Filed under: IT Financial Management, Microsoft, Negotiations, Software, Total Cost of Ownership
Microsoft’s Select and Enterprise Agreements have long provided for a 30-day grace period at the expiration of the Agreement, for customers to decide whether (or not) to renew Software Assurance.
However: In the latest version of Microsoft’s Agreements, the 30-day grace period was eliminated. This now means that Software Assurance must be renewed before the expiration of the enrollment or customers may be required to purchase new licenses to remain in compliance with their Agreements.
The apparent goal of this change is to shift the balance of negotiations power to Microsoft at the time of renewal. Clients should be in a position to make final decisions 90-days prior to Agreement expiration, and the time required for a Client to fully review its Microsoft investments averages 90 days.
As a result, NET(net) now recommends an engagement start date of no less than six months prior to Agreement expiration for Clients to perform an initial assessment of their Microsoft Agreements and/or renewals.
In addition, the Change of Channel Partner (COCP) form for your Large Account Re-Seller (LAR) is also changing. The time between the date a customer signs the COCP and the day the COCP takes effect will increase from 30 to 90 days. This is another good reason why Clients want to be prepared to implement all changes 90-days in advance of Agreement expiration and/or renewal.
With the COCP change, we now recommend that EA customers review their LAR relationships annually, and if dissatisfied, there will be ample time to either remedy the LAR relationship or to change LARs before the next annual True-Up.
NET(net) will help Clients perform Microsoft Investment Optimizations and/or annual LAR evaluations, at least six months prior to Agreement expiration to ensure Clients have enough runway to achieve their Microsoft Investment goals and objectives.
Note- many Clients have annual true-ups in June, so January is a great time to get started.Stay tuned to this blog for more information on how you can make the most of your technology investments.
Scott Braden
Filed under: Negotiations | Tags: Bargaining Table, BATNA, Carrots, Cisco, Claiming Value, Cooperate, Creating Value, Defect, EMC, HP, IBM, Microsoft, Negotiate, Oracle, SAP, Sticks, Supplier Lock-in, Win-Lose, Win-win, ZOPA
In negotiations, whether we realize it or not, our cooperation increases the size of the pie for everyone (creates value) and our defection defines our slice of it (claims value).
We often develop imaginative ways to create value through the promise of mutual gains and introduce these ‘carrots’ into our negotiation strategy at the appropriate point as to maximize their impact and benefit. As it relates to cooperation and the use of carrots, most of us consider ourselves fairly effective with this approach.
What happens when the other party isn’t cooperating, however? Are we as effective at bringing them back to the bargaining table? Are we as capable of putting the deal back on the tracks?
Quite simply, what happens when they say no when we really want them to say yes? How do we move them to our way of thinking? That is the art of negotiation. The art of letting *them* have *your* way.
Former Secretary of State James Baker once famously said (and I’m paraphrasing here), Diplomacy is the art of saying nice doggie long enough until you can find a big rock with which to smash it in the head. If there is no rock, negotiation is pointless… How many of us negotiate without a rock? I can’t tell you the number of times I’ve had a client say we’re just going to tell our supplier we want to buy their stuff, but we need a better price. I nod politely and ask, “or what”? Puzzled, they ask, what do you mean “or what”? I explain, and what if they say no? What if they say this is the best possible discount they are able to offer you? What will you do then?
You see, the “or what” is the rub. Gee Mr. Supplier, we’d like you to give us a better discount. If you’re not prepared to answer the “or what”, you are just Oliver Twist asking for more. Seemingly, we are much less prepared to correct behaviors that are counter-productive to our goals and objectives. The use of ‘sticks’ in a negotiation is every bit as important as carrots, and in many cases, much more so. When one party cooperates and the other party defects, the defecting party claims value. When both parties defect, not only is no value created, no value is claimed either. It stands to reason then, that you can prevent the defecting party from claiming value by defecting. Sometimes the best way, perhaps the only way to bring a defecting party back to the bargaining table is to defect yourself.
Easier said than done? Defection in a negotiation is often viewed with a negative connotation, and is also often confused with the end objective. Some view it as confrontational or even as threatening. Regardless of how it’s viewed, a defection strategy is often justified. Defecting from a negotiation can be extremely effective in situations where a supplier is reaching or over playing their hand.
