In the world of software licensing, Microsoft has built a labyrinth. With a myriad of interdependencies, special offerings, and potential pitfalls, navigating this maze can be a daunting task. However, with the right strategy, organizations can turn the tables and negotiate from a position of strength.

The Subscription Shift

Microsoft’s financial success in recent years has been fueled by the growth of subscription services. This shift towards subscription-based licensing has been strategically designed to increase the adoption of Microsoft cloud services and lock customers into using more Microsoft services. This strategy has led to a significant increase in Microsoft’s share of an organization’s overall IT spend.

The Cloud Push

Microsoft is strategically making on-premises software less attractive by implementing price increases, reducing product life-cycles, and creating more dependencies on hosted services. This tactic is designed to push customers towards the cloud.

The Negotiation Challenge

Negotiating licensing agreements with Microsoft can be risky. Many organizations fail to dedicate the necessary resources and time to the negotiation process, leading to long-term commitments and potential future budget overruns.

The Road to Successful Negotiations

To successfully negotiate with Microsoft, organizations need to understand Microsoft’s licensing tactics, analyze packaging structures to ensure they purchase only what is needed, be aware of the traps that lead to higher costs, and focus on the fine print and amendments that ultimately make the biggest difference.

Key Strategies for Success

Here are some key strategies for successful negotiations with Microsoft:

  • Time and Resources: Allocate enough time and resources to prepare for negotiations. This includes procurement, technical, and legal staff.
  • Know What to Buy: Understand your organization’s requirements. This will help you purchase the right products and avoid overbuying or underbuying.
  • Understand Microsoft Packaging: Microsoft’s product features and interdependencies can be complex. Understanding these complexities can help you select the most cost-efficient packaging options.
  • Understand Microsoft’s Agreement Structure: Microsoft uses multiple, interlinked agreements and policy documents. Understanding these agreements and how they interact with each other is crucial.
  • Focus on the Long Term: Each agreement lays the foundation for subsequent agreements and has long-term ramifications. Therefore, carefully negotiate all parts of your agreements.
  • Use Amendments to Address Special Needs: Use amendments to ensure special needs are addressed and to protect from extreme price hikes or adverse packaging changes.
  • Avoid Complete Captivity: Keep a certain number of services with Microsoft competitors. This will strengthen your negotiation position.
  • Engage with Third-Party Experts: Consider hiring an expert advisory firm that understands the technology, the compliance issues, and the fine print in Microsoft agreements.

By understanding these aspects, organizations can effectively navigate Microsoft negotiations and secure beneficial terms for their growth and success. Remember, the negotiation process favors Microsoft, but adopting the right approach allows customers to negotiate from a position of strength.