Key Negotiation and Review Factors when renewing your Microsoft Agreement

1. Key Negotiation and Review Factors when renewing your Microsoft Agreement Optimizing and Empowering Volume Licensing Discussions

2. Software Licensing Advisors Senior Analyst: Steve Kelley • Senior Analyst at Software Licensing Advisors • Former veteran Microsoft Licensing and Large Enterprise Sales out of Microsoft Seattle-area Headquarters. • Negotiated over 100 Enterprise Agreements, ranging from 500 seats to projects with over 100,000 seats and over $90M in US, Canada, UK and Europe. • SLA has reduced customer licensing costs by total of $65 million for both mid-size and major corporations across industries to date. • 25-year technology veteran with additional experience at Verizon Business and AT&T, Certified MCP-Licensing. • BBA/MBA from the University of Wisconsin.

3. Experiencewith Microsoft Savings Some of the firms our consultants have worked with:

4. Agenda for Today’s Call • The Current State of Microsoft in IT • Implications for you at renewal. • Setting the Stage for Savings • What our survey results say about Technology Adoption in the Enterprise • Four P’s that influence Costs: • Programs, Products, Pricing, Pitfalls • Five Negotiation Strategies that can save you big • Roadmap, Purchase Program Hybrids, User Profiling and App Metering, BATNA, Component EAs

5. Microsoft’s recent mistakes put them on the defensive • Cloud Services are being pushed, but “bread and butter” is still on-premise licensing; Windows & Office • Cloud isn’t core business; Google Apps & Amazon Web Services, it is. • Missed the boat on mobile devices and insignificant (Windows mobile - 3.8% of mobile OS market share) • Android is leading. • Damaged its expansive partner, reseller and OEM relationships worldwide: • % commission to channel • Competing w/ own hardware platform and storefronts See: “Microsoft Poisons its partners”, June 21, 2012)

6. Microsoft latest O/S : Windows 8 - Adoption • Windows 8 adoption is half that of Vista in the first 5 months. • Windows 8.1 doesn’t look any more promising.

7. Licensing Rules have been made more complex, not less • Understand Device access to company resources. …Licensing these scenarios is complicated: Licensing an iPadfor HVD Access Licensing an iPad to Access Microsoft Servers Yes, it’s THAT complicated! Licensing an iPad to Run Microsoft Office and Outlook Licensing an iPadto Access Email

8. Microsoft’s Response: If you can’t join them, beat them (down). • Audits are ramping up. • 2 out of 3 companies this year will be “selected to participate” in a SAM engagement. • Many more will get audit letters. • Broad price increases continue. • User CAL Price increase 15%. • System Center Suite – 2x qty; can’t renew just the components of System Center that you use, you must renew the entire Suiteunder SA whether you use it or not. • Sales Growth through Licensing Obfuscation. • More licensing changes in last 2 years than in the last 10 prior years in terms of changes in the Product Use Rights (PUR) • Rules and editions change for each product release. • SQL 2012 Licensed per Coreand conversion confusion.

9. Software Licensing Advisors: Technology Adoption in the Enterprise • In an October 2012 SLA survey to Mid- and Large- Volume Licensing Customers on Technology Use and Adoption; • 521 Individuals Responded from; • 238 Companies • Purpose was to test the hypothesis that Companies pay for more Software than they use or deploy through Software Assurance. • Survey was conducted via the web and respondent anonymity was maintained throughout. • Results suggested significant overspending.

10. Technology Adoption in the Enterprise – Upgrade Cycle • How often does your company upgrade your computer’s Microsoft Software? 59% responded that their company upgrades “every 4” or “more than 4 years”

11. Technology Adoption in the Enterprise – Years at current O/S • How long have you been using this Operating System in your workplace? Low Adoption Velocity Not surprisingly, then, 61% responded using their current O/S for more than 5 years!

12. Technology Adoption in the Enterprise – Current Office Version • Which version of Microsoft Office are you currently using at work? 59% of respondents have now standardized on Office 2010.

