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Analyst: Save millions, don't renew Microsoft Enterprise Agreements

Old Microsoft agreements likely include all the licenses businesses will use in the near future

By , Network World
January 07, 2014 03:30 PM ET

Network World - Renewing Microsoft enterprise agreements – the contracts businesses sign for bulk licensing of Microsoft products – may be an unnecessary ritual that costs businesses millions of dollars for products and services they likely won't need before the contracts run out, according to an expert who helps customers negotiate the agreements.

The contracts call for customers to buy future versions of software sight-unseen as well as current versions they have no near-term plans to deploy, says Paul DeGroot, principal consultant at Pica Communications.

+ Also on Network World: Microsoft's new volume-licensing scheme could simplify buying, managing products | DOD saves $100M a year with Microsoft licensing deal +

For example, about three years ago a Pica customer using Windows 7 and Office 2010 bought a three-year enterprise agreement that included future versions of Windows and Office. At the time DeGroot advised them they’d likely be using Windows 7 and Office 2010 beyond the contract period so there was no need for an agreement that provided Windows 8 and Office 2013. But the client bought the agreement anyway.

Now as the client is considering a new Microsoft contract, it still has no plans to migrate from Windows 7 or Office 2010, and since it now owns perpetual licenses for both, there’s no need to spend money on a contract that provides whatever Windows and Office versions that come next, he says. It’s already sitting on licenses for Windows 8 and Office 2013 that it’s not using.

That represents a savings of at least $2 million for the customer over three years for its 5,000-PC network, he says. Based on those savings, the client won’t renew its agreement. Many large enterprises have upward of 100,000 PCs representing even larger savings, he says.

DeGroot says Office licensing is the most expensive part of enterprise agreements, and dropping it can reduce the costs 35% to 50%, “and it will do no harm.” In fact not upgrading may make end users happy because they don’t have to learn the quirks of a new version, he says.

“Microsoft is pushing you to make choices long before you know what their impact will be,” says DeGroot. “This is gambling, and you don’t have to do it. Use the licenses you bought without paying Microsoft more for it.”

If businesses know now that they’ll stick with versions of Windows and Office for five years, there’s no need to consider purchasing newer versions until 2017, making due without agreements.

In the meantime other viable alternatives may appear or business hardware and software needs may shift. With the market for PCs declining, he says, in five years businesses may find they want to shift their hardware to tablets instead.

For its part Microsoft acknowledges that customers want an overhaul of its of volume licensing practices and has initiated what it calls its next-generation licensing initiative.

According to Microsoft the new structure is based on three key elements:

  • A simplified agreement structure consisting of a Microsoft Products and Service Agreement, a foundational licensing agreement, and Purchasing Accounts.
  • One agreement for both on-premises software and online services.
  • New and upgraded systems and tools to managing Microsoft licenses and services.

Carrying out these principles are two concrete mechanisms, the Products and Services agreement and the Purchasing Account.

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