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UPDATE: Microsoft Found To Up Prices 43 Percent with EA Licensing Renewals

Microsoft is increasing the licensing costs for Enterprise Agreement (EA) renewals by about 43 percent, according to calculations by a consulting company.

The company, Software Licensing Advisors, lays out the math in its "formula of the month" discussions, which are written by Paul DeGroot. DeGroot is a senior consultant to Software Licensing Advisors and prominent expert on Microsoft's software licensing, with his own Pica Communications consultancy.

The August post (PDF) by Software Licensing Advisors shows how to separate the actual cost of the licensing from the combined figure on Microsoft's contract renewal forms. Microsoft doesn't break down that combined figure, but it includes Software Assurance costs along with licensing costs.

In a September post (PDF), Software Licensing Advisors relates how Windows licensing costs actually increase with Enterprise Agreements after three years. By performing the calculations, the Sacramento-based consulting firm found that an EA renewal of the Windows client operating system increases 43 percent because Microsoft doesn't renew at the expected discounted EA licensing price. Instead, Microsoft uses the more expensive Select or Select Plus agreement in its calculations.

Enterprise Agreements are for companies with 250 or more PCs to license. Select Plus is also for organizations with more than 250 PCs and offers a more simplified version of licensing compared with the original Select licensing for enterprise customers, which Microsoft stopped selling in July of 2011. But the point of Software Licensing Advisors' calculations is that most customers may just assume that their renewals are based on the original EA price.

For instance, while an EA for Windows may have started out with a price of $125.31, it jumps to $179.31 at renewal time, according to Software Licensing Advisors' calculations. For an organization with 2,000 computers, that amounts to "an extra $94,000 over a three-year renewal, due to this pricing sleight-of-hand," according to the consulting firm.

Andrew Wolfe, a senior product manager on Microsoft's Enterprise Agreement team, offered the following response on Friday to DeGroot's calculations.

"The Microsoft Enterprise Agreement is designed to provide a more flexible and clear licensing experience for our customers," Wolfe said in a released statement. "It appears that the formula presented is more applicable to a Select Plus licensing scenario for Windows OS. In addition, the formula is unreliable to draw any conclusive results because additional discounts associated with either an enterprise wide or desktop platform commitment available within the EA Enterprise Enrollment are not taken into account. Furthermore, inclusion of licensing applications, CAL Suites, or Windows in an EA Enterprise Enrollment can help an organization build both simplicity and flexibility into the IT infrastructure while enjoying savings on top of the already discounted Enterprise Product licenses. Readers should also note it is not Microsoft's intent to hide price levels. Agreements are reached through open dialogue with customers; it is Microsoft's policy to be transparent to what their licensing costs will be and can compare the costs of the renewal agreement versus the previous agreement. For additional details on the platform enrollments available within the EA, please see the Microsoft Enterprise Agreement Program Guide on pages five and six."

Software Licensing Advisors is a new company that started in June. Its Web site indicates that its consultants include former Microsoft employees. So far, the company has negotiated more than 200 Enterprise Agreements for its clients. In addition to providing consulting and licensing audit advice, the company offers seminars on Microsoft licensing.

The company is independent of Microsoft and advocates for alternatives to all-or-nothing renewals in some cases, which is how EAs are designed. Software Licensing Advisors also plans to announce a new tool, designed in conjunction with SoftWatch, that will help organizations better assess their application use and avoid costs associated with "over-licensing" software.

About the Author

Kurt Mackie is online news editor for the 1105 Enterprise Computing Group.

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Reader Comments:

Thu, Sep 27, 2012 Advisor Seattle

Software Licensing Advisors encourages customers to do their own math with our posted formulas to compare the underlying L's in their inital EA to their renewal EA. Ask your LS to separate out pro desktop components into Office, CAL Suites, and Windows. Note that MDOP isn't a factor here. We bet you'll see a huge increase in the on L on which your SA is derived. Soon, we'll post Microsoft's acknowledgement of this practice in an email we received from them. Look for it on our web site in OCT 2012.

Tue, Sep 18, 2012

This licensing "anomaly" is perhaps MS incentive for customers to consider user subscription based cloud based offerings of their Office applications (Word, Excel, SharePoint, etc).

Wed, Sep 5, 2012 J Senior

SA is either a 25 or 29 % (depending of pool) of L - where L is price of a new license. In the depicted OS example L really refers to the upgrade license (not to a new license - which in this case comes OEM with the PC) so I am not sure that the math equations are applicable in this case. What results are obtained for another product such as Office Pro? Regards

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