Your Microsoft Enterprise Agreement Negotiation Roadmap
The T-18 Plan is your road map for preparing for a Microsoft Enterprise Agreement renewal or an exit. Sun Tzu, the ancient military strategist, emphasised the importance of thorough preparation in his book "The Art of War." The idea is straightforward: the more you prepare, the better your outcome will be. Businesses that start planning 30 months before renewal save an average of 28% on their Enterprise Agreements.
The Importance of Timing in Enterprise Agreement Renewals
How much time should you allocate to prepare for a significant Enterprise Agreement renewal? This advice isn't exclusive to Microsoft; the same principles apply if you're dealing with Oracle, SAP, IBM, or any other large vendor. Every vendor is different, but the need for preparation stays the same.
First, let's consider how Microsoft gears up for these renewals. While Microsoft is renowned for its technology, it's essentially a sales organisation. Their business model thrives on an exhaustive, almost scientific, sales process that initiates as soon as you sign your Enterprise Agreement.
To give you a glimpse into how Microsoft operates internally, remember that understanding your counterparty is vital for any negotiation. Microsoft's approach to renewals isn't haphazard; it follows a fixed protocol. Almost immediately after your current agreement is signed, typically within six to eight months, they begin preparations for the next renewal. It's not a one-off; it's standard practice across Microsoft.
Just six months after renewing your current agreement, your Microsoft account team is already planning the next one—30 months in advance. They establish their business priorities and formulate plans. Quick enough, discussions start unfolding. These usually revolve around true-ups, part of Microsoft's methodical preparation for the renewal. For you to keep up with their pace, your preparation should be just as rigorous. Each account manager decides how they will work with a specific customer and the protocol. It is a protocol. It is a set of rules, a methodology the entire organisation is aligned to work with. So, you have to understand this because understanding how Microsoft works will help you prepare.
So, six months after the last renewal, everybody starts to get organised. Your account team starts to work. There are business priorities and business plans that are put into place. There's a discussion that begins to happen.
Understanding Microsoft's Sales Focus
Remember, Microsoft is as much a sales organisation as it is a technology company. Right from the point you sign an Enterprise Agreement, they're not just processing your file and moving on. The moment you sign, they're already strategising your next true-up and subsequent revenue increases. This approach is systematic; it's not up to individual account managers. It's a company-wide methodology aimed at growing the baseline revenue from your signed agreement each year, often by percentages in the double digits.
You may think you know your organisation, but Microsoft's involvement often digs deeper. They establish a foothold across multiple aspects of your business. The aim is to understand how your business operates, how Microsoft products are deployed, and identify opportunities for upselling or encouraging upgrades. Essentially, they're looking to increase 'stickiness', making their products so deeply embedded in your organisation that removing them becomes challenging.
Everyone in the Microsoft chain, from your tech account manager to the regional director, has a vested interest in this. They're all compensated based on meeting specific sales quotas. This drive is not just about them; it goes up the ladder to keep shareholders happy.
As early as 18 months before your contract is up for renewal, Microsoft's already conducting value briefings for your executives. They're getting the decision-makers in your organisation up to speed, and you should be doing the same. Don't put this off; it's time to act now.
Manage What Microsoft Knows About You
Control of information is crucial. You must control the information you share with Microsoft as early as around 24 months out from renewal—especially if you're on a three-year Enterprise Agreement. They'll be present. They'll be friendly, but remember they're looking to sell. Limit the technical details you disclose and brief your C-level executives to do the same. By the time you reach your second true-up, the terms set there will be pivotal as they will form the basis for your renewal agreement.
Microsoft isn't just sitting back; they're actively seeking data from your team. Their goal is a comprehensive understanding of what tech you have deployed, how you use it, and where it's running within your organisation. About a year before your renewal is due, they, or perhaps one of their partners, will initiate a renewal presentation. They're not being nice; they're plotting their next sale.
You might think you're up to date, but things change at lightning speed in the tech world. Microsoft will have done a gap analysis; they know exactly where you are and where they want you to be. Soon, you're not just talking ideas—you're in the boardroom hashing out details.
Here's something to consider: selling to business decision-makers is usually easier for them than selling to IT or procurement pros. Why? Business leaders are laser-focused on value. That's not a bad thing per se, but it can open the door for Microsoft to exploit any gap between perceived business value and the real-world implementation, scaling, and costs of their technology. So, you have to be aware of this dynamic when entering renewal talks.