In one case, NET(net) was working with a client who had two viable solutions for a business need, and the preferred supplier overplayed their preference status to the tune of a 40% premium price over the competition. The client told the preferred supplier that the current price made it impossible for them to be selected, but the supplier refused to lower their price, believing that the client was bluffing. Instead of haggling, the client sent a polite thanks but no thanks letter, and went into unilateral negotiations with the alternative supplier with the full intent to get a deal done. The preferred supplier returned the next business day with a market leading price and improved terms and conditions. This led us to coin the negotiation axiom, “sometimes the fastest way to a yes is to say no”. This client didn’t bluff. They had every intention to do the deal with the alternative supplier and the preferred supplier knew it. It’s not gaming or brinkmanship; it’s defection. To be effective, it has to be credible, it has to be timed right, and it has to be sequenced appropriately. When it’s done right, it works.
While we are mostly inclined to be cooperative and we all work hard to find ways to increase the value and mutual gains for all parties involved in a negotiation, the use of sticks on a quid-pro-quo basis is an extremely effective way to control the bargaining table. Defections from negotiations are sometimes the best and perhaps the only way to break the cycle of supplier lock-in and the incumbency effect of entitlement rights. See future blog posts on these and other topics.
Filed under: Data Center, IT Financial Management, IT Strategic Planning, Microsoft, Negotiations, Oracle, Outsourcing, Risk Mitigation, SaaS, Software, Subscriptions, Total Cost of Ownership
Microsoft is aggressively discounting its hosted / SaaS solutions in order to gain market share, and I suspect, to sway customers from the EA / Select / perpetual license model, onto the rental / cloud / SaaS model.
Microsoft cuts prices on BPOS, to issue refunds -
http://ct.zdnet.com/clicks?t=475224883-f5935ee3a0b078029592318f09b1ea8e-bf&brand=ZDNET&s=5
Microsoft seeks to lure Salesforce, Oracle users with six months free of CRM Online
Microsoft chops prices of its hosted enterprise cloud offerings
But you’ll note that’s only on the hosted offerings.
Also of note, Microsoft’s huge new billion $ datacenters in Chicago and Dublin are now open for business. With more coming soon.
http://ct.zdnet.com/clicks?t=475224883-f5935ee3a0b078029592318f09b1ea8e-bf&brand=ZDNET&s=5
On the traditional licensing front, Microsoft just announced price increases for SQL Server.
So, clearly, MSFT is betting big chunks of cash on swaying customers to its hosted services, and as a consequence the traditional licensing models are becoming slightly less attractive. I would advise Microsoft customers to consider the true costs and benefits of moving from a traditional licensing approach, to a model such as BPOS. As in most things regarding Microsoft’s sales practices, there are hidden factors that may not come to light unless you ask the right questions.
-Scott Braden
Filed under: Convergence, Data Center, Hardware, IT Financial Management, IT Strategic Planning, Outsourcing, Telecommunications, Total Cost of Ownership, Universal Communications, Voice Over IP | Tags: co2, Data Center, energy efficiency, EPA, Green, smart data center, smart grid, sustainability
According to the U.S. Environmental Protection Agency, “energy consumption by servers and data centers in the United States is expected to nearly double in the next five years to more than 100 billion kWh.”
This is the first in a series of blog posts that will be exploring the topic of developing, managing, and sustaining a resource efficient enterprise data center and the related infrastructure around us. We will be exploring the responsible consumption of resources that make up the IT environment for the enterprise, examining the popular notions of the “Green” data center and going beyond the mainstream in tackling topics that have an important impact on IT related resource consumption.
We have a responsibility to be good stewards of the resources contributing to our consumption of information technology. As global citizens we are on a collision course that is unsustainable, given the rapid consumption of energy across the planet as underdeveloped countries advance their economies and developed nations continue to grow and increase their use of automation and other energy consuming conveniences. Our planet’s uses of energy through non-renewable fossil fuels will likely outpace our ability to find new sources if we don’t reduce and improve the efficiency of our consumption first. In the most recent U.S. Energy Information Administration International Energy Outlook report in 2009, total world consumption of marketed energy is projected to increase by 44 percent from 2006 to 2030. The largest projected increase in energy demand is for the non-OECD (Organization of Economic Cooperation and Development; developing countries) economies (http://www.eia.doe.gov/oiaf/ieo/world.html).
An unfortunate and vitally important consequence of this energy consumption is our output of Carbon Dioxide emissions. Scientifically regarded as a contributor to climate change, total CO2 emissions—as calculated with all projected full measures of CO2 emission reduction programs underway or planned—are projected to increase by 17 percent from 2010 to 2020 (http://www.state.gov/g/oes/rls/rpts/car/90324.htm).
We clearly still have our work cut out for us.
According to the U.S. Environmental Protection Agency, “energy consumption by servers and data centers in the United States is expected to nearly double in the next five years to more than 100 billion kWh, costing about $7.4 billion annually”. Similar energy cost increases are expected in Europe, Asia, and elsewhere. (http://www.energystar.gov/ia/partners/prod_development/downloads/EPA_Datacenter_Report_Congress_Final1.pdf).
