March 2023 Microsoft Licensing Update

Daryl: There were some questions or concerns that we've been hearing from our customer base regarding all kinds of, let's call it, a new strategy by Microsoft to push organisations over and above the Microsoft E5 offering. So, as everybody knows, Microsoft E5 is the go-to package, so to say, all-inclusive.

Everything that a large enterprise organisation needs is there. It's a premium price. Microsoft, slowly but surely, has been, I would say, pushing organisations from E1, E3, and all the way to E5. And it's always been sold as "all-inclusive, do whatever you need, everything that you need or require is there". Now, what we are seeing, and that's the subject of today's main discussion, is that there are quite a few add-ons to E5. Some were like "nice to have", really geeky stuff. But today, there are some, I would almost call it, components that are becoming essential, that are increasing and driving higher costs for organisations.

And Alex, I know that you've done a bit of research on this and you've looked into the subject. So, I would love for you to share your thoughts and what you're seeing with our audience and maybe open this up for a discussion.

Alexander: These thoughts have been shared by multiple people in and around Microsoft licensing and Microsoft implementation recently about Microsoft introducing premium services on top of E5. And E5 is stopping to be an all-inclusive "get everything through just one simple SKU" model. And the March update from Microsoft is another reminder that it's actually going on.

Intune is one of the most popular components of Microsoft 365 suites. Microsoft introduced Intune Plan 2 or P2 and InTune Suite. Both of them are additional licenses that should be put on top of your existing subscriptions. It's not included in E5.

And it's not only this. As Daryl just said, it's a trend. One of the things that happened quite recently is Microsoft also introduced Teams Premium and brought in some new features instead of including them in the base package. This is a paid add-on. This is a premium service.

They went even one step further. They removed some of the features from the basic Teams package to the Premium. And we have international clients that are suffering as a result of this change. Live translated captions. This is what multinational companies have started using already, still being on the basic Teams package, and it went to the Premium.

With the introduction of Intune P2 and Suite, Microsoft added another core product, a popular product, to the list of premium services, premium add-ons, which are not again included in E5.

Strategically, it's not new. There's a list of about 20 to 30 premium services that existed even from the beginning of E5.

The thing about those premium services is that they are required by a tiny number of clients, 1 to 5%. If you need to store your data for 10 years, if you need to have additional security and forensic evidence of something, those add-ons are not required by everyone.

Government entities may need them. Companies that are very concerned about IT security may need them. But it's not a mass product. Teams and InTune are essentially mass products.

And therefore, this raises a question. Daryl, remember we were, you were talking about it? We had a video on this channel where I almost jokingly said, I think it was more than a year ago that we were expecting Microsoft E7 in 2022? It didn't happen.

But won't clients start asking, "You pitched us E5 as an all-inclusive package. The reason we bought it was that it was an all-inclusive package. We didn't really need it. But, we bought into this idea of having one license and not managing all the other add-ons. Everything is one package discounted. Now we started paying on top of that. Will there be a new E7?"

What's your opinion on that?

Daryl: When I said that about a year ago, when we had the conversation about looking forward to a new E7 SKU, we actually got some feedback from the market, from Microsoft saying, "Guys, what are you talking about? It's not gonna happen. Nobody's even brought this up."

And the fact is that Microsoft took a different option. Instead of being straight out, adding a new SKU of E7, they were more sophisticated, and they basically started to add in what I call additional capabilities that are becoming a must, and removing capabilities that were part of, for example, Teams that organisations started to use and they were getting comfortable with, and they're making them a separate offer.

You can call it E7, or you can call it E5++. It doesn't matter what you call it. It's the same concept. It's the same concept from a commercial perspective that we've seen for years.

And it's not surprising. I'm not surprised. I've got nothing against Microsoft. I'm just saying, be smart about the commercial discussions with Microsoft and understand that what is, is not what is going to be. And you need to be very, very cautious.

One, when you start trying out a new product, for example, Teams with the automatic translation. Next time, before you start a new product, maybe have a commercial discussion with Microsoft and ask to get it in writing that this is going to continue to be part of your E5 SKU when you renew. That is not gonna be separated, and you're gonna have to add on a new cost.

Another good example, not out of E5, Active Directory Kiosk SKU, P1 that was used by a very large number of usually manufacturing companies for, let's call it, blue-collar workers that only just needed that added layer of single sign-on capabilities that they bought into that concept at a very low priced license. And that license has been discontinued. And now, if you've already embedded it and you've put in the cost of the infrastructure and the rollout, it's very difficult to replace it.

