What is going on right now with Microsoft licensing? How will this affect businesses like yours in 2022? And importantly, what can you do about it?
There are indeed a few things happening right now that should not be overlooked or ignored.
There is no doubt that the most significant trend in Microsoft licensing in the last months of 2021 is how the process of procuring Microsoft licenses and services is changing. It's the most extensive overhaul of Microsoft licensing in 20 years.
Many of you have probably heard the acronym of CSP. Many of you perhaps already have at least one CSP agreement. But up until now, CSP has been seen as an addition to the traditional Enterprise Agreement licensing, something you can have on top of the old licensing models, something aimed at the lower end of the market: startups, boutiques. But if you trust Microsoft announcements, that is going to change soon.
For simplicity in this article, I'll stick to the acronym that you already know – CSP. But there's a new fancy marketing name that we can't avoid mentioning: "New Commerce Experience". In its essence, NCE is the same as CSP. So why does Microsoft need a new name?
Here's why. Microsoft is bringing large enterprise customers into the CSP framework. And Microsoft, if you're a large customer, will try now and deal with you directly, eliminating all the intermediaries – LSPs, CSPs. If you're a large customer, expect that to happen.
And why is this trend essential, you may ask? How does that affect you directly? Well, many things that you're used to are disappearing with the shift to CSP.
Firstly, three-year agreement cycles that used to cover all your licenses. Now expect your Microsoft license procurement process to become more disjointed, more desynchronized, requiring near-real-time involvement. As if you don't have enough of it already with SaaS and the Cloud.
Together with that disappears the complex agreement paperwork. So if you had a process in place to manage your Enterprise Agreement, now, you need a new process. This change is for the better as Microsoft Customer Agreement is much simpler.
And there's another thing that's disappearing together with this complex agreement paperwork – bespoke amendments, terms that are special to you. However, we are expecting these to be reintroduced back in some shape or form for large customers. But for now, the entire "new commerce experience" is underpinned by a standard Microsoft Customer Agreement regardless of what your company size is.
But that is still the commercial side of things, the way of procuring licenses. How does that affect licensing?
Well, here's the bummer.
CSP has different licensing terms and conditions for the same products you have been buying through an Enterprise Agreement and deploying them in your infrastructure and the Cloud. So, first of all, you have to update your licensing knowledge to avoid becoming non-compliant.
And the other problem with that is that CSP terms and conditions are more restrictive than traditional licensing programs. Microsoft is taking away some of the rights that you are probably benefitting from today. And the disappearance of some of these rights may drastically affect how you deliver your internal on-premises IT.
There isn't much that you can do about it except, again, adapt and adjust.
Re-educate your licensing people. Get ready for the changes.
To avoid non-compliance "surprises", have a partner like us close by, so you have independent advice when you need it.
If you have no such partner, challenge every product you get offered by Microsoft directly or by Microsoft cloud solution partners.
Make sure that the rights you're getting through CSP are good enough for you to continue using these products the way you're using them today, that nothing is going to break.
Financially, licensing is becoming predominantly subscription-based, i.e., OPEX only. And what is the vehicle for this change? Well, you guessed it – CSP.
Nowadays, with "traditional" agreements, you are given three options to buy licenses and recognize expenses.
The first one is simple. If you buy perpetual licenses, you can recognize them as CAPEX.
Most of you will have an Enterprise Agreement, in which there is a mixture of perpetual licenses and compulsory maintenance. Thus you have CAPEX, and you have OPEX. And we even teach our customers how to recognize maintenance as CAPEX as well.
And obviously, you have the third option, which is a subscription, the pure OPEX option.
So, in the traditional licensing models, you still have a choice. And that choice is being taken away. CSP is fundamentally subscription-based. it's OPEX only.
Perpetual licenses are still available in CSP. You may see them on the price list. But if you check their terms and conditions, they are so cut down that you may only use these licenses if you're a petite "boutique-sized" company.
As this is the direction Microsoft is pushing everyone, we need to start adjusting and adapting now. Start talking to your CFOs, licensing people, and budget committees and prepare them for this tectonic shift. And if you're in doubt, message us. Talk to an independent advisor.
And there is a third trend that I'd like to mention. It is probably not that huge, but it's emerging, and it's interesting. Microsoft is embracing consumption-based metrics.
It's not an entirely new concept for Microsoft. Azure, for instance, is by definition consumption-based. But it did not previously exist in the traditional Microsoft licenses.
What does it mean for you? Most certainly, consumption-based licenses will creep into your infrastructure one way or another. They require different cost management and licensing management approaches. Instead of your usual, maybe annual or three-year cycle of license management, you need to implement a new process to monitor how you consume such licenses. And you need to have a regular financial planning process around that.
Why? I probably don't need to tell you that. You have probably learnt from Azure yourself that consumption-based costs can quickly get out of control.
So these are the three most important trends that are reshaping the entire Microsoft license management in 2022.
If you see yourselves affected by this (everyone shall be), please don't hesitate to reach out to us if you have any questions. Let's discuss your doubts and challenges and give you so much needed peace of mind.