Negotiating Microsoft Unified Support Agreement
How do you negotiate a decent Microsoft Unified Support Agreement? What are the common pitfalls, and what are the best practices?
Did you know that Unified Support cost grows with your Azure and Microsoft license consumption, regardless of the actual support services you consume? Are you happy with that? Do you really want that? And how do you solve it?
Learn how to make the most of your Unified Support contract from this transcript of a live discussion on our YouTube channel.
Let's talk about Microsoft Unified Support
Alexander Golev: Hello, everyone. Thank you for joining us today. Our discussions usually revolve around various aspects of Microsoft, which we call Microsoft Relationship Management. This includes licensing, economics, and agreement negotiation.
As always, I am here with my business partner, Daryl Ulman, who serves as the Chief Negotiation Officer at SAMexpert.
Daryl Ullman: Thank you, Alex. Alex will be moderating this session, and I hope to provide insightful answers regarding Unified Support. This topic has been gaining popularity among our clients, and we would like to address some of the recurring issues and areas of interest we encounter.
We get many questions from our followers, community, and clients regarding Enterprise Agreement renewals, often accompanied by Unified Support, previously known as Premier Support.
It is a successor of Microsoft Premier Support
Alexander: I recall when Microsoft began transitioning everyone to Unified Support, where you could still opt for Premier Support, which was simple to comprehend since you paid for actual services, hours or tickets. If I'm not mistaken, this was around 2018.
Daryl: Interestingly, it's still referred to as a Premier Agreement. During conversations surrounding renewals, people often say, "We have a Premier Agreement renewal," instead of calling it Unified Support. The Premier Support Agreement was introduced roughly 20 years ago, in the 2000s or even slightly earlier. It was so ingrained in everyone's minds that "Premier Support" just stuck.
The business model of Unified Support has completely transformed from Premier Support. Despite being around for three or four years, this concept hasn't quite sunk in yet, and this is one of the biggest surprises organisations encounter when they begin looking into Unified Support costs.
The perception of Unified Support – no control over cost
Alexander: In the current situation, there is a different perception of Unified Support among various teams within organisations. Let's focus on the three core teams: the IT team, the lead of procurement, and the CFO.
Here's how they view Unified Support:
The IT team has given up. They see it as, "Okay, fine, we understand. The cost is simply a percentage of what we consume."
On the other end of the spectrum, the CFO is bewildered, wondering, "Why am I paying so much more?"
Then there's the procurement manager, stuck between the IT and the CFO. This individual has the most challenging job in the organisation. As someone from procurement recently told me, "We manage risks. We don't manage costs. Most of the time, we manage risks." And the cost of Unified Support is a significant risk they have no control over.
Daryl: We want to give them some control. Today, we have some tips that can help them gain control over their expenses.
We don't consume more support, but the cost is rising!
Alexander: One of the questions we frequently hear from our clients is, "What the hell?" Why is my Unified Support cost increasing, even though I'm not utilising more services?
Daryl: It's confusing, and I would even say that from a business perspective if it weren't Microsoft and you were dealing with a smaller vendor, it would never fly. No provider out there can automatically increase costs while providing the same level of service, and nobody will say anything. I'm being blunt here, but this is only possible with Microsoft.
To say that Unified Support is a masterpiece of an agreement is an understatement. It's structured based on your actual consumption costs of your Enterprise Agreement and your Azure monthly billing statement. Whether you're consuming support, consulting services, or proactive support from your Unified Support contract does not matter. You must still pay a percentage of your overall Enterprise Agreement and Azure monthly costs. You've lost control and are not seeing the value you're paying for.
When you sign an agreement, you expect a fixed price, but that's not the case with Unified Support. If your Azure spending spikes after three or six months, your Unified Support bill will also increase, even if you haven't used any additional services. Then your CFO, who has a predefined budget, will contact you to ask why you're paying more.
Premier Support was simple: you had a fixed price, knew how many service credits you were getting, and understood what kind of consulting services and the number of engineer hours you needed and consumed. Everything was transparent, and the cost only increased if you required additional services.
Unified Support is the opposite. Nothing changes, but you're paying more. That's where the big caveat is. Its cost is a percentage of your spending.
Can I offset the cost with Software Assurance benefits?
Alexander: Can I offset my Unified Support costs with Software Assurance benefits?
Daryl: Software Assurance benefits are declining. Initially, there was a nice Software Assurance benefit package that included support credits. However, it's not a significant benefit anymore. Microsoft converted those SAB support benefits into a monetary figure and credited you for the first year of your Unified Support cost.
For instance, suppose your first-year support cost was supposed to be $200,000, and you're expecting to budget $200,000 for each of the next three years. Microsoft offsets the first year's cost by $100,000 by providing a conversion of those SAB credits. This reduces your first-year payment to $100,000.
