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June 20, 2008 6:33 PM

Microsoft Licensing: Get Smart!



News Analysis. Surely there is some hidden meaning to Forrester Research releasing a new Microsoft licensing report the same day the movie "Get Smart" opens.

"Successfully Negotiating Microsoft Licensing Agreements" doesn't mention the movie, but it should. Because many Microsoft customers are either Maxwell Smart or Agent 99. The bungling Smart might get a good deal by accident, but it's Agent 99 who is all business and the shrewder operator.

Timing is important for another reason. It's the time of year when the most licensing agreements are up for renewal, through July 31, particularly.

Report authors Duncan Jones and Christopher Voce are clear that negotiating licensing with Microsoft can be arduous, in part because of the "unique terminology, complex pricing structure and rapidly changing product portfolio" that "can confuse unprepared negotiators." They emphasize that "preparation is key to success."

I won't review all, or even most of, the report's contents. Forrester charges clients for reports. It's not my place to give away all the contents for free. From Forrester's report and my own research, I want to provide four things enterprises must be aware of when negotiating Microsoft licensing renewals.

Microsoft negotiates aggressively, and not necessarily fairly. Fair is a subjective term. What seems fair to you might not seem fair to Microsoft. To Microsoft, fair starts with getting paid for every single license, and the company is quick to use noncompliance as a negotiating tactic.

Enterprises must make sure that every single license is accounted for before sitting down with Microsoft reps to negotiate new contracts. The report authors warn: "Companies that own up to noncompliance will see some flexibility, while those that try to hide it from Microsoft can lose some significant potential discounts or concessions."

True, maybe, but the better position is assured full compliance and ability to negotiate from strength. Because of an enterprise's potential legal liability, Microsoft can use noncompliance, even admitted, to gain concessions. Get smart. Be compliant.

Last-minute negotiations can weaken bargaining. Some businesses are disorganized or simply waiting, hoping to pressure Microsoft into cutting a better deal. But time is two-edged. The report authors explain: "Some reps may even try to use your deadlines against you, forcing you to sign suboptimal deals because you can't afford to let [Software Assurance] lapse or delay a major project."

Get smart. Plan ahead, but don't be hostile. The report authors warn: "Buyers should not let the negotiation become overly adversarial by assuming that Microsoft is out to mislead or bamboozle them with artificial complexity." Let Microsoft make the mistakes, not you.

Microsoft wants you to buy as much as it needs. Most enterprises upgrade, at best, on three-to-five year cycles. But long upgrade cycles aren't good for Microsoft's bottom line. The company wants recurring revenue from annuity contracts—and that means Software Assurance added onto Open or Select agreements or paying for Enterprise Agreement.

Bottom line: Software Assurance requires an extra-cost commitment, annually, 29 percent of the desktop software cost and 25 percent for server products, typically for three years. The break-even point is three-and-a-half years. After that, it's cheaper paying full price. Microsoft provides incentives, like support and training, to attract annuity contract sales, which won't suit enterprises only interested in discounted software.

That said, Microsoft has aligned product cycles with annuity contracts. Some enterprises may want a product's interim version, or what Microsoft calls "R2." Software Assurance customers get the software for free. Everybody else pays.

Get smart. Only buy as much software upgrade protection as needed.

Microsoft wants to help you buy more of its stuff. Both sides benefit when the enterprise thinks in terms of the big picture. From the Forrester report:

Successful Microsoft contract negotiations go beyond the line item costs and consider the additional consulting and support services available. For example, if a sourcing team's organization is embarking on a Vista migration, Microsoft might be willing to throw in discounted planning services and training—items that could have a material impact on the overall IT budget.

Get smart. Identify products you need that Microsoft really wants to sell. Vista's not doing well, so it's a good starting point for deals that ease deployment costs or acquisition of supporting software. Enterprises can expect Microsoft dealmaking for SharePoint Server 2007, Windows Server 2008 and Hyper-V. Any company even considering virtualization deployments should negotiate hard for planning, deployment and training services.

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Comments (30)

billybob :

There is only one tip I would add to that list.

Make sure you have a test Linux deployment setup and running and tell the rep you are seriously looking at switching all your machines to Linux. It works for most Government departments and gets great discounts.

Zane :

Why dont companies use Linux. Software costs anything from nothing to free and support costs if you need it can be negotiated from cheap to less costly than your microsoft contract. When will the big business people actually grab a brain and try linux in their company. Freeze microsoft upgrades, save money then gradually introduce linux servers then linux desktops then get a tech guy to work full time and maintain them.

I swear all company execs who waste money on microsoft software are all on crack or heroin. Seriously what company wouldnt save money and big money at that.