However with data centers, and the other information infrastructure we have in businesses and the homes to support our information and communication needs around the world, it is still a drop in the bucket compared with overall energy consumption. What we do have is the capability to turn the information technology into solutions for energy savings.
We see this today with smart grid technology applied by the utility companies to manage home energy usage and provide bi-directional communication between the home appliances and the energy company to manage energy usage wisely and efficiently. Applied to the data center, smart energy technology can be timed with the business cycles to reduce energy consumption on resources that don’t have to run full throttle for supporting a business application that is comparatively idle.
We will explore these ideas and more in upcoming blog posts, as we delve into improving our information to energy ratio; squeezing more information out of the energy necessary to produce it—and, perhaps taken to the extreme, spending less energy on information that has less value. Now that’s a tricky topic!
Stay tuned for future posts.
Filed under: Hardware, Microsoft, Oracle, SAP, SaaS, Software, Subscriptions
There appears to be a significant amount of buzz around Web 2.0, what it is and how do you get some… If you do a Google search on Web 2.0, you are using Web 2.0 technology! Just by the fact you are reviewing this blog post means you are using Web 2.0 technology.
Why would a professional optimization firm write about Web 2.0?
The newest versions of applications, services and hardware touted by companies like IBM, Oracle, Microsoft and others are being sold as Web 2.0 necessities.
So what is Web 2.0?
If you click on some of the results from your “Web 2.0” Google search, many people say Web 2.0 is nothing more than a marketing spin on the natural progression of Internet technology. So why then are Enterprises being encouraged to pay premiums based upon marketing and hype? Continuing a tradition among technologists to buy the latest and alleged to be the greatest? Beyond that, we have no clue! But, we can try to put some context around what is Web 2.0?
Quite simply, one can look at a website or application as being Web 2.0 if it contains any of the following characteristics:
- A user centric customizable interface (i.e. use of widgets to customize pages)
- Community updates like those found in Blogs or Wiki pages
- Uses the Web as its delivery platform and is entirely browser accessible
- Allows for collaboration like that found in Instant Messenger or other Social Networking sites
- Utilizes user generated “Dynamic Content” for updates
- Software as a Service (SaaS) by definition, uses the Web as its delivery platform
- Provides for a rich use experience
Who can argue with those, almost like motherhood and apple pie (all good). Those characteristics are so all encompassing, almost all software fits into at least one of the categories above. Still, by using the latest buzz word and labeling products “Web 2.0”, technology companies are jumping at the opportunity to capitalize on the ambiguous definition of “Web 2.0” and trying to use it to compel buyers to pay a premium to obtain it. At NET(net), we consistently rally against hype and focus on business value received relative to financial investment expended. This is where Web 2.0 falls flat (in our humble opinion).
Filed under: IT Financial Management, IT Strategic Planning, Microsoft, Risk Mitigation, Service & Support, Software, Total Cost of Ownership
Microsoft is entering a period of new product releases; Windows 7 is widely expected to ship in time for Christmas 2009, and Office “14″ along with refreshed versions of key products, such as SharePoint, are expected as well in late 2009 or early 2010.
Since many Microsoft customers are evaluating their Microsoft agreements in the next few months, as many Microsoft deals come due at the end of the calendar year, customers are again being asked to pre-pay Microsoft for planned innovations that may or may not ever reach a product release, and when or if they do, may or may not be of interest to customers, who may or may not be able to effect meaningful ROI by upgrading.
Which key product upgrades should customers expect in the next few years? How can customers best optimize Microsoft investments in light of the coming planned upgrade cycles?
NET(net) has researched and summarized the key upcoming product releases so you can effectively plan your organization’s IT rodamap.
Filed under: Convergence, Data Center, Disaster Recovery Planning, Outsourcing, Risk Mitigation | Tags: Uptime Institute
The Uptime Institute developed a tiered classification approach to data center site infrastructure functionality and high-availability that addressed a need for a common benchmarking standard in this area that was usually based on opinion and conjecture up to this point. This system has been in practice now since 1995 and is often referred to by enterprises and co-location/managed hosting service providers to tout the robustness of their data center. The tiers classify from tier-I (Basic Data Center), where there is simply a single path for power and cooling distribution, without redundant components, providing to 99.671% availability, to tier IV (Fault Tolerant), where there is site infrastructure capacity and capability to permit any planned or unplanned activity without disruption to the critical load; 99.995% site availability.
