In anticipation of our upcoming Microsoft Licensing Seminar in New York on 21st October 2015, our Analyst David Foxen interviewed Steven Kelley – Director of Software Licensing Advisors and one of the expert speakers at our New York event.
His session ‘Software Assurance – Placing Bets on Microsoft’s Future’ will delve into why he thinks Microsoft Software Assurance Customers ‘never win’.
DF: Steven, in simple terms, what exactly is Software Assurance and why is it so important with Microsoft licenses?
SK: Software Assurance (SA) is Microsoft’s discounted offer to pre-purchase future upgrades of the software title one carries SA on. It is often mischaracterized as “maintenance” or “support”. While buying enough Software Assurance does come with certain Software Assurance Benefits (training vouchers, handful of support calls, planning services), it is not a fee for ongoing support or maintenance as with other vendors. Lately, Microsoft has identified desirable ways that companies use their products and then removes these use rights from the standard product usage, only to “add it back” when one carries Software Assurance on the product. (e.g. SQL) It is important to know what products have certain SA-rules and requirements so that you have the right to use the product according to various use-cases. Without knowing the rules, a company may be out of compliance, putting the firm at substantial legal and financial risk. Microsoft actively auditing customers that violate Software Assurance requirements.
DF: Why do you think Customers with Software Assurance ‘never win’?
SK: Software Assurance was originally designed at a time when 1) Microsoft products were immature, 2) Rapidly being upgraded, and 3) when there was more formality in business. (when was the last time you received a formal memo? At 29% of the license price per year for 3 years, desktop products receive an effective discount of 13% if a new SA-covered product is released during that three year period. Historically, most companies have skipped a version of major desktop components and several servers. (Office 2007, Exchange 2007, Windows Vista, Windows 8.1) If a company carried SA for 2 EA cycles (6 years), received the rights for 2 new upgrades but only actually deployed (realized value) from 1 of those upgrades, they effectively paid 174% of the license price. The company that did not carry SA, waited to see the released product, piloted the product and then decided to use it, bought it for just the cost of the license, a 74% savings. If the customer bought it at any large quantity, they could easily negotiate 10-20% discount. Numerous examples abound with other programs that require SA, like the ECI and EAP, where customers spend millions and received very little in value. Apart from some tricky SA rules, it’s a bet that the house wins almost all the time.
DF: If I purchase SA for my Microsoft licenses, will it really cost me a lot more?
SK: You’re placing a bet. If I pay SA on Office, I’m betting that the next version of Office will be a compelling one and I will deploy it enterprise wide. If I buy SA and the next version is compelling, I have won a 13% discount. Interestingly, however, Microsoft has given away more products to people who did not have SA (Windows 10) without refunding those who did. Some customers who added SA to products, paid the SA only to find that those products were discontinued or collapsed into other products (FAST Search) during their 3 years of SA payments; again, without a refund.
DF: Is the extra cost not worth it?
SK: Unfortunately, SA is required for certain use cases on Microsoft products. Whether the extra cost is worth it is doubtful. Before SQL 2012, SQL Server VMs could be freely distributed throughout a hyper-visored cluster. Makes sense! You bought the license and as long as you aren’t running it at the same time in two different places, you should be allowed to install it, uninstall it, reinstall it, or move it. Now, SQL 2012 has a right called “License Mobility through Software Assurance” that requires an SA payment of 25% of the license price per year in order to move your (paid-for) licenses between hosts. Is that extra “tax” worth it?