The New Microsoft Negotiation

Spend Matters welcomes another guest post from Jon Winsett of NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom and transportation.

By now, most Microsoft customers have heard about the major changes the company has made to licensing and pricing. Those aren’t the only changes taking place, however. The conversation tone between Microsoft and its customers has shifted. Enterprises that plan to renew their EAs would be well served to understand the forces driving Microsoft’s behavior at the negotiation table.

  • Q4 is a big one for Microsoft. Did you know nearly half of Microsoft’s EA renewals occur in Q4 of the company’s fiscal year (i.e., April/May/June)? A majority of these are signed in June, and renewals are often delayed beyond fiscal year-end because customers don’t start the dialogue early enough. Microsoft’s desire to prevent this spillover is stronger than ever in 2013.
  • Pressure on sales reps and channel partners to forecast revenues accurately. Microsoft is putting new pressure on its sales teams and channel partners to improve revenue forecasting and enforce on-time renewals. In some cases, more than half of a rep’s sales commissions are tied to forecasting metrics – not actual revenues.
  • Pressure to stick to standard pricing and licensing practices. The Microsoft licensing desk has become increasingly unwilling to deviate from standard pricing and licensing practices. As such, many customers are finding it more difficult to receive concessions from Microsoft based on their unique user environment.

So what does this mean for Microsoft EA customers? For starters, timing is more important than ever. Waiting until the last minute to renew your EA may not be the best strategy as Microsoft’s sales teams are highly motivated to offer better pricing and discounts to customers that renew earlier. Additionally, with less flexibility around licensing for unique business environments, customers need to have a deep understanding of the licensing options available to them – in many cases, there are programs that are a better match (and lower cost).

Lastly, it’s important to view the EA negotiation as a process and not a single event. More and more customers are undergoing official and “soft” audits from Microsoft, and true-ups are routine mid-term. Preparing for these exercises ahead of time, and on your terms, are foundational to keeping Microsoft costs in check.

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