Microsoft M365: Understanding Your Entitlements

Some 88% of the 150+ Microsoft renewals we've inspected in the past year feature a lower blended discount percentage than the previous deal. In other words, clients must re-double their efforts to prepare for their Microsoft spends, or face an uplift.

The steady rise in costs has been exacerbated by the supplier’s move to subscription-based licensing, which promises low up-front cost and delivers high long-term commitments. The only way for deal makers to press “re-set” and optimize their Microsoft spend is to scrutinize their usage, and make sure the licensing matches their user needs during deal set-up… and Microsoft makes it very hard to do this, as illustrated in the following two slides:

Microsoft's sales strategy - licensing complexity drives sales growth
Microsoft licensing 3 points to understanding usage

To help clients untangle their Microsoft commitments and understand their options, we offer the following counter-strategy to build leverage for use with this vendor.

Microsoft purchasing 3 buying keys to success - bundle cost options, product weighting, deal alternatives

Microsoft controls most of the levers involved in any given deal (with incumbency, bundling, knowledge of usage, the re-naming and re-shuffling of product suites, the constant threat of noncompliance). Therefore, it is not surprising that buyers struggle to prevent a mis-purchase or over-purchase from rippling through their every future renewal. They must work hard to keep Microsoft out of the forecast process and determine who in the organization truly needs what – and deploy the resources to achieve this. Then, they must figure out which Microsoft products are more important to their sales reps than others, which can be harnessed to influence their deal. And, assuming they cannot move away from the vendor, they must examine deal alternatives from Microsoft (the use of different user profiling, different licensing vehicles, delayed deployments, etc.), leaving no stone unturned.

A renewal is not the only time where Microsoft is using the subscription model and all its complexities to their advantage. We saw a case last year where a client was faced with a $1M Advanced Threat Protection (ATP) audit bill from the vendor. ATP is one of those features that once it's enabled for one user, it's enabled across the entire tenant. This customer had mostly E3 licenses, then bought a couple of E5 licenses, and as they were deploying these licenses and talking to the vendor, Microsoft discovered the customer had turned on ATT P2. The results are shown in the following slide:

Microsoft Cloud audit case study license requirements renewal negotiation

All this underscores how critical it is to know what Microsoft features you’re using, because the vendor will leap at the opportunity to take advantage of your gaps and either sell you more licenses, audit you – or both. To drive an effective Microsoft renewal, deal makers must re-visit licensing assignments and interview users: just because someone has a license does not mean they’re using the product -- and vice versa. What can be just is effective is issuing a notice that says, “In 60 days, we’re going to discontinue the product Visio; if you currently use this product and want to continue using it, you must go through an approval process.”

In summary, when it comes to best way to defend against Microsoft’s aggressive sales and audit tactics is to get a firm handle on usage in your organization. Only with this knowledge can you clean up your environment and stop buying more unneeded licenses.

To learn how to prepare for your next Microsoft engagement and assess your current leverage position, download this webinar Microsoft M365: Understanding Your Entitlements, check out the portfolio of Microsoft content on our website, or contact your ClearEdge representative.

- Mitch Macro is a Senior Analyst in the ClearEdge Compliance Practice.