In March 2022, the dreaded price increase announced by Microsoft came into effect, ranging from 9 per cent to 25 per cent depending on the offer. But there are ways to protect one's IT expenditure and successfully deal with renewal negotiations.
You are paying more because we are offering you more.
This, in a nutshell, is the motivation that is driving Microsoft to substantially increase the prices of Microsoft 365, which had not changed significantly since the launch of Office 365 ten years ago a ten years ago. An «increased value» of innovation in three key areas - communication and collaboration, security and compliance, AI and automation - that could not fail to require a price adjustment, according to the Redmond giant. Considering also the introduction in a few weeks of new audio-conferencing capabilities.
The updated price list saw a price increase of 9 to 25 per cent depending on the offer, came into force on March 1 2022.
Prices increased more at the low end (20 per cent, from $5 to $6 per user) than at the high end (12.5 per cent, from $32 to $36 per user), a sign that Microsoft is pushing companies to spend more for save more. The percentage price increases, in fact, are less on the purchase of more complete (and more expensive) bundles. These changes do not affect the consumer or educational versions of the software for the time being.
This announcement has unsettled organisations, which already allocate a substantial chunk of their IT budget to Microsoft licences, and is leading them to wonder what exactly they are paying for. M365 is the most widely used Saas application in the world because it meets the needs of new, more flexible and hybrid ways of working and is a must-have for many companies. Since M365 is central in the enterprise technology stack, how can companies deal with this increase in spending?
Considering its centrality in the company’s technology stack, how can companies cope with this increase in spending?
Microsoft's is perhaps the most striking example, but rising software costs are on the radar of many vendors.
And yet, according to Gartner, 30% of the growing expenditure on cloud software and services will remain unused. The conclusion is that by optimising unused capacity, companies may not experience significant changes to their existing licence budgets.
According to the "Global Office 365 Report: Licensing Optimisation" 56% of M365 licences are more expensive because the licence is:
What actions can you take to reduce spending on licences you don't really need, in order to have a budget to cover the increases planned for March?
At WEGG, we have a long history of Spend Optimization on the software licensing assets of large corporations, based on an in-depth understanding of the contractual, commercial and compliance logic of the major vendors.
There are actions that companies can take to protect their IT spend and be more aware of renewals. To remind you, we even have a nice acronym: URRÀ (it could be just the italian exclamation to use when faced with a protected budget!).
Let's look them in detail:
The first step in finding out whether we are incurring unnecessary costs is to know what we have in the corporate ecosystem and how we are using it. To do this, we need to relate data on three fundamental elements:
This information can be retrieved natively within the Microsoft365 administration center (sometimes even directly from the applications, see PowerBI usage data).
Typically companies export the individual items into reports, then aggregate them into Excel spreadsheets. They then perform calculations to check users and assignments, as well as the applications they are using within each assignment (taking into account the components included in each level).
This is a long and laborious process that has to be multiplied by all the users in the company and often cannot be done in time for pushback in negotiations. Our advice is to automate the verification process as much as possible.
Use a SAM (Software Asset Management) tool with advanced software recognition features included. These types of tools offer lists of already "normalised" data (thus avoiding background noise) and correctly reconcile the different Microsoft application families and software entitlements with their usage data (users, allocations, uses).
We configure in our customers’ tool a view dedicated only to Microsoft 365 and its licensing models.
What insights can you glean from these reports? You can see at a glance:
M365 licences for businesses (Business/Enterprise, depending on the number of users), are sold on the basis of increasingly expensive tiers, with each tier providing additional applications and services. The price differences between one level and another are not insignificant, ranging from 7 to 53 euro.
There are subscriptions (e.g. E5) which have 25 applications into one combined offer. In their day-to-day work, there are some users who will benefit from the full offer, and others who could easily do their work with lower, cheaper levels (e.g. E3). Let's think about Visio and Project applications, which are part of the most expensive level: how much are they actually used?
Analysis of usage data in relation to allocations and users serves precisely this purpose: to identify excessive ownership. Even if allocations reflect company profiles, they may not necessarily match. How many C-levels, for example, delegate tasks to employees, even though they have all the tools to do so? What really matters are the workflows.
There are companies that, because of their size, have a very high turnover. You should therefore check in real time how many active and inactive users there are in the company ecosystem. What happens, in fact, is that we have subscriptions allocated and not used and subscriptions purchased but not yet allocated.
According to the Global Office 365 report mentioned earlier, just by redistributing inactive licences, 14% of total costs would be saved. On an expenditure of 500 thousand euros, 14% of the costs are 70 thousand euros, not bad!
It can happen that when switching from one licence model to another, the same person has several subscriptions. Let's take an example: an employee might have a perpetual device-based licence and an M356 a subscription that provides access to up to 5 devices. Wouldn't it make sense at this point to exclude the device in the perpetual licence from the pool of devices registered in the M365 licence?
There are many reasons for duplication: company mergers, purchases managed by different business functions, incorrect licence reactivations, etc.
We must therefore check whether there are users who have more than one licence. This work is also very useful for verifying compliance because it helps us to understand if there are any overlaps in the allocations compared to what was established in the contracts with the vendor.
Once this information has been obtained in the form of reports, we recommend setting up automatisms to reconvert/reassign overused, unused or duplicate licences.
This also makes it easier to set up self-service subscription plan activation procedures: each user, monitored in their workflows, could receive a plan appropriate to their usage.
As an example, we set up automated workflows within the SAM tool that periodically check for unused applications. Since regulations require that they be reassigned to new users no more than once every 90 days, the system "logs" them and sets them aside, and then produces an alert for when they can be reassigned.
There is another aspect to take into account. Microsoft and its dozens of enhancements have created a technology stack that is sometimes almost redundant. There may be applications within the same bundle that have similar functionality (see, for example, Sharepoint/Dropbox and Teams/Zoom).
Sometimes a lower level is sufficient. We also recommend a technology analysis based on actual needs. This is also useful for assessing possible cheaper (or free) alternatives to lower subscription plans.
This analysis could also be useful for negotiating standardised licence agreements on a given pool of applications, achieving better economies of scale.
Although Microsoft 365 is Microsoft's flagship Saas suite, it is not the only product to look at to ensure business continuity. Servers, data centres, infrastructure etc. there are a number of companies that are planning to move business data and workloads to Microsoft's cloud, Azure.
This is why we recommend getting full visibility of all areas of spend - on-premises software, cloud infrastructure and Saas application usage - so that when negotiating, you have an overview that allows you to opt for an overall offer that benefits from the economies of scale of using multiple Microsoft solutions.
If the cost of licences cannot be reduced too much, other areas of optimisation can be found. The cloud, in particular, is known for its versatility and easiness of activation, but it has hidden costs that require ad hoc management. Without FinOps (Cloud Financial Management) practices and tools, you risk managing your Microsoft spend as if it were divided into many small silos.
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