How to stop overpaying for Microsoft licensing

Reducing Microsoft volume licensing costs, Enterprise Agreements (Part I)

Microsoft Enterprise Agreements (EA) have long been a favorite for both Microsoft and resellers, if you have over 250 computers in your organization chances are someone has proposed an EA to you at least once! While there are a lot of positives in the EA, there are a lot of drawbacks as well – make certain you understand these drawbacks before buying into the EA philosophy.

(Due to the amount of content involved, we are breaking our coverage of the Enterprise Agreement into multiple parts…forgive me, but I didn’t want to you to have to swallow too much of this material in one gulp!)

Microsoft Enterprise Agreement (EA) Overview:

EA’s are designed for companies with 250 seats or above who want to standardize on Microsoft products, have the rights for the most current version of the software and only want to account for additional seats once a year. It is a 3 year agreement that automatically contains Software Assurance (SA or maintenance) on all products for the three year term. With the exception of “subscriptions”, all licenses in an EA are perpetual licenses.

The EA is the agreement where you decide to standardize on Microsoft products for your business productivity software and your server software because each “qualified” desktop (or “qualified” user) will be licensed for the EA Components listed below.

EA Components:

There are a couple of different flavors of the EA:

Full-platform EA (Professional Desktop Platform) is comprised of ...

Office Professional Plus, the Core CAL (Windows Server Client Access License (CAL), Exchange Server Standard CAL, SharePoint Server Standard CAL, System Center Configuration Manager 2007 R2 Client Management License) and Windows 7 Enterprise (upgrade only, you still have to own a base license for each device).

Full-platform EA (Enterprise Desktop Platform) is comprised of ...

Office Enterprise, the Enterprise CAL Suite (which includes the Core CAL as described above as well as Active Directory Rights Management Services, Exchange Server Enterprise CAL, SharePoint Server Enterprise CAL, Lync Server Standard CAL, Lync Server Enterprise CAL, Systems Center Client Management Suite, Forefront Protection Suite and Forefront Unified Access Gateway), and Windows 7 Enterprise (upgrade only, you still have to own a base license for each device).

Here's more information on the contents of the Enterprise CAL Suite (eCAL) from Microsoft.

Component EA whereby you only license components (such as only Office or only Core CAL and Operating System).

Additional Products:

Additional products can be added to your EA. One thing to note, the products listed above must apply to all of your “qualified” desktops but additional products do not carry the same restriction.

While there are some limitations on what products can be added to the EA, these are limited in nature. Do note that all products added to the EA will have Software Assurance (SA) on them (and therefore added to their cost) for the duration of the EA. However; for any products that you plan to carry SA on, the EA can offer savings as it is priced at a 15% discount over Microsoft Select Agreement pricing (see Pricing section below for exceptions to this rule).

True-Up:

Under an EA, you are contractually obligated to “True-Up” once a year.  This True-up applies to products already included on your EA. FYI - Products that you put into use during the course of the year that were never on your EA need to be ordered as “Additional product” at time of implementation rather than waiting for the annual True-up. 

The annual True-up can cause quite a surprise for companies since it requires that you pay in total for new usage for the remaining life of the agreement (a one-time lump sum versus pro-rated annual payments). However; the “fear of the true-up” also frequently leads companies to over purchasing when they first enter an EA to avoid high true-up costs.

My recommendation here is to buy what you need, when you need it and plan for the costs associated with increased use.

For example, if when signing your new EA you know that it is projected that you will grow by 100 users within the next three years some experts will advise you to include them in your initial EA. However; doing so will result in your actually paying more for those users than if you add them in through your True-up after you’ve seen the actual growth (see the table below):

Scenario

Estimated Cost (Level A)

Additional 100 users at EA signing

$90k total cost, spread over 3 years

Additional 100 users at year 1 True-up

$83k total cost, lump sum payment

($7k savings)

Additional 100 users at year 2 True-up

$70k total cost, lump sum payment

($20k savings)

Additional 100 users at year 3 True-up

$56k total cost, lump sum payment

($34k savings)

As you can see from this example, while a True-up might cause some cash flow concerns it is typically far less costly to add to your EA at time of actual usage rather than estimating for it in advance.

Pricing:

Pricing for EA’s is set by Microsoft so there is no price difference between resellers (although not all resellers can sell the EA). Be sure your reseller is “earning” your EA business by providing you with discounts on your other purchases as Microsoft compensates resellers for their servicing of EA’s on Microsoft’s behalf.

There are three pricing bands for an EA with each level change providing around a 7% price break.

Level A           250-2,399 qualified desktops

Level B           2,400-5,999 qualified desktops

Level C           6,000-14,999 qualified desktops

Level D           15,000 or more qualified desktops

One thing to consider when adding additional products to your EA is the structure of your business. If you are heavier in server licensing than you are in desktop licensing you may find that purchasing your servers with SA through a Select Agreement allows you to buy those servers at a higher level which in some cases could result in a better discount. My recommendation is to have your reseller quote both options and then pick the one that is most cost efficient for your business.

Further reading: Tips when considering exiting an EA.Other reading on Microsoft Enterprise Agreements.

Are you currently considering an EA? Are there burning questions you’d like answers to…post your questions here (we can’t promise to answer all of them, but you never know…)!

For more help, consider taking my Microsoft Licensing Training an In-Depth Webinar Series (fee required)

Or read my previous blog posts:

An Independent View of Microsoft Software License Agreements

Microsoft CALs and External Connector Licenses…Part I

Microsoft CALs…Part II

Microsoft Office licensing now a bit easier for Citrix users!

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