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January 22, 2023

Negotiating Microsoft Unified Support

SAMexpert Podcast

Why are Unified Support prices increasing, even though I'm not utilising more services? Can I offset my Unified Support costs with Software Assurance benefits? What are the key mistakes made when negotiating Unified Support contracts? Are there alternative providers for Microsoft Unified Support? Is the year one cost of Unified Support the same as year two and year three?

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Episode Transcript

Alexander: Hi, everybody. Thanks for joining us today. We usually discuss everything about Microsoft, which we now call Microsoft Relationship Management, such as licensing, economics, and agreement negotiation. 

And today, as usual, I'm joined by my business partner, Daryl Ulman. He is the Chief Negotiation officer of SAMexpert. 

Daryl: Thank you, Alex. This time, Alex will be the moderator, and I'll hopefully provide some insightful answers regarding Unified Support – a topic that is increasing among our customers. So, we bring up issues and areas of interest that we see recurring constantly. A few questions come in from our followers and community and our day-to-day interactions with our customers around Enterprise Agreement renewals that often lead or don't lead but are accompanied by Unified Support, known in the past as Premier Support.  

Alexander: I remember when Microsoft started putting everybody onto Unified Support when you still almost had a choice between continuing to procure Premier Support, which was easy to understand – you paid for actual services, hours or tickets. I may be a little bit off. I think it was 2018. 

Daryl: Funny enough, it's still referred to as Premier Agreement. When we have conversations around renewals, It's interesting that people still refer to it as, "We have a Premier Agreement renewal." it's still not referred to as a standard, as Unified Support. The Premier Support Agreement was introduced around 20 years plus minus. Back in the 2000s, I think. It was introduced maybe slightly before that. It was so embedded in the minds of everybody that the name "Premier Support" just stuck. 

The business model around Unified Support has wholly changed from Premier Support. This idea hasn't already sunk in, even though it's been around for three or four years. And that is one of the biggest surprises organisations come up against when they start looking into Unified Support costs. 

Alexander: The perception is different in various teams inside organisations in the current day situation. Let's look at the core three teams. We have the IT team – the CIO, the lead of procurement, and the CFO. 

And here's the way they view Unified Support:

  • The IT team gave up. They see this as an add-on cost, "Okay, fine, we understand. The cost is simply a percentage of what we consume."

  • On the other side of the spectrum, the CFO thinks, "What the hell's going on here? Why am I paying so much more?"

  • And then we have a procurement manager between a rock and a hard place – IT and CFO. She has the most challenging job in the organisation. As somebody told me recently from procurement, "We manage risks. We don't manage costs. We manage risks most of the time." And Unified Support cost is a massive risk they have no control over.  

Daryl: We wanna give them some control. We've got some tips today that can give them control over their expenses. 

Alexander: One of the questions we hear recently from the clients we deal with daily is the kind of "What the hell?" question. Why are Unified Support prices increasing, even though I'm not utilising more services?

Daryl: It's confusing. And I'd even say from a business perspective, if it wasn't Microsoft and you were dealing with a smaller vendor, it would never fly. No provider out there that can increase costs automatically, who provides the same level of service, and nobody's gonna say anything. It can only be with Microsoft, and I'm being a bit blunt here. 

The reason being is that Unified Support is a masterpiece of an agreement. It is even an understatement. How it's structured, based on your actual consumption costs of your Enterprise Agreement and your Azure monthly billing statement, is unbelievable. Whether you are consuming Support or consulting services or proactive Support from your Unified Support contract, you still have to pay a percentage of your overall Enterprise Agreement and Azure monthly costs. You've lost control and are not seeing the value that you're paying for. 

You sign an agreement, and you get a fixed price. At least, that's what you think you have. And three months later, or six months later, your Azure spending spikes up. And we all know that it is happening to most organisations. Then your Unified Support bill increases as well, although you haven't utilised any additional services. And then your CFO, who has a predefined budget, picks up the phone or sends you an email saying, "What the hell is going on here? Please explain to me why are we paying more. Are we consuming more services?"

