Redmond Negotiator

Dealing with Multiple Microsoft Licensing Agreements

You can almost always bring these together -- and save money in the process. Our licensing guru Scott Braden shows you how.

• By Scott Braden
• 01/31/2007

And there are also many reasons why you might want to consolidate and align your agreements into one master plan. The obvious one is price: For example, if your company has three divisions with about 1,000 PCs in each, you'd get better pricing by signing one agreement for 3,000 PCs versus three independent deals.

Another benefit is centralized management and procurement, which can help you keep a handle on license compliance (to keep Microsoft and other auditors off your back) and also help you enforce IT standards (to reduce support costs and allow for more realistic planning).

But these benefits don't always come easily. First, there's the organizational politics to consider. If your company doesn't yet have a centralized approach to IT governance, then someone is going to have to be the champion and evangelist in order to sell the concept of one large agreement for the entire company. This is hard to do without high-level sponsorship, or at least a companywide program to piggyback onto. Normally, it only takes a quick look at the cost savings opportunity to get a CIO interested in consolidating agreements, but what if each division has its own IT chief? You'll need to show each individual not only the cost savings but detail how they can maintain control and tracking for their own division.

When a company has multiple agreements, they are usually based on differing discount levels, different product bundles and, most critically, different expiration dates.

Typically, one agreement is facing expiration and, in the process of preparing to begin a new agreement, there's an opportunity to bring in the other groups to participate so that every group benefits from the combined negotiating power and resulting discounts.

So how do you handle it when one agreement is expiring, but the others are in the middle of their terms? What are your options?

Well it depends (don't you hate that answer?) on what kind of agreements you're dealing with. You must get a clear understanding of exactly which dates and deadlines are involved.

• Open Agreements: Most of these have no real requirements beyond the initial purchases that started the agreement. So it's very common for a shop to have many "legacy" Open agreements in the files. You'll want to inventory and track these for license compliance history, but (probably) there are no future commitments with them. The big exceptions are Software Assurance, which we'll get to in a moment, and a program called Open Value Subscription which was available outside the U.S. and is basically a software rental program.
• Select Agreements: These have specific end dates, but that doesn't mean you can't consolidate under a new agreement. Microsoft describes Select as a volume purchase commitment-based program, but you can stop buying under a Select agreement any time you choose. Again, the big exception is Software Assurance, which often has annual payments that you'll still owe even if you begin purchasing under a new, consolidated agreement.  
• Enterprise Agreements: These will have specific end dates, and there are payments tied to those dates. Think of an EA as a payment plan, much like buying a car -- you don't really own the licenses until you've made the last payment. So if you have an EA that you want to end early or fold into another agreement, you're going to be negotiating some prorated payments, or possibly even an early buyout of your remaining payments.

In principle, when you consolidate multiple agreements you follow the same process as negotiating a new agreement. Assess your current licensing and compliance, plan your future requirements, have a gap analysis, explore the various ways to meet the requirements and negotiate the best choice.

In practice, the complexity and gray areas come from the usual challenges of performing software license management across multiple organizations with independent organizational structures, and also from figuring out the timing and negotiating the payments associated with the Software Assurance and Enterprise Agreements that have different dates and coverage periods remaining.

Note that in recent years Microsoft has done a pretty good job of accepting the concept of a straight-line prorating of these payments, and I frequently see clients getting any remaining payments rescheduled and prorated as they are folded into the new agreement.