The Countdown: Time to Do Your Homework
Microsoft starts negotiations at least 12 months before your contract renewal. You should know this isn't only about numbers on a spreadsheet; it's about managing a complicated set of relationships throughout your entire organisation. Holding the Microsoft contract makes you more than a number cruncher—you're running the relationship show. And whether or not you're the official decision-maker, you've got to be seen as the leader in this whole dance.
Now, 18 months before your contract is due for renewal, you should start your homework. You're not pulling out the negotiation cards yet, but you should be doing your due diligence. Assess what you've deployed, its real-world value to your business, what's coming down the Microsoft product pipeline, and how it aligns with your future needs. It is also the time to re-familiarise yourself with who's who in your organisation. Who are the decision-makers? Who holds the purse strings? What are the internal dynamics at play? You may have been caught up with other priorities after signing your last agreement, but now's the time to regain control and return to the driver's seat.
The Value Briefing: Keep the Upper Hand
And here's a strategic point to consider. Microsoft typically comes to you with an executive-level 'value briefing' around that 18-month point. It could be wise to either delay this meeting until you've got your ducks in a row or get the jump on them and start your prep work a month in advance. That way, when your senior leadership hears Microsoft's pitch, they're also armed with a grounded, internal perspective on what's going on. You manage the flow of information and keep the upper hand.
Being tuned into your organisation's various facets—the server side, client side, cloud, or operations—is invaluable when Microsoft begins their engagement. When this starts, get your team in the loop. Let them know, "Great, Microsoft wants to enlighten us about the latest in tech, cloud, or cybersecurity. But remember, they're already thinking negotiation." Tell your team to be careful with what they share. Microsoft is an essential tech partner, yes, but they're also a vendor hungry for revenue. Everyone has a budget with a limit, and blowing it is not an option, no matter how shiny the tech offerings are.
Kickstarting the Real Negotiation Phase
So when does the actual negotiation phase start? It starts when you first see the initial bill of materials, not three or six months before your renewal but a year before. It would be best if you were all set for this. Have your team prepared, both internal and external. Start putting together your bill of materials. Getting this right takes time and effort, but it's crucial. You're not just listing products but establishing control over the negotiation. You're telling Microsoft, "I'm leading this. I know my organisation's needs." It's your way of retaining the upper hand, ensuring you're not cornered into accepting whatever Microsoft believes your requirements should be.
Remember, it's a game of chess, not checkers. Don't let Microsoft dictate the terms. You provide the bill of materials to them, you set the pace, and you take control. That's how you keep yourself in the driver's seat. And it's not just about the bill of materials. Your business case needs attention. Get your finance team, budget committees, and everyone on board early. Each stage, including getting the agreements through the legal department, takes longer than you think. Don't let time sneak up on you and force you into compromising legally or financially. You need a solid plan, like laying out a project Gantt chart. Get your milestones in there, and work towards them.
Your Team Versus Theirs
When you're about 18 months out or, realistically, even 12 or 10 months, depending on your organisation's size and complexity, that's the time when you start assembling your team. You need your legal team, procurement, finance, IT, and business leaders in one room or at least on the same page. Make sure it's crystal clear who leads the negotiations. If you don't make that clear, Microsoft will sidestep IT and procurement to talk directly to the decision-makers. They're good at dangling the shiny, appealing offerings in front of people who might not understand the full implications of what they're agreeing to.
But here's where the next level of strategy comes in. It's not just about your team; it's also about understanding Microsoft's team. Knowing the names of your Microsoft contacts isn't enough. Find out who they report to and what region they're accountable for. It isn't just about your business; it's about understanding theirs. The more you know about how they operate, the better you can navigate—sorry, let's say steer—through the process. So, get your internal team in order and then get to know the lay of the land on the Microsoft side. It's not just about hanging on; it's about winning.
In large enterprises, the executive sponsor from Microsoft plays a critical role. If you don't know who this person is and their relationship within your company, you're essentially negotiating blind. You won't even know what discussions might be happening behind your back, let alone influence them. Mapping out the organisational relationships within your company and on Microsoft's side is essential.
Personality analysis is a tool that's often overlooked, but it can provide a lot of insight. Knowing whether someone's a driver or a procrastinator, aggressive or reserved, can inform your negotiation strategy. To win at chess, you need to know your pieces and your opponent's too. So, do your homework on personalities as well. If you get this right, you can brief your team accordingly and improve your odds considerably.