13. Technology Adoption in the Enterprise – Current Office Version • How long have you been using your current version of Microsoft Office? 58% of respondents have used this version for 1-2 years, in alignment with 59% of respondents choosing Office 2010 – a common standard image.

14. Technology Adoption – Use of Office Applications • Which of these Office Applications do you actively use for at least one hour per week? Lync & Other Clients can be purchased separately for some or all users for much less cost than licensing Office Professional Plus for everyone. Office Standard Version would be adequate for most Companies User Communities

15. Negotiation Impact: Build your Technology Roadmap How much Windows 9 and Office 2016 will you deploy in 2017, 2018? • These are the products you’re actually buying if you have a full-platform EA today. If Windows and Office are on your EA, you already own Windows 8 and Office 2013 NOW and they can’t be taken away from you. • Develop a reasonable budget for purchasing licenses for software in your roadmap. • Customers who standardize on their current Windows 7 and Office 2010 images for the next three years should re-examine the value of an EA. • Given this, you are well-positioned to demand a proposal from Microsoft that reflects your real needs and offers you greater flexibility than the all-or-nothing EA approach. • Consider moving your Software Assurance to SelectPlus for a subset of users where it is required.

16. The Microsoft Enterprise Agreement Contract Language Key changes to be aware of: • Agreement structure changes mean every new Agreement enrollment can now change your responsibilities, accountabilities and relationship with Microsoft. • The new language changes the way Microsoft holds you responsible for paying for in the EA! • Serious Bring-Your-Own-Device and Tablet implications. • Timelines are tightened. • Grace Periods are eliminated. • Audit exposure increases: Punitive language replacements • (125% of the price for license deficiencies)

17. Microsoft Updated Enterprise Agreement: What are you counting? Dangerous New Language • Change of one word blows compliance risk wide open: QUALIFIED DESKTOPto QUALIFIED DEVICE. “A Qualified Device means any personal desktop computer, portable computer, or similar device that is used by or for the benefit of the Enrolled Affiliate’s Enterprise.” • Employee-ownediPads brought into the office for the benefit of the company (the enrolled affiliate) count as Qualified Devices.

18. New “30-year” Master Business and Services Agreement • Microsoft will downplay this as a “routine update” of your contracts at renewal time – good for 30 years! • Compliance has been moved to the Master Agreement with punitive clauses: • If found to be out of compliance by more than 5%, you’ll be getting the bill from Microsoft’s selected auditor. • Penalized for non-compliance by having to pay 125% of the then current price for the license.

19. Technology Adoption in the Enterprise – BYOD Implications • Do you personally own a tablet? • If you own a tablet, do you bring it into work? Agreeing to the new Qualified Device language knowingly or unknowingly widens the window of compliance risk.

20. Microsoft Updated Enterprise Agreement: Other Important Changes • Eliminates the within 15 day of anniversary True-Up Period • Now requires true-ups 30-60 days PRIOR TO anniversary date • Eliminates 30-day Renewal Extension Allowance • Takes away negotiation leverage for June renewals by eliminating the right to exercise 30-day extension into Microsoft’s next fiscal year. (runs July – June) • Removes One-Year Renewal Option KNOW THAT YOUR CURRENT EA MIGHT ALLOW A 1-YEAR RENEWAL/EXTENSION Use it as leverage to get another year of product upgrades for only 1 year of additional SA commitment. • Adds more stringent compliance language: The true-up clause now says, “Microsoft, at its discretion, may validate the customers true-up data submitted through a formal product deployment assessment using an approved Software Asset Management (SAM) Partner."

21. Negotiation Impact: What this means to you • Start your negotiations process early in order to allow adequate time to scrutinize and negotiate onerous language. • Review and understand the recent changes in User CALs vs. Device CALs, Roaming Rights and Qualified Devices. Determine users who need Virtual Desktop Access and obtain specific exclusionary language around iPads and other employee devices, rather than assuming you don’t have to count them. • Negotiate audit languages: limit to self-audit, mutual agreement on an INDEPENDENT auditor, tools, techniques auditor experience, and/or time period between audits. • Understand your SELECTPlus alternative to renewing your EA. An EA Renewal is buying futures in products whose features and benefits are largely unknown. Know what your needs are and that you likely don’t need an EA, and therefore don’t need to agree to these terms.