Dont deploy costly proprietory lock in software when you have an alternative that starts from free. Geez.

I-Man :

Joe, how come you're not willing to let your readers know the importance of the VCSY/Microsoft lawsuit and what it means to Microsoft's "future"?

From the response filed today:

II. MICROSOFT PRESENTS AN INCORRECT
BACKGROUND FOR THE ?744 PATENT
The discussion in Microsoft?s brief regarding the WebOS product, although
misplaced, shows that Microsoft fails to appreciate just what the invention of the ?744
patent is and how it differs from anything that preceded it. The prior art WebOS product is
an example of procedural programming while the present invention is an advance on
conventional object oriented programming developed a long time after the appearance of
procedural programming.
Procedural programming, of which WebOS is an example, appeared in the 1950?s
along with the appearance of computers. It is a rigorous approach to programming where
the programmer writes the programming code in sequential steps, including subroutines
that perform some function or provide some needed information. This type of
programming proved unusable in many modern applications because as more people
worked on a procedural program the sequence of steps became too long and
unmanageable.
In the late 1980?s and early 1990?s, programmers developed a new way of
programming called object oriented programming. This type of programming allowed
programmers to separate the development process into modules called ?objects? that
interfaced with each other to provide the overall program. The program also could reuse
the objects at various points in the program. But in this type of programming, the
programmer still had to define the interface between a given object and the rest of the3
program. The programmer had to pass any variables that the object used or needed; and
it had to pass them in a pre-determined order.
The invention of the ?744 patent, as stated in Vertical?s opening brief, is an
important advance in object oriented programming. It provides a smart connection or
interface between an object and the rest of the program. The program need not pass any
parameters that the object needs, because the object will determine those parameters on
its own by using available information that it can obtain. If the programmer passes the
parameters through the interface, an arbitrary object will use them; if he does not, it will
determine them on its own with available information.
Microsoft seeks to improperly connect the WebOS product with the ?744 patent by
arguing that FIG. 5 of the ?744 patent is ?virtually identical? to an old WebOS diagram on
another company?s website and by arguing that FIG. 5 shows an embodiment of the
invention of the ?744 patent. cont'd

much more at url:
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_V/threadview?m=tm&bn=33693&tid=5561&mid=5562&tof=1&rt=1&frt=2&off=1

Ralph :

I would add to the above. Install Linux as a dual boot on several of the machines and have them running Linux when the rep comes in.

Do a analysis graph report of cost per machine of the potential savings per machine without Windows, Anti-spyware, Office. Give a copy to the rep so he can take it back with him.

Also tell the rep that your company is getting a quotes from other suppliers including Red Hat and will compare the overall costs and potential savings.

Timmah :

"flexibility"

Heh, random unicode characters appearing mid-article. Seems to me you must have typed this article on your fancy Mac, which throws more random unicode into text than I've ever seen. Either way, most of this is pretty good advice, Joe.

@Zane: Some businesses are different, but the cost of doing business isn't buying software, it's people's time and people's salaries. For startups with one or two people, a $1000 Windows Server license makes a big difference, for Fortune 1000 companies, or even companies with a few hundred employees, it really doesn't mean much. Most companies are paying Microsoft for time they don't have, which, if you need the vertical stack that Microsoft offers, is still a bargain.

So setting up a linux box as a negotiation tactic won't do anything for you. Microsoft aren't dummies. They've figured out that people who claim they're switching to linux because "it's free" are either morons or liars.

BlahBlah :

Being in IT for many years and having a chance to design my current network from the ground up, I can tell you that Microsoft has made my job beyond boring. Each successive product especially on the back end has reduced my workload.

Going Linux or Apple would just make my job vastly harder. I have no problem spending money on the best hardware and software I can find because it's money in the bank.

The best measure of my value to the company is eliminating my job through efficiency and no downtime.

I will leave the religion to the other guys who post here.

The Hand :

@Timmah :
who says:
"So setting up a linux box as a negotiation tactic won't do anything for you. Microsoft aren't dummies"............

On your second point, microsoft aren't dummies. Really? They did release Vista didn't they?

As far as "setting up a linux box as a negotiation tactic won't do anything for you." Maybe it depends on the size or the company, the amount of money involved, and how much publicity it gets from switching to Linux in the press. But one point for sure, is if a company takes the time to setup and learn a linux server, and a workstation, they also find out how much money they are saving in software, maintenance, and reinstalling windows every time the security is infected by some piece of malware. Security in Windows is like swiss cheese.

