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April 30, 2024

Microsoft Unbundled Teams from Microsoft 365

SAMexpert Podcast

Microsoft recently separated Teams from its Office 365 and Microsoft 365 suites, impacting subscription costs for enterprise users. New subscribers may see a price increase compared to existing subscribers who can maintain their plans with Teams.

Microsoft's Copilot productivity tool is offered to front-line workers like call centre staff. The business case and use cases for this target audience are unclear.

Rumour suggests that Microsoft might phase out Enterprise Agreements (EA) in favour of Microsoft Customer Agreements for Enterprise (MCAE). Key differences between the two include a lack of tiered discounts and variations in product availability and features within MCAE.

Q&A:

  • Windows Server licensing in a cluster — why we cannot license per VM without Software Assurance?

  • SQL Server Standard for Unlimited Virtualisation – is it possible?

  • Can System Center be licensed per virtual machine?

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Episode Transcript

Microsoft Teams Unbundling from Microsoft 365

It's no exaggeration to call Microsoft's recent decision to unbundle Teams from its Office 365 and Microsoft 365 suites worldwide a significant change. Though framed as a discount, this is effectively a cost increase and deserves close attention, especially for enterprise customers.

Previously, Microsoft unbundled Teams in Europe in October 2023. Now, the company has "harmonised" subscription plans globally. Microsoft 365 and Office 365 suites without Teams are available at a reduced price. This could potentially lower costs if you prefer alternatives like Zoom or Slack. Plans without Teams cost $2.25 less than traditional enterprise plans with Teams.

However, things become complicated if you want to use Teams. Let's start with the most expensive Enterprise plans (E3, E5, and Microsoft Office 365 E1). Existing subscribers can continue renewing their subscriptions with Teams, and the change won't affect them. However, new subscribers have no choice but to buy those plans without Teams.

You might think that since Microsoft reduced the price by $2.25, adding Teams back would be the same as before. It's not. Teams Enterprise costs $5.25, resulting in a $3 per user per month increase for new subscribers compared to existing ones. This is clearly a price hike on the Office/Microsoft 365 Enterprise bundle.

Microsoft was likely motivated by legal and regulatory pressure in the EU. However, they didn't have to extend this change worldwide. This suggests that either something else is at play, or they saw a positive financial effect of the European unbundling and wanted to replicate it globally.

Microsoft's language around renewing existing subscriptions also raises concerns. Changes in company structure, plan upgrades or downgrades, mergers, acquisitions, or tenant migrations might invalidate existing subscription status. We don't yet have enough data to know how Microsoft will handle these situations.

Understandably, people are worried. For new subscribers or those with changed circumstances who want an enterprise plan with Teams (especially the predominant Microsoft 365 E3 plan), this represents an 8% price increase. Remember, though, that existing subscribers can maintain their old plans with Teams.

What can you do about it?

  • Negotiate! If your organisation has skilled negotiators, now is the perfect time to push back against Microsoft. You may be able to secure discounts.

  • Smaller companies and those on Front-line and Business plans are less affected as they retain the choice between plans with or without Teams. However, be careful when choosing a plan. If you need Teams later, it'll cost you a little too much.

Interestingly, some users who dislike Teams are pleased about the unbundling. While the discount is smaller for non-enterprise plans, adding Teams back still costs the full $5.25.

Does this address competition concerns? Perhaps. Teams Enterprise remains cheaper than comparable commercial collaboration tools. However, if you take a plan without Teams, you can choose to use an alternative like Zoom or Slack.

The bottom line: If the unbundling affects you and a plan change is unavoidable, negotiate. Existing subscribers who can keep their plans are the least impacted. Be cautious once you switch plans, as adding Teams back later will be more expensive.

Copilot for Front-Line Workers: Questions and Observations

Interesting developments surround Copilot. Microsoft recently promised to extend Microsoft 365 Copilot to front-line workers. This decision raises some questions.

Firstly, why? What's the business case or use case for, say, a call centre professional to use the full Microsoft 365 Copilot? They likely need Sales Copilot, the Dynamics 365 add-on. They don't create documents or analyse data; they answer calls and need a different tool. What will delivery drivers use Copilot for? I'm very curious about the use cases here. It's a fantastic tool, but is this the right target audience?

