see flexibility from Microsoft. We have seen organizations that have gone two months past the expiration date to finally reach agreement with Microsoft.
The only other option available to you to get around this unfortunate situation is to start earlier and get serious about the negotiations as soon as possible. In the past, the intensity of the negotiation came to its peak around one to three months before the renewal but now, in order to reach the most ideal agreement, negotiations should begin in earnest around three to six months before the renewal. You also need to be prepared to escalate within your organization and with Microsoft’s.
Having a strong understanding of your software usage and current spending will give you the knowledge you need to create two or three pricing options that will allow you to decrease costs or at least to not increase it. Don’t expect Microsoft to be any help to you in these areas, their goals are very clear, they want you to increase your spending regardless of whether it will provide greater value to you.