The Hand :

If a company takes the time to setup and learn a linux server, and a workstation, they also find out that they are better off without Microsoft, and save a lot of money and time, end up with a far more stable system.

Timmah :

@The Hand: Windows maintenance and antivirus is inexpensive compared to employee training and employee salaries. The lack of mainstream software on Linux, as well as replacing custom tools development/deployment (especially if you're using .NET now), usually jacks up the latter price a lot more than it saves on the former.

You're right though, if you're small enough such that you didn't need Microsoft's vertical stack in the first place, or your finance people are dying to use Open Office to attempt to do data mining from a SQL Server, then maybe Linux is for you.

So instead of pretending you'd switch an enterprise to Linux wholesale when they know no one in their right mind would do that, take an incremental approach. Tell them you're considering not buying any of their new enterprise software and are considering viable competition like Java and Oracle which may _eventually_ lead to a non-Windows path, and would hurt their enterprise sales immediately.

mebabyme :

Blow MS and Linux.
Free BSD :p

Marco :

Ignoring open source is costing us dear
w.guardian.co.uk/technology/2007/sep/20/guardianweeklytechnologysection.comment1
Quoting:
The depth of its neglect was made plain by speakers at a seminar last week hosted by Westminster eForum, which tries to make parliament aware of IT issues. It turns out, in contrast to what other governments are doing, that most departments - including Health, Work and the Foreign Office - are so risk-averse they have virtually no open source in their IT infrastructures. The Treasury runs less than 1% of its operations with open source. The Conservatives, who rightly believe Labour is vulnerable in this area, claim that nearly £700m could be saved by switching to open source. This is disputed by others who point to the high initial cost of switching from an embedded system and retraining everyone. But in the long run, low maintenance costs plus the absence of licence fees and upgrade charges must give open source the edge and, even if it didn't, there is still a strong case for encouraging it because a workforce skilled in open source would be well placed to exploit the enormous opportunities opening up for the future.

Schools are not much better, a double tragedy because they not only don't benefit from savings but also lose the opportunity to train children in the skills of the future. Equally serious is the indifference of small companies. This, we were told, was down to a suspicion that anything that is free can't be any good.

This is not a view shared by Google or Amazon - both huge users of open source. It was strongly disputed by a representative from Malmaison, the very cool hotel group which has put most of its operations on to open source for one simple reason: "high performance and low cost".


-----------

Marco :

This and other opinion are changing the whole thing in the UE and the World.
----------------

The question:Is Linux a real alternative to business?
The short answer(that that MS doesn't want you to know); Yes

Why? Do you think that Google use Ms product?... and Google is:
"By this time next year, Google's search business will be larger and more profitable than the most profitable and legendary monopoly in history--Microsoft Windows. (Just Google's search business--that doesn't even include AdSense)."
w.alleyinsider.com/2008/5/google_to_surpass_size_of_microsoft_windows_in_2009


Of course Ms will tell you (through advertising, Blog and shills):No it is imposible, Linux is only for Geeks and who say some different " are either morons or liars" or "most companies are paying Microsoft for time they don't have" or about "employee training and employee salaries"(do you remember the needs of new trainig for each new Ms product ? example; Vista)

Of course there is to learning curve but after: "in the long run, low maintenance costs plus the absence of licence fees and upgrade charges must give open source the edge"
Ah!...and don't forget the feeling of freedom.

GFC :

We've been experimenting with Linux on the desktop and with Vista. At this point, the advantage seems to be going towards sticking with Windows. The comment that Vista requires excessive training costs seems out of left field. It's actually a very easy system to pick up, set up with a few tweaks for familiarity based on previous windows. People don't rely on those training wheels for very long, once they see that the alternatives are simpler when they are understood.

The support cost issue with Linux is very real, particularly for extending beyond basic office functionality. That includes not just the maintenance costs but also the deployment costs. The recent deployment tools developed for Windows really do simplify the process, resulting in a substantial projected saving in labor costs that offsets a big chunk of the license fees. We'd love to get that warm fuzzy open-source feeling, but our resources do not seem suited to the Linux support model and maintaining the functionality of our engineering software with a switch to Linux is highly uncertain. There is also nothing we've seen on the Linux server end that compares with Server 2008 in terms of integrating features between desktop and server. Maybe it's possible, but the path to achieving it is not clear to us.

chips :

Lately "we" have seen a lot of brand new commentators here who make just one comment, like GFC. I doubt he is a real commentator, but someone with an agenda, who posts here many times. Take this line; "That includes not just the maintenance costs but also the deployment costs." What maintenance costs? Windows has maintenance costs, because you need an up to date antivirus, antimalware, etc. Those you have to use, ie scanning, updating, slowing down the computer, on a constant level. Linux does not require that level of maintenance at all. Deployment costs? Community GNU Linux is mostly free, get real.