22. SLA Formulas: Identifying Anomalies in License Cost At EA Renewal, you’ve retired the License cost portion, so your EA Renewal prices dropped quite a bit to SoftwareAssurance only prices. It’s cheaper now! Yes, but look past the drop in costs... It’s cheaper but is it ACCURATE? (It should be EVEN LESS!) …Don’t take our word for it: • Get a Preliminary Renewal Customer Price Sheet (CPS) from your Large Account Reseller (LAR) or Microsoft Licensing Specialist (LS) and run the numbers yourself. • We’ve seen it a hundred times, but prove it out for yourself. Disclaimer: Not every product is as insane a price hike as Windows, but did you know Microsoft was jacking up the License cost on which your SA at renewal was computed by this much?

23. Negotiation Impact: What this means to you • Establishing what the License Price on which your SA is computed at renewal under the Enterprise Agreement Program allows you to compare true costs to other programs like OPEN and SELECT PLUS, which offer more flexible desktop coverage and terms. • Start the conversation of EA Renewal around what your “Sticker Price” is. What’s our license price on these products on our renewal. Then, compute your own SA. Finally, get a Price Sheet from your LAR or Microsoft and establish the percentage in price hike. Ask them to back out the price hike to a reasonable level since the License cost on your last EA CPS. • Now that you’ve established the more reasonable “sticker price”, talk discounts if you’ve determined your roadmap requires that you continue Software Assurance on that product. • Remember, Software Assurance Upgrade rights means… YOU OWN ALL THE LATEST PRODUCT RELEASES COVERED IN YOUR EA PRICE SHEET – YOU’RE NOW LOOKING AT INVESTING IN FUTURE PRODUCTS

24. Three factors to consider when moving to the cloud • Existing Investment in On-Premise Software • You’ve sunk a lot of money into existing licenses. • Loss of Control • Over your data – who will most strenuously defend you against subpoenas and investigation. • Over Service Levels provided to your users • Over Upgrades – you always get the latest, but do you want it? • Moving to Office365 dictates on-premise license upgrades with cloud server upgrades, whether you want to or not. Will these upgrades co-exist with your other vendors and systems? • MS O365 designed to co-exist and cross-sell the fat client. • No other cloud apps do this.

25. EA Renewal Process Build your Roadmap or your Roadmap will be Microsofts Know the best way to license your required software elements before entering negotiations

26. Negotiation Impact: Stop buying software you don’t use. (Shelfware) Paying for Licensing that won’t be deployed • Your Technology Adoption Velocity may mean some or all components in the Professional Desktop bundle should be re-evaluated, and a component EA (or No EA) may be more rational. • Customers who standardize on their current Windows 7 and Office 2010 images for the next three years should re-examine the value of an EA, which would mean paying for more software than you need or plan to deploy. • Given this, you are well-positioned to demand a proposal from Microsoft that reflects your real needs and offers you greater flexibility than the all-or-nothing EA approach. • Consider moving your Software Assurance to SelectPlus for a subset of users where it is justified.

27. Technology Roadmap: Microsoft’s Plan for You Qualify10%–20% Close90%–100% Prospect0%–10% Develop20%–40% Solution40%–60% Proof60%–80% Deliver100% Microsoft’s Structured and Prescriptive Plan for Account Managers to Drive their Roadmap to growth in your next EA Renewal: Engage Envision Architect Prove Deploy Services/Partner led EXECUTIVE BRIEFING Start the conversation. STRATEGY BRIEFING Create the right sales opportunity. ARCHITECTURE DESIGN SESSION Deliver the details. PROOF-OF-CONCEPT WORKSHOP Drive the deal home. ENVISION/PROTOTYPE WORKSHOP Drive deployment. Letting Microsoft lead the Roadmap Discussion allows them to set the agenda, build the price sheet, build gradual acceptance along the way, and circle the wagons around key political players and constituencies. Before you know it, they’ve gotten executive and line-of-business leadership support to renew the EA, and you’re just there to process the paperwork. Build your cross-departmental team now!

