The future of Microsoft licensing - what will happen?
1.Enterprise Agreement & SPLA end of life?
In our opinion, certain licensing models such as the Enterprise Agreement and SPLA are end of life. This won’t happen right away, but we think this is the future of Microsoft licensing. The transition will take some years as there are still a lot of missing pieces, but it will phase out slowly and surely. The focus will shift to the newer models like CSP and MCA.
At the beginning of the year, we already published a blog speculating on CSP replacing the Enterprise Agreement. We wrote that by moving all the different options onto the Microsoft Customer Agreement (MCA) platform, or for CSP to the New Commerce Experience (NCE), Microsoft could gradually get rid of the Enterprise Agreement altogether. And we see signs that Microsoft is definitely moving in this direction.
2. Microsoft Customer Agreement (MCA)
The Microsoft Customer Agreement was launched already. As far as we know, it is currently still only available as MCA for Azure, which Microsoft offers directly.
The MCA will have committed offers (as you have in CSP right now), long-term subscriptions, and potentially discounts for large organizations. We think these items will be added soon, as we already hear rumors that Microsoft has onboarded customers to MCA directly for services other than Azure.
Transitioning customers from the Enterprise Agreement to MCA can take years. Especially Fortune 500 customer who have custom-made, tailored agreements will be the last to move, along with for example governmental frameworks.
This is due to the fact that they are usually not immediately available in new offers as they require a lot of customization. Until Microsoft makes customization possible (if they even will make that possible), many organizations continue to be dependent on the EA.
For those Microsoft customers with no special EA clauses (typically the current level A, B and C Enterprise Agreement customers), the move might come sooner rather than later. We expect this to happen within the next year or two.
3. Will the Enterprise Agreement be phased out?
One of the reasons we think the EA is being phased out is the heavy pushback on five-year agreements without good reason. Microsoft is only allowing longer-term agreements if you are interested in purchasing the Microsoft 365 E5 suite with ramped discounts. These longer-term agreements are not offered to customers who require other suites.
The pushback and disparity could be to allow for more price increases. However, they can also be a sign that a new licensing model is coming. Migrating customers from the full M365 E5 suite to a new agreement type will be easier for Microsoft (and they can upsell E5 in the process). It can happen sooner rather than later.
Seeing how Microsoft customers accepted the recent price increases without complaint, our expectation is that they will also accept a new contract model. Even if this model might be more restrictive.
4. A new contractual model?
A new contractual model does not have to be a bad thing. The Enterprise Agreement has lots of issues, is outdated and inflexible. It’s far from perfect, but can Microsoft already promise something better?
Can the new licensing model offer the same price security? Will the new model allow you to lock in prices for multiple years? What will make the move to new model worth it? If a new contractual model can offer a more efficient, streamlined process, we would welcome that.
Something we worry about is the structure of the new contractual model. Can you procure licenses, services and products directly from Microsoft in the new model? Or do you need to go through partners?
As we wrote before in our blog “How is the role of the LSP changing“, the partner landscape is changing and not for the better.
The quality of the expertise and service provided by Microsoft Partners and LSPs is deteriorating. Watch the video below to hear our licensing experts Erik and Floris discuss the future of Licensing Solution Providers in more detail.
5. What is our advice for now?
For the foreseeable future the MCA will not become the leading motion to contract with Microsoft. This licensing vehicle severely limits your options (compared to the EA).Yes, the Enterprise Agreement is inflexible. It makes you place orders through an LSP, does not allow multiple tenants under one enrollment, and much more.
But the question is, will the new contract type solve this? We don’t think it will! Therefore, our advice is to stay on the EA for the time being. The EA still provides the best value for money and allows you to customize.
Are money and/or customization not the most important considerations for you? Then the new model can be interesting when it is launched. We do think it might offer a model where you can have multiple tenants under one contract. Hopefully, it also has a better billing system (which is one of the big issues with EA).
In summary, try to identify what type of customer you are. Do you still need the customization options of the old but tested EA? Or are you ready to move to something new and shiny? Make sure you understand your licensing requirements and that you are prepared. The shift to a new model can take a long time, but it could also be a mere few months away. You don’t want to be caught off guard at your next renewal!
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