And Microsoft has removed this SKU. And the only alternative they're offering is an F1 license. That's double the price. You can scrutinise Microsoft's practices or licensing practices, and rightfully so. I don't think it's good practice. You put an SKU in, you wanna change the SKU, fine, but don't request a hundred per cent more on the cost. Be fair with your customers. And that's not the case. And I think that's bad practice.

Microsoft needs additional revenue. And the way to increase your revenue streams is to, on the one hand, maybe add additional value. That's fine. But don't take out capabilities or capabilities that should be an upgrade and make that into a new product. And I think that's the trend we are seeing today, and you just need to be cautious and have the right commercial discussions with Microsoft.

Alexander: In addition to that Intune update, really, there's nothing more that is very significant. The other update is that Microsoft added other 2 add-ons to Microsoft 365, again Premium add-ons. Forensic Evidence for Insider Risk Management and Microsoft Defender Vulnerability Management add-ons. So those are the two new add-ons that Microsoft brought into the Product Terms document. There's a rename of a product in Dynamics 365. And there are some additional privacy and security terms for additional Azure services. That's it.

Seems to be quiet. But as we just said, please do not overlook this trend, especially if you're in procurement. You're planning strategically how you buy your licenses. Do not overlook this trend. We are also part of some closed groups where professionals gather and talk to each other about the trends. This is being brought up more and more often by those who manage Microsoft. Microsoft is moving into this premium add-on model. Know about it. Plan for it. Act upon it. That is the main idea.

Questions from the audience. Using Windows 11 in a provider's estate. If you want to outsource something to a service provider. We get a surprisingly large number of questions just about that product from providers and from end users. Can we now, in 2023, deploy our Windows VDIs, Windows clients, on a provider's platform.

Yes, you can. You can do this on almost every provider, except for (with caveats) Azure, Alibaba, Google, and Amazon. Azure has its own offerings, like Windows 365. Please watch our channel's announcements. We're going to announce Microsoft 365 licensing training roughly four weeks from now, where we'll cover Microsoft 365 and, hopefully, Azure Virtual desktops and Microsoft Windows 365 services.

Otherwise, any other provider, including Rackspace, OVH, IBM Cloud, and Oracle Cloud. If they agree, you may deploy your Windows 11 VDIs in the provider's estate.

The other question that we have related to that is people asking, how do we count the licenses?

They are effectively your on-premises licenses. You're not getting a service from a provider. Providers still may not provide services using their own Windows 11 licenses. End clients must bring them to the providers. In that case, it's licensed exactly as your on-premises VDIs. It's licensed per user.

You have your E3/E5 subscriptions. If you already have them, all the provider needs to do is allow you to deploy those virtual machines. There are no additional licensing requirements if you already have licenses. If you don't have licenses, you just buy them as regular, normal on-premises licenses. There's no difference.

The problem here is for the providers. There are some providers that are struggling, really banging their heads against the wall, trying to understand how they can offer services based on Windows 11. My answer is, if you can avoid that, please avoid it because providers cannot just rent out Windows 11 virtual machines.

They need to make sure that the client has the licenses. It's not like SPLA. You even rent SQL Server with a license included, but not Windows 11. You must have the licenses. Therefore, there may not be anything like a Windows 11 machine charged per minute on providers.

Azure still has an unfair advantage. I'm sorry, Microsoft, but that's an unfair advantage because nobody else has it. You kept it to yourselves. But as a provider, again, if you want to run such a workload, Azure is your only option. No per-minute charges. Even in Azure, there must be monthly subscriptions sold to your clients, even though they use it per minute.

Unfortunately, this is the deal. This is the arrangement.

Daryl: Alex, I just wanna add one last note before we wrap up, and that is, everybody, please keep in mind the 1st of April.

There are quite a few price lists globally that are going up by 11% on average. Please check out how you're gonna be affected. Microsoft has increased the Euro price list, UK price list, and a couple of others by 11% on average due to what they call fluctuations in currencies.

And that's coming on top of the average 15% increase we saw last year on the various components of 365. Overall you can expect, on your next EA renewal or CSP renewal, an average of 20 to 25% cost increase without receiving any additional new value.

If you have to start preparing budgets or if you're starting a negotiation, please take that into consideration. It's a huge increase in spending.

Alexander: If you type in your browser SAMexpert.tv, it always takes you to our YouTube channel. This is how you know when the next live event will be.

Thank you, everyone. Thanks, everybody. Thanks, Daryl.

Daryl: Thanks, bye.