28. Your EA Renewal Plan: (DART) Discover, Analyze, Report, Tactics • Consider SLA’s process in preparing for EA Negotiations. Start at least 6 months prior to EA expiration. Build Cross-Departmental Team & Communicate Progress & Intentions Ensure General Awareness of your Effective Licensing Position to Mitigate Audit Risk

29. Know Your Technology Roadmap and Adoption Velocity • Review Adoption Velocity & Build Future Roadmap • (Current/Desired State) • CRM System • Sharepoint Client Collaboration Sites • Improve • Customer • Engagement Map Business Goals to Technology Requirements Possible Microsoft Technologies Gap Analysis for Required Technologies • Business Intelligence Tools • Talent acquisition • Thru modern tools • Expand Markets 20% Growth In Profitability • Repurpose • Intellectual • Property • Enterprise Search • Collaboration • My Sites, Team Sites • Fast Resource Locating

30. Determine User Communities for Planned Technologies in your Roadmap that support business goals • Compare your Technology Needs to current entitlements, Understand what your requirements are and the User Community who needs them. • Compare Desired State vs. Entitlements & Use Rights; Identify Gaps Gap Analysis for Required Technologies Entire Enterprise User Base Sales, Marketing, Customer Service No Additional Needed All Employees Marketing Only –Enterprise CAL No Additional Needed for Standard No Additional Needed

31. Optimize Desktop User Profiles with Application Usage Monitoring • SoftWatch not only looks at what’s installed, but also records application launches, percentage of user focus time in the application and level of user interaction with the application to find money-saving alternative desktop bundles • Optimize User Desktop Product Profiles Deploy SoftWatch Agent Get your Data

32. Use your Technology Roadmap and SoftWatch User Profiles to Review Licensing Program Alternatives • The EA is rarely the only program you should consider and often isn’t appropriate at all. • Determine Licensing Program Mix

33. Know just what you need and the optimum licensing program requirements to get you there. • Using your Technology Roadmap, User Profiles and Licensing Program Mix to build your “Walk-Away-from-the-EA” Alternative, and negotiate savings of up to 50%. • Build the Walk-Away-from-the-EA BATNA & Negotiate

34. Top Enterprise Agreement Negotiating Tips • Use our Formulas in our blog to identify stealth price increases from your current Enterprise Agreement on your Renewal Price Sheet. Use formula prices as the starting point for price negotiations – not the pricing on the renewal CPS! • Consider a componentEnterprise Agreement if the full platform does not meet your Roadmap requirements. Utilize SoftWatch to create User Profile Exceptions on your Enterprise Agreement. If Microsoft won’t work with you, license these profiles in SelectPlusand get out of the EA. • Understand that your Account Manager’s goal is to grow the renewal agreement 15-20% over your previous one and that cutting your EA may make concession requests even more difficult. Build a “WALK AWAY FROM THE EA” plan. • Be Ready to defend your Effective Licensing Position against audit threats, especially if you don’t renew your EA…Have an internal SAM process.

35. Top Enterprise Agreement Negotiating Tips • Microsoft’s fiscal year end is June 30th; EA’s expiring around this time will be able to garner exceptional concessions. However, know that On-Time-Renewal-Rate (OTRR) metrics provide similar compelling levers. IF your Roadmap suggests renewing the EA, then present your EA Alternative early and commit to completing renewal by Microsoft’s On-Time Renewal Date (by your expiration date) in order to retain leverage. • Consider Pitfalls like MDOP and the Home Use Program, which require Software Assurance on Windows and Office respectively and be mindful of these very costly dependencies. • Ensure contract addendums list all agreed upon points before signing, as anything agreed to verbally or by email will be voided by the contract. Side Agreements, emails and verbal approvals are non-agreements.

36. Get help and get empowered with Software Licensing Advisors • Free consultation to discuss your specific licensing scenario. EMAIL info@msftadvisors.comto schedule an initial call THANK YOU FOR ATTENDING!