The Uptime Institute has recently asserted two things in their leadership role in this area: there is no such thing as “almost tier III” or tier II+; you are either tier III or not adhering to the strict definition. And you must be “certified” by the Uptime Institute’s certification body or a by an Uptime Institute trained and certified consultant to refer to your data center as adhering to one of these classification levels.
I tend to think that the Uptime Institute’s tier classification has become a de facto standard and it is a little late and disingenuous to assert control now over using this term to describe a data center. I think it is telling that Uptime Institute reports that only “two dozen” data centers have had their tier rating certified.
This type of rating should be within the purview of an international standards body, not an organization, even a not-for-profit organization, that stands to benefit financially from certification. Adhering to a strict definition of a particularly tier level, such as the difference between level II and III, does not necessarily mean the data center is not meeting strict compliance for redundancy in important other areas. There is no allocation to weighting of measures of fail-over and redundancy; it is either all or nothing.
While I am not advocating ’shades of gray’ when it comes to building a robust infrastructure, there are many factors that come into play when evaluating the availability of the infrastructure. All of this is for naught if the application architecture, the sole purpose of having a data center to begin with, is not built for a sufficient amount of resiliency and failover. No tier IV data center is going to save a poorly architected application.
Filed under: IT Strategic Planning, Microsoft, Risk Mitigation, Service & Support, Software, Uncategorized | Tags: Windows XP Vista 7 downgrade OEM
A closely watched topic for many of our cleints: how long can we continue downgrading our new hardware to XP, after MSFT ships Win7? Answer: April 2011 or upon release of SP1, whichever comes first.
Details from Mary Jo Foley (who’s a great source to keep up with)
http://blogs.zdnet.com/microsoft/?p=3104
Filed under: IT Financial Management, Microsoft, Total Cost of Ownership, Uncategorized
Microsoft reported earnings for their fiscal 3rd quarter.
- The big news is that this is their first ever year over year decrease in revenue and earnings (as a public company).
- “Unearned Revenue“ is Microsoft’s bucket for future Software Assurance (SA) / Payment obligations, usually via Enterprise Agreements that are in flight. This number went from $12.2b to $9.6B (-21%) from June 30 2008 to March 31 2009.
o Unearned Revenue is down across all of their key product segments, even Servers which is their strongest at the moment.
o This is one of the key numbers to watch in their financials and being so significantly down it means that customers in droves are defecting partially or wholly from the EA / SA model, which is bad news for Microsoft’s annuity business and thus, its stock price.
o It also casts doubt on the typical MSFT story about EA renewal rates being “in line with historic” which they are on record as saying recently.
o This number is mainly disconnected from PC shipments so they can’t use that excuse either. I view this as one of the most significant numbers reported.
- Random note – they settled with the IRS re: the 2000-2003 audit, paying $3.1 billion during 1Q09.
- $1.4 b to the EU for antitrust settlement, more pending.
- Class action suits re: the “ready for Vista” pc scam: up to $2.7b
- You may recall their share buy-back program; they announced up to $40b in spending on that, so far they’ve actually only spent $5.5b. hmmm, maybe they need to use their cash elsewhere?
- In the usual note about forward looking statements, MSFT noted “intense competition across all markets”. Perhaps some clients should note that as well?
- They’re still in fine shape re: cash, with $40b or so current assets and cash flow of $6b./qtr. But I noted that they started up a couple of lines of credit, maybe for insurance purposes?
Don't Be Surprised
In advance of its annual Sapphire meeting SAP has bowed to the torrent of negative press and customer feedback on its mandatory shifting of support to Enterprise with an effective rate of 22% of net license value, which represents a 29.4% increase in support costs for SAP. As SAP customers undoubtedly know, the effect of the shift to Enterprise support is that the percentage of net license moves to 22% from 17%. While the target of the 29.4% increase continues to be 22%, the trajectory will be more in line with traditional annual increases. SAP has provided a revised progression towards the 22% target. Originally, the increase was to be carried out over 4 years, starting with an 8% increase in 2009 and increasing a further 8% per year until 2012 when it would increase by 2.5%. Under the revised timeline, the annual increases will be scaled back to 3.1% per year until the 22% level is reached. In addition to the timeline, again responding to pressure from the various SAP user groups, the improved services that SAP is advertising under the Enterprise model will be audited by an independent party to assess the value customer received.
Despite the movement on timeline, SAP remains silent on whether the pace of increase will abate once 22% is reached. As SAP continues down a path of fewer customer options for support, and a mandated support level at the 22% level, it’s hard to argue that the slant aligns more with Oracle’s policies than it does with the interests of SAP customers, and it is not unthinkable that price increases could continue in perpetuity. Check out NET(net)’s May newsletter for more on the “5 Things SAP Isn’t Advertising on Enterprise Support”.