So the bottom line is, with Premier Support, it was simple. You had a fixed price. You knew how many service credits you were getting. You knew precisely what kind of consulting services and the number of engineer hours you needed and consumed. Everything was really transparent. And it didn't change throughout the year. It only increased if you needed additional services.

Unified Support is precisely the opposite. Nothing's changing, but you're paying more. That's where the big caveat is. Its cost is a percentage of your spending.

Alexander: Can I offset my Unified Support costs with Software Assurance benefits? 

Daryl: It's changing. Software Assurance benefits are declining. There was a very nice Software Assurance benefit package initially, which included support credits.

Software Assurance benefits are declining. It's not really a significant benefit anymore. But there was a time when there was a substantial amount of service credits, of support credits within the Software Assurance benefits. Microsoft took those SAB support benefits. They translated it into a monetary figure and credited you off the first year of your Unified Support cost.

Say your first-year support cost was supposed to be $200,000. And you're expecting to budget $200,000 each of the next there years. Microsoft offsets the first year, for example, for a hundred thousand by providing you with a conversion of those SAB credits. That makes your first-year payment a hundred thousand dollars. 

If you didn't pay close attention, and not everybody pays attention, the reduction only applies to your first year. If you only budgeted a hundred thousand for each consecutive year, the second year's costs would be a big surprise – $200,000. It might even actually be more because your Azure spending went up. Maybe you had organic or non-organic growth and added on some M365 licenses, which increased your overall spending. 

And then from a hundred thousand, you go to $200,000, if not higher. And you weren't prepared because you didn't set your budget correctly and didn't understand that your SA benefits only apply to year one of the contract. 

Daryl: What are the key mistakes made when negotiating Unified Support contracts? That's an excellent question.

The first mistake is not understanding the cost model. It's very misleading. 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, and spending goes up.  

The second mistake is that if you are a large enterprise organisation, you must understand that you can negotiate two factors. I'm not saying it's trivial, but two factors can be negotiated. 

One is the percentage you pay. There are different tiers of the percentage of your Microsoft spending – between 6% and 10%. Ask Microsoft for the conversion tables. We've got an excellent article on Unified Support, and all the tables and data are there. You can negotiate the tiers depending on your size and how you coordinate your Unified Support negotiation with your other renewals.

If you align it with your EA renewal or an Azure MACC agreement, you've got a better chance of adjusting the tiers.  

Another negotiable factor, I won't even call it a mistake, is the lack of knowledge. The reason for it is that you usually negotiate Microsoft agreements once every three years, or maybe it's the first time you've ever negotiated such a contract. Here's what you need to know. Depending on the size of the organisation, you can negotiate a cap on the potential growth of your spending. 

Suppose your Unified Support Agreement is at $200,000 per year. It's just an example. We know Unified Support costs can get into the millions. If you expect massive growth of your Azure spending but do not expect to consume additional support services, ask Microsoft to cap the annual cost, for example, at $250,000 or $275,000, so you don't have any surprises.

You need to look at everything holistically and understand that, yes, that is negotiable, depending on what leverage you can bring to the negotiation. You need to build up the proper leverage to have a conversation about those points I just discussed.

Basic negotiation strategy. Build up leverage, build up alternatives we will discuss in a minute, and then put your requirements, demands, targets, whatever you wanna call them on the table and have a discussion.

Alexander: Speaking of alternatives, we do have a relevant question. It's a frequently asked question recently because people are fed up with Unified Support's uncontrollable costs and looking for alternatives. 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. You can Google and find them very simply. Just Google Unified support alternatives.

Alexander: How legitimate is it to use them?

I wanna answer these questions separately. My first answer is yes. There are alternatives out there to Unified Support. From the feedback we've been hearing from customers, it's not bad. 

There aren't that many alternatives out there, like with Oracle. But the alternatives out there provide you with [three] benefits. 

One: 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. That's a significant benefit because you can plan ahead, and the price is fixed and predictable. 

