Mar 30, 2020 - 10:51 PM
EOLS Reduction is allowed to EA Minimum
in Microsoft agreements they state the license reduction and how it has to meet the minimum requirement, and it states clearly that this is doable before the anniversary date, although this will only affect your next anniversary billing and not the one that is already billed as the anniversary is paid upfront
Contact your LSP and take it forward.
Mar 31, 2020 - 01:01 AM
First fo all, kudos to you for having differentiated subscription types within your contract; most 0365 clients don't do that!
It's unlikely that such a 'throttle down' terms & conditions were applied to your contract ( but happy to review it for you); as such a scenario as this global-virus-shutdown are not typically 'anticipated'.
... and that falls in your favour, at least from a 're-consideration' POV.
Here's the conundrum that Microsoft is in:
1)Their end-of-year is June 30
2) Most 'initial/legacy' 0365 contracts were term-initiated around May & June
3) If Microsoft is 'overly' considerate - and releases/resets everyone's 0365 contracts, it will adversely affect earnings expectations.
4) If Microsoft doesn't demonstrate goodwill, the PR will be disastrous for them.
So...we are helping our SAM clients with a 're-consider clause' with MS to deploy a graduated review where subscription payments are re-considered every 60 days based upon 0365 metering usage, on the assumption that it will take 9 months ( ie the rest of the calendar year) for the 0365 clients to effectively recover. This 'reconsideration' becomes a 'throtlle up' term/condition within the existing contract, rather than re-negotiating (breaking) the existing contract ( which makes it easier for MS 'legal' to accept and lessens any management review upon your MS rep).
Happy to help - from at least 6 feet away- with any other considerations.
Mar 31, 2020 - 06:02 AM
Apr 01, 2020 - 06:22 PM
In discussions I had with resellers in the 2008 recession, trying to renegotiate in these circumstances is rarely worth it. MS removes any discounts or concessions you had, and you're basically at square one again. However, I would still encourage you to ask for a reduction. No harm there.
Your issue is one that strikes at the core of Microsoft's business case for Office 365. Most people don't recognize that Microsoft's move to the cloud was not based on the superiority of the software. That wasn't the issue, and for years, cloud features lagged well behind the features of perpetual licenses and on-premises software.
The issue you're facing is, interestingly, the key to why MS is pushing people to the cloud ASAP, and that's this: Office 365 has far greater lock-in capabilities than perpetual licenses with Software Assurance.
Their old "annuity" payment program, Software Assurance, has a serious weakness. A customer adds SA to a perpetual license, but if they cancel the SA, they can still keep using the software forever. In my consulting business in the last 9 years we look critically at what a customer will get with SA, and if the benefits are minimal, we drop it. We routinely cut EA costs by 40% that way, saving customers about $700 million over the last nine years.
But if you have a subscription, you don't have that option. If you stop making the annual payment, you must remove the software and reinstall older software for which you have perpetual licenses on your systems. That's a lot of work. Most people will simply bite the bullet and pay whatever MS asks. And as the years go buy and your old perpetual licenses age out, you eventually are completely captive to Microsoft. They own your collaboration and productivity platform and they dictate what features it does or doesn't have, your upgrade schedule, and, most important, the price you pay.
The is the main reason I am not a fan of Office 365 for customers with more than about 2,000 seats. In my opinion, the people who benefit the most from Office 365 are small customers who can't afford good IT staff. They can let MS run their Exchange and Sharepoint, and focus on using those products, rather than keeping them running efficiently and reliably. Beyond 2,000 seats, you start to lose economies of scale. Adding 1,000 people to your on-prem system will probably be less expensive than adding 1,000 subscriptions for Office 365, where costs rise in direct proportion to the number of users.
There are other economies as well. Every Microsoft customer skips every other version of Office, which has barely changed in the last 10 years.With Office 365, or even with Software Assurance, you're buying every version, whether you use it or not. Office 365 customers pay twice as much for Office as customers who simply buy new perpetual licenses every 6-8 years.
One suggestion you might look at for the future is to purchase your cloud licenses through the Cloud Solution Provider program. This is a very flexible agreement, reductions in cost and quantity can be accomplished easily. Your costs may be a few percent higher, but that's generally offset by the lower quantities you purchase.
There is a way to revert to perpetual licenses that maintains your right to use the latest versions. I've done that for 3 customers so far. It doesn't save a lot of money immediately--costs may go up a bit, but it gives the customer a much better negotiating position for their next EA renewal. Microsoft puts up as much of a fight as they can to stop it. It's very harmful to the account teams quota attainment, which is entirely cloud based, but the language to do this is in your contract, and if you hold your ground, you can get it.
There was one case similar to yours (change in business after year 1) in which I was involved directly, but getting it done was was brutal, and it did not involve any cloud licenses.
The client had 800 seats at the start of the agreement, then hit a bad patch and went down to 200. MS said they'd consider a reduction, but the customer had to agree to an audit.