Microsoft's Technical Teams Aren't Neutral
Let's talk about Microsoft's on-the-ground technical teams. Don't make the mistake of thinking they're neutral because they're 'technical'. Everyone at Microsoft has sales goals or targets tied to their performance. Whether it's a technical consultant, a technical account manager, or anyone else—they're looking at opportunities for upselling. Even when they suggest a new tool or feature, claiming it's beneficial for you, remember they have their own targets to meet. It might genuinely be helpful, or it might be an upsell you don't need. So, own the narrative from start to finish.
And yes, you've got to be vigilant about all the information that flows through support tickets or other technical interfaces. Lose your grip, and you end up showing Microsoft more of your hand than you'd like. And that can certainly tip the balance in negotiations. So, hold the reins tight, from the executive sponsor down to the ground-level tech teams and everywhere in between. It's your game to lose.
Microsoft Reseller Works for Microsoft
Another aspect of their team is the reseller, the Microsoft reseller. They're essentially an arm of Microsoft. Never forget they're Team Microsoft first. It should shape how much you disclose to them because that information goes straight back to Microsoft.
Gathering Crucial Papework
As for the documents, start by gathering every piece of paperwork tied to your current Microsoft agreements. Your original EA, Unified Support contracts, you name it—get it all on the table. It's your starting point to chalk out a robust strategy. Being clear on what you already have and the terms you're operating under is essential. You won't get far in a new negotiation if you're unclear about your existing commitments.
Remember, Microsoft's starting point is their existing revenue from you, and they want to bump that up. Your objective should be optimisation—securing what you actually need without unnecessary add-ons. You're genuinely ready to negotiate effectively once you've aligned your paperwork and strategy. Ensure your entire team is clued in, and then take that well-prepared step into negotiations.
Laying the Groundwork
Understanding your current agreement is your starting point. Just like Microsoft aims to build on existing revenue, you should aim to optimise what you've already achieved with your current agreement. Your first task is to put together a comprehensive readiness and strategy document that outlines your current terms, conditions, and inventory. It allows you to set a baseline from which to negotiate.
Once that's clear, you'll need to delve into your requirements. It isn't just about your current needs but also your future plans. Collaborate with your internal teams to identify what tech solutions you genuinely need and when you'll need them. Whether that's in the next 6, 12, or 24 months, these details should go into a requirement document. It is your formal 'ask' to Microsoft, with anticipated costs.
When it comes to stakeholders, don't leave them in the dark. Draft a memo outlining that negotiations are starting or have already started. Include the key milestones of the process and your objectives. Make it clear that if Microsoft approaches them, they should loop you in immediately. Stakeholders span various departments—finance, legal, IT—and even extend to the head of procurement. Keep them all in the loop so you're a united front in negotiations.
You want to maintain control of the dialogue at all times. The more you prepare and keep every level of your organisation informed, the better you'll fare in the negotiation process.
Why Timing Matters
The emphasis on starting early, say at T-minus 18 months before license renewal, isn't arbitrary. The aim is to allocate sufficient time for tasks such as crafting vital documents and analyses. Both historical insights and practical experiences indicate that procrastination is detrimental. Initiating the renewal process only a month prior can lead to chaos—people work excessive hours and lose sleep. So the advice is straightforward: don't delay.
The starting point may vary on the technical front depending on how prepared you are and the resources at your disposal. Nonetheless, T-minus 18 is an excellent baseline to start your technical and asset analysis. It involves scrutinising your inventories, collecting data on how Microsoft 365 and Office 365 are being used, and understanding the tools you have in place.
When dealing with outsourcers, it's even more critical to begin early. Large organisations with multiple outsourcers are particularly prone to challenges. Outsourcers often resist inquiries into their licensing calculations, even if those calculations are based on your assets. You'll need to know the foundational pieces of information they use to estimate your licensing requirements. So, it's prudent to notify them well in advance that you'll be engaging in this exercise. While outsourcers aren't necessarily ill-intentioned, managing your licensing estate isn't their primary concern.
If you have a simpler infrastructure, you might be able to delay the start to perhaps eight or nine months before the renewal. However, given the complexities and potential pitfalls, initiating the process as early as possible is wise. This approach stems from lessons learned the hard way.
The Cost of Complacence
Starting early gives you the leeway to clean up your software estate. Whether you're over-deployed or under-licensed, time is your ally in setting things straight. Take, for instance, an organisation audited for Adobe licensing. They were using homemade scripts and tools, assuming they were compliant. However, a third-party audit revealed they had triple the Adobe licenses they thought they had. This gap isn't just surprising; it's expensive. And when it comes to budget overruns, someone usually takes the fall.
Here's the bottom line: even if you believe you're compliant, continually reassess. The last thing you want is for Microsoft to have more intel on your estate than you do. If you're in the dark about your own estate, Microsoft probably knows a lot more than you think. They may not always know how to utilise that data, but they have it.
