Posted by Duncan Jones on February 25, 2009
I get this question all the time because, let’s face it, it’s a significant decision. For example, an Enterprise Agreement (EA) renewal for an enterprise with the main desktop suite on, say, 10,000 PCs could cost around $1,500,000 per year. So what do you get for this outlay? You’ve already purchased a perpetual license for the relevant Microsoft products via your original EA, so the renewal is merely an extension of the maintenance element, which Microsoft calls Software Assurance (SA). Like most terms in Microsoft licensing, SA looks like an industry standard concept, but has sufficient Microsoft-specific nuances that confuses customers. The key differences from most vendors’ software maintenance offerings are that SA:
- Is not tied to product support. Customers that aren’t paying SA still get access to patches, and can purchase additional support services from Microsoft or its partners on a time & materials basis.
- Delivers upgrade rights that live on after the agreement expires. Customers earn rights to any version that Microsoft releases while they are on SA. So, for example, a customer paying SA on Microsoft Office for the next 12 months will earn the right to the next version, Office 14, due out at the end of 2009, even if it doesn’t intend to actually upgrade to that version for another 3 or 4 years
- Includes many additional benefits that, though hard to value, are far from worthless. For example, the extra training, online e-learning and rights to use the same version on a home PC will certainly translate to more effective use of the software and enhanced user productivity, but it's very hard to give that a dollar value.
In order to make a sound decision on an EA renewal or on SA, which is almost the same thing, the IT team has to do some homework. It needs to look closely at all the elements of SA and assign them a value. A simple decision support spreadsheet will help you evaluate and compare alternatives, taking all relevant aspects into account. The most important part of SA, by far, is the upgrade rights, whose value depends not on the next upgrade as one might think, but on the next-but-one upgrade. Clients may not be on the latest release, but already they have the perpetual rights to it from their existing EA. SA will be valuable if and only if the next-but-one upgrade will be to a version coming out during the agreement’s term. For example, enterprises that don’t expect to look beyond Office 2007 for 4 or 5 years should probably drop SA, because rights to Office 14 will be of minimal value to them, since they may well skip that release altogether. They may be better advised to save their money now, and consider buying the then latest Microsoft office version in 2013 or 2014.
The decision based on upgrade rights alone may be close, however, so consideration of the other SA benefits will be crucial to making the right call. Things like:
- Single image concessions. The EA is designed to let business simplify and standardize their desktop image. Customers that don’t renew may find that they have to start supporting multiple images, pay extra for multi-language versions, and keep track of what licenses they have bought for each machine. This extra work will have real financial impact, which could justify the EA renewal if the upgrade rights calculation isn’t conclusive.
- Important Microsoft services tied to SA. A prime example is desktop virtualization, supported by Microsoft’s Vista Enterprise Centralized Desktop, or VECD[i]. VECD enables desktop images to be stored and run on central processors, but its only available to customers paying SA on their operating system licenses. Desktop support managers should decide if they are likely to implement some sort of desktop virtualization, because that might justify EA renewal on its own, at least for the OS.
- User training. Many of the SA benefits are intended to help customers train their users on new versions of their Microsoft products. The vendor wants customers to get more value from its products by ensuring that users know how to use them to their full extent. Microsoft provides vouchers towards formal training together with online eLearning tools, but perhaps the most valuable training aid is the right for each user to have the same software installed on his home PC as he uses at work. Upgrading to a new version such as Office 2007 will have a huge impact on user effectiveness until they become familiar with it, and letting them play around with it at home could shorten that learning curve significantly.
So should you renew your EA? As you can see, there are a lot of factors to consider, so the answer is genuinely “it depends.” But consider this: Somewhere between 25% and 35% of customers don’t renew. So you’ll be in a minority if you don’t renew, but you won’t be exceptional.
And if you want to explore the pros and cons a bit more, join me for our upcoming Microsoft Negotiation Workshop at the end of April.
Search Forrester's Blogs
Free Mobile Mind Shift Webinar Series
Learn how to win your customers' mobile moments in this three-part series »
Your Customers Are Powerful
Become customer obsessed to gain competitive advantage »