After the audit, Microsoft said "as a result of the audit your annual payment has been increased by $80,000. After giving this additional thought, we respectfully decline your request for a change to the current agreement." Pretty brutal treatment of a customer already circling the drain. And not necessarily smart by Microsoft. If the customer goes bust as a result of their demands, MS gets nothing.
Our advice to the customer was that since they hadn't installed any new software--they were still using perpetual license versions from their previous EA--they should not make any payment, either the annual payment or the (probably bogus) audit request. We thought it would bring Microsoft around. But the customer got threatening calls from their rep and his boss every day for the next six weeks. "We're going to take you to court, we'll confiscate your PCs," etc.
In the end, the customer got exactly the result they wanted. Microsoft's Reno office, which handles payments, gave them a notice that their payment was 30 days overdue, and if it was not paid within 30 days or something like that, the agreement would be terminated. 30 days later they got the termination letter. Now they were free of the EA, didn't need to answer any calls from Microsoft, and could continue to amortize their perpetual licenses.
I don't know what happened later. People generally think that this kind of experience so sours the relationship with MS that the customer will never get any further concessions. My experience is that it actually improves the relationship. The reason is that while your current rep hates you, your next rep sees nothing but upside, since the value of your current contract is so low. He/she thinks there's nothing but upside here, if they can sweet talk you into a deal, even a deal with a hefty discount.
Apr 06, 2020 - 06:40 AM
Apr 07, 2020 - 05:16 AM
It's outlined in this language found in Microsoft Product Terms:
"Enterprise Agreement customers who transitioned to an Online Service or who purchased a From SA subscription License in lieu of renewing SA may reattach SA to a License at anniversary or renewal without purchasing a new License. SA must be ordered for that License for the remainder of the enrollment term. SA coverage may not exceed the quantity of perpetual Licenses for which SA was current at the time of any prior transition or renewal and may not be reattached to transferred Licenses." So, at an anniversary date or at the end of an agreement term, you can transition back from Office 365 to perpetual licenses with SA. Some restrictions apply.
1. Only licenses that had SA at the time you transitioned to Office 365 are eligible. For example, if you switched from 2,152 licenses for Windows, Office, and a CAL suite in an EA, which requires SA on everything, you can transition that many licenses back by resuming SA on them. Note that is a maximum, not a minimum. If your business has declined and you have only 1,000 licenses, you can transition back to 1,000.
2. Any Office 365 subscriptions in excess of 2,152 would need to be trued up, assuming you are transitioning back in an EA. So if you had subscriptions for 2,500 users, and wanted to maintain that count when you transitioned back, 2,152 licenses would be SA only, and 348 would need to be trued up.
3. The SA must be paid for the remainder of the enrollment or, if the transition occurs at the expiry of the EA, for a 3-year term in a new EA.
Note that when you resume SA, you get full SA rights. In one case, done in 2019, the customer had purchased Office 365 for the last 6 years, without deploying a single seat. Their last perpetual licenses were at 2013 versions. If they just dropped Office 365, their perpetual licenses would be locked at the 2013 version. By transitioning back and paying for SA, they were now entitled to Office 2019, 2019 CALs, etc.
The ROI you get is affected by when you transition back. The first time I did this, we notified MS of the decision to transition back just before the second anniversary of the agreement, with one year left. We still managed to chop $500K off of what was a $6 million annual agreement, because we didn't resume SA on everything in the EA. (We dropped it on Project, Visio, etc.) We could have saved another $500K if MS had not (illegally, in my view) refused to drop EMS from the final year of the contract. As a pure subscription in the EA we had the right to take it back to zero, but we had won most of what we wanted, so we kept EMS (unused by the customer) for the final year.
A year later, when the customer renewed the EA, we dropped SA on Office, Windows Server Standard, SQL Server Std, EMS and some other stuff, and saved about another $1.5 million annually.
The last time I did it, the customer contacted me after the 2nd anniversary deadline, so we had to renew SA for a full 3 years. However, it puts them in a much better position to negotiate agreessively 3 years from now and they will also probably have perpetual 2022 licenses by that time.
So to answer your question exactly, you need to look at your SA requirements going forward, any subscriptions that can just be outright cancelled, and so on. You also need to calculate SA for the remaining years, and look hard at what you really need in the future.
For example, I think most customers can drop SA on Office, which is very ripe (i.e., expensive) low-hanging fruit, ready for the picking. Every customer I have known skips every other version of the Office anyway, but by keeping SA on it they're still paying for every version.
It's also a very matuure product with very few new ideas or features. You also get a weird benefit by taking Office out of your EA--you get a second install on a portable, which frees up the second license needed by users with both a desktop and a portable in your EA. And by buying only every other version, license only (in the MPSA or Open), your purchasing is matching your requirements. Your Excel jockies will always want the latest, so just buy that small group of people the latest version of Excel anytime they want it.
Source: Microsoft Product Terms