Entering Negotiations Prepared for the Battle
So, what's your game plan when you sit down at the negotiation table? You've got two options. You can go in with a perceived compliant position and risk getting a bill in the millions, or you can do your homework. Assess your assets. Invite subject matter experts for thorough analysis and future optimisation. It's far better to negotiate from a position of certainty.
Think of this like preparing for a military campaign. You wouldn't go into battle without knowing exactly what your resources are, would you? And it's not just about having a headcount; it's about knowing the specifics. Do you have cavalry or just foot soldiers? Archers or artillery? Are they rested and well-equipped, or are they running on fumes? Knowing the exact state of your 'troops' allows you to form a battle plan that plays to your strengths and addresses your weaknesses. So when it's time to engage, you're not just prepared; you're in command.
The Intricacies of Gap Analysis
Gap analysis is essential but more intricate than it might seem at first glance. At its core, you're comparing what software is installed against what you're entitled to have.
The tricky part is figuring out what those entitlements are. The Microsoft Licensing Statement (MLS) is your go-to document for this, but even that can be a complex beast open to interpretation.
Moreover, the MLS won't reflect certain business events like mergers, acquisitions, or divestitures. The MLS won't capture that information if your organisation has gone through any of these transitions. Many companies have had at least one such event, so while the MLS is a good starting point, you'll need to dig deeper. Understanding your true license entitlement could take months, especially if you're an organisation that has seen a lot of changes.
The process involves collecting data, normalising it, and then analysing it to determine your actual position. It is not something you can afford to start at the last minute. Even if you aim to begin the analysis about eight to ten months before your renewal, you need to allocate time well before that to understand what will go into that report.
The big question is: who will conduct this analysis? Do you have the in-house expertise to decipher the MLS and all its intricacies? Would you instead rely on a third-party expert or your software reseller for assistance? Deciding who will carry out this work is a significant piece of the puzzle, and it's not a decision you should leave until you're up against the clock.
The Importance of Financial Analysis
Let's delve into financial analysis, a critical aspect of negotiation preparedness. While many tend to overlook it, establishing your budget early on is fundamental. Knowing your financial limits upfront prevents later surprises when renewal costs turn out to be misaligned with your budgetary expectations. The point is not merely to identify the amount allocated for Microsoft services but to pinpoint the origin of those funds within your organisation. This information is essential for understanding your company's overall financial commitment to the renewal.
Budgets are not static; external factors like economic downturns or pandemics can influence them. Any such shifts can disrupt your technology roadmap and necessitate adjustments in your negotiations with Microsoft. Be prepared to adjust your plans accordingly and do it well in advance.
Financial constraints can affect more than just the immediate numbers. They can have a trickle-down effect on your technology roadmap. If your organisation is looking to cut budgets, that is a constraint you must account for in your Microsoft negotiations.
The issue of revenue recognition is another aspect that needs upfront clarification. Consult your finance department to understand how and when they plan to recognise this spending. Aligning this with Microsoft's fiscal year is another factor that requires forethought. Sorting these financial details early in the process is not optional but a prerequisite for a successful negotiation.
The third essential consideration when planning an Enterprise Agreement renewal is your commercial options. Are you simply renewing your EA or considering a move to CSP? Beyond Microsoft's ecosystem, what are your other product alternatives? You need to benchmark these to understand your negotiation landscape fully. It sets the stage for your BATNA – Best Alternative to a Negotiated Agreement, a critical element in your strategy.
Financially speaking, you need to be prepared. Microsoft's enterprise segment aims to grow its revenue by 15-20% from your account. So, if you're currently spending £10 million per year, Microsoft will likely aim for at least £12 million. If you've budgeted £11 million, you're falling short. It becomes your framework to keep your renewal within budget.
The Cost of Cloud and Digital Transformation
Now, let's talk numbers, specifically in the context of moving from on-premises to cloud solutions. Many think this transition won't significantly affect costs; however, I've seen budgets double due to such shifts. A striking example involved a budget jumping from £9 million to £17 million annually. So, you must adjust your budget expectations and be transparent about them, especially if you plan to transition services.
Don't be too optimistic; if unprepared, anticipate at least a 20% hike in your initial bill of materials. So, you must diligently review your budget and constraints and always consider alternatives. Exercise caution even if you're consulting with your Licensing Solution Provider about other options. You might as well be asking the bees to guard the honey pot.