Currently, 40% of our client base is at least piloting Copilot but not using it for widespread day-to-day business operations yet. These are still focused deployments for enthusiasts, advanced information workers (data analysts), and content writers—though ChatGPT and Gemini might better serve content writers.

We recently heard an unconfirmed rumour that Microsoft isn't seeing the expected uptake of Copilot. The source claimed this is why they quickly extended Copilot to business plans and are now giving it to front-line workers. Perhaps there's extra capacity or slower adoption? The moves are curious.

Despite this, we're still bullish on Microsoft's potential in this area. Don't underestimate their ability to execute. They learn from mistakes quickly, are agile, and have a forward-thinking roadmap. They're not afraid to adjust.

Potential Shift from Enterprise Agreements

Another key question is what will happen with Enterprise Agreements (EA) as Microsoft might begin transitioning customers to MCAE (Microsoft Customer Agreement for Enterprise). MCAE is similar to a CSP (Cloud Solution Provider) subscription, but directly with Microsoft and tailored for enterprise clients. Currently, EA clients are being moved to MCAE, but EA remains available. The rumour is that EA might become unavailable entirely, either for specific segments or across the board. When this might happen is unclear. It's a situation worth monitoring.

There are a few potential issues with switching to MCAE:

  • No Discount Structure: EAs offer tiered discounts based on company size; MCAE does not.

  • Product Availability: Azure offerings differ. For example, Enterprise DevTest subscriptions aren't currently part of MCAE.

  • Azure Billing and Features: These differ from EA. Azure's back-office management through CSP/MCAE has a different feature set than that of EA.

  • License Management and Cost Control: MCAE has varying tools compared to EA in these areas.

  • No Direct Transition: You can't simply migrate an EA tenant to MCAE. This underscores the complexity of the potential implementation process.

Additionally, Software Assurance doesn't exist within MCAE. Keep a close eye on these developments and be prepared for changes. If you have questions, come talk to us!

Questions and Answers

We received a question a couple of days ago, "Where is it written that Windows Server, when it's licensed in a cluster, say in a VMware or any other cluster, where machines move, cannot be licensed with Windows Server Standard without Software Assurance per virtual machine? Where does it say that you need to license for maximum capacity? Why are Windows Server Data Center licenses preferred?"

You're absolutely right; you won't find "max capacity" written anywhere in Microsoft Product Terms. But let me tell you a story to explain why this is the case. It's a tale from the trenches of countless audits and reviews I've been a part of, and it goes back to a bit of wisdom I picked up directly from Microsoft back in 2008.

It all boils down to licensing for potential. Imagine your cluster has 30 machines. Even if a single host can only handle eight virtual machines at a time, Microsoft's rule is that you need licenses for all 30 virtual machines on every host.

When we officially asked Microsoft about this (back in the day when you could still do that, around 2010), their answer was to refer to one of the fundamental rules of licensing: A license has to be in place before it's needed. If disaster strikes and the virtual machines in a cluster suddenly pile onto one host, that host must already have enough licenses assigned to handle the load.

That's precisely why Datacenter Edition, with its Unlimited Virtualisation, is the go-to license. Plus, as long as your cluster has more than seven virtual machines, Windows Server Datacenter licenses end up being cheaper anyway.

The lesson here is that Microsoft licensing isn't always clearly defined. Sometimes, you have to read between the lines and learn from experience.

We have another question in the chat, "I wanted to ask about licensing System Center on virtual machines. Can it be based on a licensing model per individual VM? I think Microsoft does not clearly define this."

Actually, it's quite straightforward. If you have current System Center licenses with either Software Assurance or a subscription-based model, you absolutely can license per individual VM. This, of course, applies to System Center-managed servers. Client operating systems (like in VDI environments) are different, requiring client management licenses per operating system, not per server.

However, if you've let Software Assurance lapse on those System Center licenses, then the rules change. You must license for maximum capacity, just like the situation I explained earlier with Windows Server.

Another Question: If I license the host with SQL Server Standard, does that cover all the VMs running on it?

Unfortunately, no. Unlimited Virtualisation is a feature exclusive to SQL Server Enterprise licenses. If you license the host with SQL Server Enterprise and have Software Assurance, then you can run as many SQL Server instances (virtual machines or containers) as that host can handle. Just a quick note, though: It pays to calculate the potential savings first, as this isn't always the most cost-effective option.

SQL Server Standard licenses assigned to the host only cover the SQL Server instances running within the host's physical operating system.