Negotiating your next Microsoft Agreement

By Ann Marsh

So, you’ve just signed your agreement with Microsoft, time to relax for the next two years right? Wrong! Your Microsoft agreement is probably one of the largest agreements financially for your company and touches every person working at your company. Many of the things I’ll talk about here apply to any other large complex agreement too, but I’ll slant my ideas toward Microsoft.

For an agreement as large and company-wide, the contract review process really never ends, but I recommend kicking off your formal process of reviewing your agreement 24 – 18 months before your agreement expires. My philosophy on contract negotiation is whoever has the most knowledge has the most power. Understanding all your internal requirements, current use cases, challenges and future needs for next 2 – 4 years gives you the data you need for the negotiation. You should also have an in depth understanding of your current contract and use rights and how those may change in your new contract. If you are a global company, it’s also critical that you understand your global usage of these products and any planned changes. Legal and data privacy will be your partners as you work through these global concerns.

For most people your Microsoft contract falls into several buckets – server products, Office365 environment, Visual Studio users, Azure cloud and misc. products. Your Office 365 environment touches the most people and is probably your most complex, so I recommend for most companies you spend the most time there.

For your Office365 products, talk with your support team and application owners around each of your Office365 profiles which are generally what Microsoft calls your “Enterprise Products”. It’s important you understand what your users are currently using and NOT using, and what plans are to rollout additional features. It’s also important to talk with security, communication, HR and telecom teams to understand their needs and what they may plan to be rolling out. You also need to be familiar with the Microsoft roadmap (or know how to get that information) so you can help coordinate getting that information to those times to help in those 2 -4 year planning decisions. If you have manufacturing workers using your Office licenses make sure you touch base with your stakeholders in that area as their needs may be different. This could be 3 – 6 different groups that may need multiple meetings. Make sure you are documenting your findings and confirming your understanding. Ensure you understand for these core products what are the most critical features for your company. This is especially important if you are dependent on more obscure features that may not be as important to Microsoft.

You will also have “non-Enterprise” products in your Office365 portal. These are the products where you can change quantities each year in your agreement. These are generally things like Power BI Pro, Powerapps Plan 1 and 2, Project Online, Visio Online, etc. The number and complexity of your use of these products will determine how much time you should spend and how many meetings are needed.

Do the same type of data gathering for your other product groups. The depth you go into and time spent is going to depend on the criticality of those products to your business, your spend, and future plans.

Once you have all this data, it’s important you have your license experts involved to consider possible alternative ways of licensing your new agreement. Many people unfamiliar with Microsoft licenses assume a good way to save money is to drop SA on all your perpetual licenses. This may be appropriate, but it’s important that you understand all the license rights that are included with carrying SA and you make sure you are not accidently putting yourself out of compliance by dropping those rights or placing yourself in a situation where you would need to purchase many more licenses to stay in compliance. You also need to understand all the different use cases for your Office365 users so you can determine the best way to license them – things like number of physical and virtual PCs, use of various features like flow, teams, legal hold requirements, etc are all very important.

Microsoft agreements come with many other benefits which may or may not be important to your business. Ensure you understand how important things like training days, designated software engineers, planning days, etc are to your business and your past usage of those benefits.

Gathering this data is at minimum a 12 month effort and for large complex companies may take longer. You will want to start your negotiating process with Microsoft a minimum of 6 months before your agreement expires. You should have a timeline developed to get you to a signature date before your agreement expires.

This is the time to pull together your key stakeholders and negotiation team. At my company this normally would include vendor relationship manager, IT Sourcing, senior manager owning Office 365 environment. Depending on the spend and criticality of other products you may have a few more people on the team. This is the group of people that are going to get together and review all the data you have gathered and develop your negotiation strategy. Some companies have a formal process and template for going through this and some do not. Even if your company does NOT have a formal process do not skip this step. Microsoft is going to bring skilled negotiators to the table and you should be well prepared. You should also identify your management escalation path and which of your requirements are musts and which you would be willing to give up.

Make sure you put your “ask to Microsoft” together in a formal presentation you can present to them using your negotiation strategy above. Risk tolerance and negotiation is different for every company, but ensure you include dates you expect responses back, so you can meet your renewal date.

Finally, do NOT be afraid of the dreaded Microsoft “ business desk “ and feel comfortable discussing your issues and concerns with them. In my experience, it is generally better if you can talk to the business desk directly and explain your concerns and questions. In general, both companies are interested in coming up with a win-win solution. Understanding the needs and requirements of both sides is key to coming to an agreement you can both live with.

Hopefully I have given you some ideas to help make your next Microsoft contract negotiation less painful. Good luck!

About the Author

Ann Marsh is with Medtronic, Inc.