The Need for Technical Optimisation
Begin by closely examining your existing infrastructure. You'll meet resistance, and not just from external service providers. Even C-level executives may think everything is running smoothly and there's no excess, often referred to as "fat." That's seldom true. I've yet to come across a scenario where there wasn't something that could be removed.
I'm not referring to lone servers or virtual machines that have been operational since the 1990s. I'm talking about large clusters left running due to previous migration projects. These consume valuable licenses, such as those for Windows Server Data Center and SQL Server. But the savings don't stop at cutting back on licenses. One client calculated that shutting down outdated hardware could save not just a million pounds on licenses but an additional 1.5 million pounds in operational costs like electricity and support.
So it's straightforward: there's always something to cut, and there's no reason to include that waste in your renewal. If you get audited, the last thing you want is to pay for unnecessary licenses for the next one to three years. Start the optimisation process now. Get rid of the excess and concentrate on the essentials.
Reining in Microsoft 365 Costs
Given that a large portion of your budget is likely allocated to Microsoft 365, it's crucial to focus on re-harvesting and optimising these licences. You're missing out on significant savings if Microsoft 365 accounts are poorly managed or given cursory attention. Here's a number to bear in mind: 18. That's the average percentage of direct cost savings or cost avoidance across the industry, achieved simply by reassigning or removing inactive accounts. These are often known as 'zombie' accounts—licences held by users who've left the company but are still assigned a licence. On average, zombies account for about seven to nine per cent of these unnecessary costs.
Beyond just the zombies, another critical aspect is your licence 'packaging' in Microsoft 365 Cost Optimisation and Avoidance. You need to optimise your 'personas'—the different types of users within your organisation requiring specific Microsoft Office 365 tools. Whether you're in the middle of your contract or approaching a renewal, it's vital to reassess these personas. Ensure you're only paying for the licences you need and use and avoid costly errors like improperly licensing shared mailboxes.
Don't Neglect Data Center Savings
Even though the lion's share of the budget is currently being poured into Microsoft 365, it's a mistake to overlook the savings potential in Data Centre licences. These often receive less attention because they only make up a smaller slice of the budget. But don't let the 80-20 rule mislead you; significant savings can be achieved through SQL Server consolidation. If you're migrating, reductions of up to 40 to 50 per cent on this portion of your budget are entirely feasible.
It's important to note that many SQL Servers haven't yet made the leap to cloud platforms like Azure. They continue to operate on-premises for various reasons, such as security and performance concerns. It means there's still a great deal of untapped savings potential. Don't forget about unused hardware; decommissioning it brings immediate benefits.
When negotiating with Microsoft, Azure commitments often form part of the discussion. Be cautious with these commitments. A good rule of thumb is to cut any optimistic estimate by at least half or perhaps even one-third. While these commitments can sometimes act as leverage for discounts, it's crucial not to overcommit.
Another area worth considering is development segregation. For the sake of compliance, it makes sense to keep development environments separate. Though mixing is possible, it's a grey area and best avoided. Start putting these elements in order several months before your renewal is due—ideally between three to six months—to ensure you're in the best possible position.
The Long-Term View: Metering and Reharvesting
The initial bill of materials reflects your current deployment and outlines your development plans for the next three years. Having this long-term vision is essential, not just a snapshot of your current situation. Metering and reharvesting are part of this comprehensive view. While these tasks might seem trivial, they can lead to significant cost savings. For example, frequently underused desktop software like Project and Visio can have unused licences reclaimed. Don't automatically subscribe to every cloud licence available as you shift to the cloud. Purchase them as needed. You could reclaim up to 80% of Project and Visio licences if you've not previously monitored their usage.
Take the Reins Early
Negotiation with Microsoft is an ongoing process, not a one-off event that starts with the first formal meeting. Microsoft often begins engaging with your company around 18 months before your licence renewal. This early engagement, which includes internal roadshows, stakeholder conversations, and helping you transition workloads to the cloud, is the unofficial negotiation phase. Recognising this will change your entire approach to the negotiation process. You'll become aware of activities and tactics from Microsoft that you might have previously missed, giving you a clearer understanding of their strategic moves in the lead-up to your renewal.
Being proactive is vital. Start your planning early, ideally around 18 months ahead of your renewal. Understand your financial landscape and optimise your assets. The objective is to be in charge of the process rather than letting Microsoft set the agenda. The central message to take away from this is the importance of leadership. Whether or not you're the decision-maker, you can still influence and guide the process. By taking the reins instead of letting Microsoft dictate the pace towards renewal, the outcome will likely be far more favourable for your organisation.
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