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Analysis: Microsoft's New Licensing Still Vague, 'Next Gen' Licensing May Significantly Raise Costs

• By Kurt Mackie
• 12/03/2013

Microsoft may have some unpleasant surprises for organizations that license its software, starting next year.

The actual plans aren't fully described, even by Microsoft, but organizations specialized in translating the company's complex licensing offerings are beginning to pipe up this week. So far, Microsoft has announced two broad licensing changes to come next year, although they may be available to some degree today. One of those changes is the new Server and Cloud Enrollment, which is an Enterprise Agreement type of contract requiring Software Assurance (SA) coverage across infrastructure that eventually will replace Microsoft's existing Enrollment for Application Platform (EAP) and Enrollment for Core Infrastructure (ECI) offerings. The other offering is called the "Microsoft Products and Services Agreement," or MPSA.

MPSA is a vaguely described licensing option for medium-size organizations that supposedly simplifies licensing contracts and provides Web-based software asset viewing tools. Microsoft indicated that it would roll out MPSA licensing this week, on Dec. 1. However, a Microsoft press spokesperson contacted on Tuesday, Dec. 2, would not confirm the availability of MPSA, and offered no further details.

MPSA licensing likely isn't broadly available at all, according to Scott Braden, senior vice president of value creation at NET(net) Inc., an international IT optimization and consulting company. Braden cited this explanation, which he attributed to a Microsoft field licensing support representative.

"This [MPSA licensing agreement] is only rolled out to certain customers at this time but eventually in late 2014 all enrollments will move to this," the Microsoft support rep explained to Braden.

Next Gen Volume Licensing
On top of the two new licensing plans, Microsoft has a broad program, called "Next Generation Volume Licensing" (NGVL), which apparently has a portal page here, but it doesn't seem to have been described in any great detail. NGVL apparently is planned for implementation sometime in late 2015. Braden pointed to a statement to that effect from an unnamed Microsoft Large Account Reseller (LAR) describing NGVL.

Starting in December, NGVL (Next Generation Volume Licensing) will be open to a larger number of customers from its previous pilot phase. However, the target audience is still very limited. Select License only customers without Software Assurance. Or large customers who only buy Office 365 directly through Microsoft Online Services Portal.  SA is not available through NGVL at this time. "Committed Offers" like EAs are not available through NGVL. Actual product licensing is not changing. This is a multi-phased introduction, the new structure will not be fully in place until the end of FY15, possibly even further. Long term, the goal here is to make buying Microsoft easier.

Organizations that already have Software Assurance (SA) coverage and Enterprise Agreements that purchase the new NGVL licensing may end up with "dual contract structures, a multitude of agreements, multiple VLSC-esque portals, and a management headache," the LAR added, according to Braden.

Although details about NGVL are still far from clear, Braden interprets it as more of an overall licensing program approach, rather than a specific licensing offering. NGVL could include the so-called "simplification" of licensing contracts that Microsoft has promised with MPSA, as well as a new Web-based billing portal, he suggested via e-mail. It could also involve a revamp of the Microsoft Volume Licensing Service Center (VLSC), which "has long been a sore spot for customers," Braden said. NGVL also likely will signal the phase out of Enterprise Agreements, Enterprise Agreement Subscriptions (EAS), Select Plus licensing, as well as ECIs and EAPs, he added.

Software Assurance Push
The key word, according to Braden, is the phrase, "committed offers," which the LAR rep uses to describe the NGVL program. It's also a phrase that Microsoft uses to describe its Server and Cloud Enrollment offerings. That signals a Microsoft push to get its customer to apply SA across their infrastructures.

"Like they've been doing with EAP, ECI, etc. agreements, you only get the great volume pricing when/if you include Software Assurance for every device and/or installation in the enterprise," Braden explained. "For many enterprises that's a deal-killer."

The example Braden provided involved SQL Server. He said that Microsoft's EAP currently requires paying for SA. However, organizations with datacenters may have remote offices that don't need SA coverage. "So the net effect of these 'committed' deals is that unit line item price decreases a bit, but total spend increases a lot, because 'all' servers must be included," he explained.

Consequently, Microsoft's new licensing, expected in 2014, could bump up prices for some organizations by compelling broad SA purchases. However, Microsoft has so far remained fairly tight-lipped about any such details. SA, which notably offers upgrade rights to the next software release within a contract period, is estimate to increase prices for organizations by 25 percent to 29 percent over the underlying software licensing price.