Finding Leverage with Microsoft – Negotiating Wisely and with Care

By Stephen Covert

In any negotiation preparation, one should prepare by developing a walk-away point and alternative options to the proposed solution. A Microsoft negotiation is no different than any other negotiation, but developing these points of negotiating leverage are difficult because of the complexity that Microsoft introduces in their offerings. An understanding of Microsoft software and any benefits related to the products that you own is a great place to start negotiation preparation. Due to the complexity of the Microsoft offerings, negotiation preparation can be analogous to peeling the layers from an onion. The following article walks through preparing for the Enterprise Agreement renewal process for an agreement that includes the Office suite.

Enterprise Agreement

The Enterprise Agreement (EA) is one of Microsoft’s volume license agreement types which targets mid- to larger-sized organizations of at least 250 desktops. Traditionally, this agreement was focused on the following three desktop products; the Desktop Operating System, Office Suite, and Server Client Access License Suites (which permits access to specific servers). The EA carries with it enterprise requirements on these three products, meaning that every desktop in the enterprise must be licensed for any of these products covered under this agreement. This requirement may mean that any entity that is not fully utilizing the products throughout the enterprise may be bearing unnecessary costs. The following evaluation of the EA with the Office Suite serves as an example of the process to evaluate the value of each of the enterprise products covered in the EA. Once the value provided by the EA and the cost of the EA is determined, comparisons against other options can be made in order to create walk-away points that can be utilized during the negotiation.

Office Professional Plus Suite

The Office suite, if covered by the EA, carries with it two enterprise requirements. The first is the EA requirement for every qualified desktop in the enterprise to be licensed with Office Professional Plus. Office Professional Plus is Microsoft’s premium offering of Office with multiple features beyond the Office Standard Edition. The second EA requirement is that all qualified desktops must be covered by Software Assurance (SA). SA is a subscription-based offering that provides the organization with benefits related to the covered product. The primary benefit of an SA subscription for the Office suite is the right to upgrade the software version to the releases that occur during the term of the EA. Both of these EA requirements carry unnecessary costs when the products and benefits are not used sufficiently. The following review will provide more detail of these requirements and analyze the related SA benefits in order to establish a firm negotiation stance.

Office Professional Plus EA Evaluation

As mentioned earlier, under an EA, the Office suite has to be on all qualified desktops and has to be the Office Professional Plus suite with its extra features. Potentially, only a fraction of the enterprise users of the Office Profession Plus Suite may actually utilize the additional features. In contrast, the other volume license agreement options of Select Plus and Open License agreements do not have a requirement for all corporate desktops to be licensed with the Office suite. The Select Plus and the Open License agreements also provide the option of selecting which Office product is licensed on each desktop. To restate, this difficult point, both the Select Plus and Open License agreements provide an enterprise with the option to only license desktops that require the Office suite and to license those desktops with the appropriate Office product. These alternatives to the EA may provide the enterprise with an Office suite which better suits the needs of the worker at that desktop at a lower cost.

The difference between the two Office suites may be explained through the following capability differences. The first capability that the Office Professional Plus Suite provides over the Office Standard is the three additional products of Access, Infopath, and Lync. Secondly, Office Professional Plus also provides Advanced Integration Features (AIF), which provides access to enhanced features in Microsoft servers. These features are not available through Office Standard. An example of an Advanced Integrated Feature is Information Rights Management and Policy Capabilities which allows an author of a document to restrict content access to a selected audience.

If some combination of the additional functions, AIF and extra products are not utilized by a large percentage of the users in the enterprises, then money could be saved by purchasing the Office Standard suite under a different agreement. Any enterprise in this situation has the option, under the alternative volume license programs mention before, to select the specific Office product appropriate to a specific user and to not license the Office suite at all if not needed.

SA Benefits for the Office Suite

As mentioned previously, SA provides the protected software with multiple benefits, primarily, the right to upgrade that software to the latest version of software made available during the SA subscription period. The price of an SA subscription for Office is an annual payment amounting to 25% of the license fee, resulting in a four year breakeven point of paying SA versus rebuying the updated Office license. In other words, if an organization is paying for more than four years of SA before installing the latest version of Office, the SA can be dropped in favor of repurchasing a license at the time of upgrade. For example, Office 2010 became available June 2010 and Office 2013 was released January of 2013. If Office 2013 is not implemented until 2015, after five years of SA payments have been made since the release of Office 2010 was released, the SA benefit for the upgrade would cost more than repurchasing the license for Office 2013. If the enterprise is paying for SA as part of an Enterprise Agreement and has paid more for the subscription than had they repurchased the software license, discontinuing the SA subscription should be considered. The consideration to drop SA under an EA should not be finalized until after further evaluate is completed to determine as to whether the additional SA benefits beyond the new version rights justify the cost of the subscription.

There are multiple SA benefits in addition to the new version rights for the Office suites and many of the SA benefits that are provided are nice benefits to have, but rarely justify the cost of an SA subscription. Further, there may be restrictions on a given benefit that could cancel out the SA right for a given organization. As such, each benefit should be evaluated against the need of the users of the software to determine whether the benefit has value to the company. One such SA benefit for the Office Suite is the Roaming Use Rights. This SA benefit provides the primary user of a desktop covering the Office suite with SA with the right to access Office running on servers from a remote non-company owned desktop. Additionally, this right provides the primary user of a desktop the right to run Office Professional Plus from a USB or Virtual OS on a remote non-company owned desktop that has not been licensed with the Office suite. This benefit only applies for off-site use, meaning that users of the third party desktop may not be on the company’s premises for this benefit to apply. Any on-site third party device used by the primary user of a desktop covering the Office suite with SA would need to be licensed with Office, thus eliminating the value in this benefit under this circumstance. Restrictions like this may mean that only small subsets of the users in your organization would benefit from rights such as this, further justifying walking away from a restrictive enterprise wide agreement.

If any of the analysis previously mentioned points to the fact that the SA benefits are not providing the benefit to justify the cost of covering all desktops with SA on Office under an Enterprise Agreement, the organization may want to consider dropping the Office Desktop out of the EA and thus discontinuing the coverage of Office with SA. In the event that it is determined that only pockets of the desktops cover Office with SA under EA benefit enough to cover the cost, an organization could consider covering only those selected desktops with SA for Office under either the Open or Select Plus Agreements. Both options may provide less costly options without sacrificing value to the business and create a great negotiation stance.

Summing it up

Preparing for a Microsoft Enterprise Agreement negotiation requires the organization to assess the value that the agreement provides against the alternative options available. The Enterprise Agreement has requirements which drive the cost of the agreement up. These restrictions, which increase cost with potentially no value added to the organization, provide opportunities to evaluate other options against an EA. The options may be used as leverage while preparing to negotiate with Microsoft. In the case of an EA covering an Office suite, all desktops must be licensed with the Office suite whether the function is needed or not on that desktop. Secondly, the premium product, Office Professional Plus, is required on all desktops whether or not the features are needed. Finally, all licenses covered by an EA require that the organization pay an annual SA subscription whether they are receiving adequate value to justify the cost. Upon evaluation, the negotiator may find that the restrictions imposed by the EA present opportunities to evaluate less expensive options without sacrificing value. These opportunities provide the negotiator leverage in the form of other options and walk-away points during the negotiation.

About the Author

Stephen Covert is the Manager of Vendor Services for Highlights for Children, Inc.