However, the reduction only applies to your first year. If you only budgeted $100,000 for each consecutive year, the second year's costs would come as a surprise at $200,000, or possibly even more if your Azure spending has gone up due to organic or non-organic growth or if you added on some M365 licenses that increased your overall expenditure.
If you didn't pay close attention and didn't set your budget correctly, you might not have realised that your SA benefits only apply to the first year of the contract. As a result, your second-year bill could come as a shock, going from $100,000 to $200,000 or higher.
What are the key negotiation mistakes?
Alexander: What are the key mistakes made when negotiating Unified Support contracts?
Daryl: That's an excellent question. The first mistake is not understanding the cost model. It's very misleading, and one of the misconceptions is that your cost will stay constant over the three years because you misunderstood that the percentage is based on your actual spending, which tends to go up.
If you're a large enterprise organisation, you must understand that you can negotiate two factors. So the second mistake is not knowing that. Two factors can be negotiated. One is the percentage you pay, which has different tiers between 6% and 10%. Depending on your size and how you coordinate your Unified Support negotiation with your other renewals, you can negotiate the tiers. You can align it with your EA renewal or an Azure MACC agreement to increase your chances of adjusting the tiers.
You usually negotiate Microsoft agreements once every three years, or maybe it's your first time negotiating such a contract. Depending on the organisation's size, you can negotiate a cap on the potential growth of your spending. Suppose your Unified Support Agreement is $200,000 per year. In that case, you can ask Microsoft to cap the annual cost at $250,000 or $275,000 if you expect massive growth of your Azure spending but don't anticipate consuming additional support services.
You need to look at everything holistically and understand that this is negotiable, depending on the leverage you can bring to the negotiation. You need to build up proper leverage to have a conversation about the points I discussed.
The basic negotiation strategy is to build up leverage and alternatives, which we will discuss in a minute, and then put your requirements, demands, or targets on the table and have a discussion.
Are there third-party alternatives?
Alexander: Speaking of alternatives, we have a relevant question. Recently, people have been fed up with Unified Support's uncontrollable costs and are looking for other options. For example, in the Oracle world, Rimini Street and Spinnaker offer third-party support alternatives.
Are there alternative providers for Microsoft Unified Support?
Daryl: Yes, there are alternatives. I'm not here to promote anybody, but you can easily find them by Googling "Unified Support Alternatives."
Alexander: How legitimate is it to use alternative providers for Unified Support?
Daryl: Using alternative providers for Unified Support is legitimate. From the feedback we've been hearing from customers, it's not bad. While there aren't as many alternatives out there compared to the Oracle world, these alternative providers offer significant benefits.
The first benefit is that their cost model is very much like the old Premier model, which is not based on your spending. It's based on the number of support tickets, consulting hours, and proactive workshops. These alternatives provide everything you were used to in your Premier Agreement, allowing you to plan ahead, and the price is fixed and predictable. Moreover, most alternative providers are Microsoft partners so they can escalate severe issues to Microsoft.
The second benefit is pricing. It is typically 30 to 50% less than your Unified Support costs.
The third benefit is having alternatives, which is like having your best alternative to a negotiated agreement (BATNA). With third-party alternatives, you always have a BATNA, which allows you to bring another option to the table. As in any negotiation, you can benchmark Microsoft's pricing against the competitor's and potentially save money.
While it may seem peculiar to have an alternative to Microsoft, it's worth exploring to potentially save money and have better control over your support costs. In our experience, using alternative providers can completely change the discussion dynamics.
Is year one cost the same as years two and three?
Alexander: Is the year one cost of Unified Support the same as year two and year three?
Daryl: No, not necessarily. If you still have Software Assurance benefits that you can use, they can help reduce your first-year cost. However, this reduction will not carry on to years two and three, so you must budget accordingly. You cannot extend the discount for more than three years, as Microsoft will not allow it.
Furthermore, since your Enterprise Agreement will become more expensive as your internal user base grows and you purchase more licenses such as M365, SQL Server, Windows Server, Dynamics 365, and Azure, your Unified Support costs for years two and three will also increase.
It is your responsibility as the CFO to budget for a cost increase every year of your contract. If your company is large enough, you can negotiate a "not-to-exceed" or cap on your support costs, as I mentioned earlier, which is something to consider in your next negotiation.
Talk to a Unified Support negotiation expert
If you're struggling with your Unified Support contract and need guidance or advice, don't hesitate to contact us here. With years of experience dealing with Microsoft contracts and being entirely and intendedly independent, we can help you navigate the complex process and save you money.
Don't let the confusion of Unified Support contracts cost you more than it should. Contact us today and take control of your contract negotiation.