If you look at the flowery language and style of writing, most will conclude that GFC is most likely just the MS $hill Andre posting more FUD.

n0neXn0ne :

GFC Says :
"Server 2008 in terms of integrating features between desktop and server. Maybe it's possible, but the path to achieving it is not clear to us."


@GFC :
If you replace the "not clear to us" with competence, maybe you'll see "the path"l

@GFC :
"It is better to light one candle than to curse the darkness", huh?

layta....

n0neXn0ne :

correction: Posted by: n0neXn0ne | June 23, 2008 12:03

GFC said, full quote for post above :
"There is also nothing we've seen on the Linux server end that compares with Server 2008 in terms of integrating features between desktop and server. Maybe it's possible, but the path to achieving it is not clear to us."

@ _ :
"And I'm going to continue to light a candle, instead of cursing the darkness"

BlahBlah :

People are very expensive, hardware and software are cheap.

If it takes one extra IT person to support a change to open source, it's a long term financial loser.

n0neXn0ne :

BlahBlah :
"If it takes "one extra" IT person to support a change to open source, it's a long term financial loser."

@BlahBlah :
If it takes "one extra" IT person(*nix) to support a change to open source, then you will have to fire two 'paper tiger' MCSE to see a long term financial winner.

PS. I'm sure every IT department can find at least two

BlahBlah :

'PS. I'm sure every IT department can find at least two '

No, it's not the 90s anymore

JM :

Every enterprise environment that I have worked in has always used multiple platforms including mainframes, Window Servers, and Linux servers. To say that enterprise environment should be purely one or the other platform is just not talking from the real world. Windows is not going anywhere and neither is Linux.

chips :

@JM:
"Windows is not going anywhere and neither is Linux."
----------------------------------------------------
While I would agree that neither is going away any time soon, I would say that there is a lot of movement on both platforms these days. Since the advent of Vista, Microsoft has lost approximately 4% of the home desktop market. Mostly to Mac and some to Linux, BSD, and OpenSolarius.

Since Windows Seven coming out in about a year, will basically be Vista with a touch screen driver, that means, no real replacement for Vista for at least 4 years. Is Microsoft crazy or what? The malware alone will eat them (the users of MS windows) up within these 4 years.

But the big question is, in 4 years time, how many users will have had enough and switch to an alternative operating system?

Mac is taking over the high end computer marked for home use, so when will the the OEM's decide they must try to either put Linux on their computers, do like Pystar and install Mac OSX, or stop making so many high end machines. Windows users who jumped on the Vista bandwagon, are about to go thru another windows upgrade cycle with Windows Seven coming out very soon. And we all know, there was never a windows upgrade cycle that did not cost and arm and a leg.

Joe, it would be nice for you to comment on your opinion of what Pystar is doing, since you do both Microsoft and Apple watch these days.

chips :

Sorry about the typo's. It should have been Psystar. As in;

Psystar's Open Computer: the Alterna-Mac

http://www.osnews.com/story/19904/Psystars_Open_Computer:_the_Alterna-Mac

Sheeva :

Have already gone through the process of negotiating with MS and the result is they proffered an unchangeable position which then provided us with the clear and "best damn thing we've ever done" direction of going Linux. We are now at 80/20 Linux/MS and look forward to removing the rest of MS. Our cost savings in all ways have been so significant that we have changed other strategic direction. We're now able to focus more on the client side of things both internal and external and even they have noticed improvement in servicing. From the staff's point of view they have not slowed down or been impeded by the change or lack of MS anything. The 20% MS that's left is in some very specific application requirements which we hope to finally replace by Q3 of 2009. We've no regrets and are so thankful we don't have to spend months "negotiating" with MS any more. Our IT is now an asset to be optimized and not a liability to be managed.

Stratocaster :

I'm sure I am not the only one who is tired of I-Man's postings about the neverending VCSY lawsuit which generally have nothing whatever to do with the topic of the Microsoft Watch post -- in this instance software licensing agreements.

Gerardo Tasistro :

@Blah Blah

"The best measure of my value to the company is eliminating my job through efficiency and no downtime."

This has got to be the saddest line I've read in a while. You're worth more fired than hired. So you're point is that a Windows System Administrator is only capable of baby sitting servers? What is this? LOST?

Such a view is narrow minded and shallow. First of all because the workload savings should be converted to time invested in productive tasks. Like developing new ways of doing things, small software applications to automate things, etc. In general think of better ways to do things and actually implement them.