And most of the alternative providers can escalate severe issues to Microsoft. That is because they are usually Microsoft partners, unlike third-party Oracle support providers.

The second benefit is pricing. It is somewhere between 30 to 50% less than your Unified Support costs.

The third benefit – I'm gonna put on my negotiation hat – is having alternatives. And I love alternatives. I would look at this as your BATNA. BATNA is your best alternative to a negotiated agreement. The worst thing to do when you negotiate, even a Unified Support Agreement, is when you feel that you are against a monopoly. When you have no alternative. Ultimately, you'll have to concede and pay what they ask. 

With third-party alternatives, there's always a BATNA. At least bring in an option of a third-party support agreement to the table. Microsoft knows these companies. They're not foreign to them. 

Get a price quote. I'm not saying abuse their willingness to provide you with an alternative. Get into a conversation with them and benchmark them. Benchmark Microsoft, benchmark the competitor like in any negotiation. I know it seems peculiar to benchmark Microsoft or to have an alternative to Microsoft. 

We are all so used to Microsoft being Microsoft, except for, maybe, cloud services. There you have got AWS, Google Cloud and Microsoft. There is competition. But now you know that there's an alternative out there for Unified Support. It might not be that big an agreement, but it's still a potential for money wasted. That money can go somewhere else. 

So yes, the third benefit is having an alternative and alternative pricing. And from our experience, it can completely change the dynamics of the discussion.

Alexander: Good. Thank you. Daryl. I want to close off this session by answering any audience questions. And Tushar is asking, "Can we reduce the number of licenses if we have an Enterprise Agreement for three years in terms of perpetual licenses?"

Perpetual licenses, you can't reduce them. As simple as that. You can't reduce licenses like Office Professional Plus, Windows 10, and Windows 11 per device. 

And the same is true for any other perpetual licenses like Windows Server and SQL Server. The only option for you to reduce them is when you renew the Enterprise Agreement after three years. That's why we always suggest considering mixed agreement options when you renew an agreement. For example, Server and Cloud Enrollment allows you to buy perpetual licenses and subscriptions simultaneously, making you more flexible.

If you switch to online services, go for a purely Enterprise Subscription Agreement. Move everything else, including all the other licenses, to an alternative agreement like MPSA or to your Server and Cloud Enrollment. That will provide you with a lot of flexibility on what you can do with Microsoft 365 as long as you license everybody with Microsoft 365.

The simple answer to your question, Tushar, is there's no way to reduce perpetual licenses mid-term. You committed to paying for Software Assurance for three years, and there's no way out. Unfortunately, you have to pay all that money. 

I have a few more questions about Unified Support, Daryl, but you more or less answered them while answering the other questions. One of them was, for example, how pricing is calculated. You already said that. 

But here's another one. Is the cost of Unified Support in year one the same as in years two and three? 

Daryl: Not necessarily, not as a standard. If you still have Software Assurance benefits that you can utilise, they can help you reduce your first-year cost. It might be substantial, or it might be just a dent in the cost. However, that first-year discount or reduction in cost will not be applied to years two and three. So you have to budget for that.

You can't amortise that reduction over three years, so you have a fixed fee. Microsoft won't provide that to you. In addition, because your EA will become more expensive due to the growth of your internal user base, your M365 licenses will increase, your SQL Server and Window Server licenses will increase, and maybe even expensive licenses like Dynamics 365. And, of course, if you're an Azure customer, that will increase too. And therefore, your Unified Support costs for years two and three are going to grow as well. 

Your responsibility to your CFO is to budget a cost increase every single year of your contract. If you're big enough, as I pointed out, try to negotiate a "not-exceed" or cap on your support costs. Keep that in mind as an option for your next negotiation. 

Alexander: Daryl, thank you. 

We've come to the end of our weekly live stream on the YouTube channel each Wednesday. Please join us live next Wednesday.

Again, thank you, Daryl, and thanks to everybody who's been with us today. 

Daryl: Thank you. Bye, everybody. See you next week. Thanks.