Thus your paycheck goes to support improvements and developments instead of paying you to hit F9 every 3 hours 25 minutes. Or figuring out why the latest patch didn't work with what it was supposed to work with or you know removing those leaked updates that went right through the upgrade system, etc etc etc. Once you stop doing those jobs, you stop being an expense and become an investment.

Of course this is what folks who run *nix systems discovered way way back. Management somehow believed Microsoft when it said NT was cheaper and good. Of course it was cheaper, but it wasn't good. So it took some sweat and about 10 years (till Server 2003) to figure that out and get things polished. In the meantime the culture and perception you speak of was created. Folks who's only purpose was to babysit these things so they wouldn't crash.

Meanwhile folks using BSD and later Linux were enjoying marvelous uptimes and had all this free time to do things. Ever wonder how those folks from the open source community ever get time to do all that stuff for free? Well they're paid professionals not kids in their parents basement (well some are, those under 18).

Catch now is Linux is cheaper than the NT offspring (unlike Unix was) and supported by a large, very large group of skilled professionals. So companies can now choose between a cheap system run by "recipe repeaters" like Windows Server 2008. Or choose an even cheaper system (Linux) run by people who understand the fundamentals of the system and can thus extend and improve on the company's infrastructure investment.

Note: I'm quite aware there are very good Windows professionals out there. This post was not intended to them nor the companies who have them, but rather to the (unfortunately) large group of people like "Blah Blah" and the companies who hire them. Who's view of IT is as an expense not an investment and prefer recipe repeaters over problem solvers.


n0neXn0ne :

@Gerardo Tasistro :
You lite Blah Blah's candle with a blow torch!

n0neXn0ne :

correction for above:
You "lit" Blah Blah's candle with a blow torch!

I think his hand may have been in the way. ;)

BlahBlah :

@Gerardo Tasistro

Are you an idiot? Do you have the slightest clue what the hell I'm talking about?

Do you even work as an Infrastructure Engineer? My job is to come in as a consultant and streamline, upgrade and make networks as efficient and requiring as little babysitting as possible.

I don't do support, and once I'm done I move on. If I can elimate a few unneeded jobs along the way, all the better.

All I was doing was pointing out how a well designed system is gold and you go off on this moronic rambling about pressing F9 all day...

Gerardo Tasistro :

@BlahBlah

Well what can I say? I must be one if you say so. Because when I read your post you had network and now you're talking plural (networks). Oh wait, gosh there it is!

"having a chance to design my current network"

I guess you meant your network of clients or your current client's network. Either way it was not clear and your line sounded pathetic in such a context.

Now reading your comment from a consulting point of view only makes it look worse. You claim that:

"Each successive [Microsoft] product especially on the back end has reduced my workload."

Well duh?!?! Would you expect otherwise? Don't you think this is a redundant statement?

Now considering your increasing free time. After all isn't that an immediate effect of reduced workload? Couldn't you spend some time learning a bit about Linux and Apple?

When you claim "Going Linux or Apple would just make my job vastly harder." Do you mean to tell us you'd recommend a product to your client based on what hard for you and not what best for them?

Now I don't want to sound like an idiot AGAIN ;) . So I'd like a little clarification, but the way I'm reading this after your second post is that you'd rather recommend an all Microsoft solution because you know it rather than because your client needs it.

I wonder why can't you hire an Apple and/or Linux expert in your consulting team and provide an integral solution? One that leverages the benefits of each platform.

BlahBlah :

Look - I not only make recommendations but do much of the work myself depending on the size and structure of the company. Often I'm there for a year or more(none are less than 150 users) and that's the only company I work for during that time(my current network). When I'm done I hand it over and someone else supports it.

'Well duh?!?! Would you expect otherwise? Don't you think this is a redundant statement?'

I don't think so because most people who hate MS claim that's not the case

'Do you mean to tell us you'd recommend a product to your client based on what hard for you and not what best for them?'

I honestly believe that it's not only the easiest to implement but also the best solution for the company.

'I wonder why can't you hire an Apple and/or Linux expert in your consulting team and provide an integral solution? One that leverages the benefits of each platform.'

Apple is not a good choice(at least yet) because they lack the ecosystem of AD that MS has built over the years. I know some 3rd party apps can simulate that but I hate using that if I can. MS future upgrades often break 3rd party applications requiring them to be upgraded too(it's just a pain). MS rewards clients that go all MS especially on the backend by giving you multiple intergration advantages.

Linux has the entire suite but my experience is that it trades zero license costs for increased support costs hence some of my other posts. I know you and many here disagree and that's great but I'm paid for my opinion and that's it.

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