Do Microsoft’s New Software Bundles Make Sense from a Cost Perspective?

By Dan Brewster

Director of Client Services – Microsoft, NPI

January 14, 2021

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I’ve discussed Microsoft’s software bundles in recent blog posts for a few reasons. First, Microsoft loves bundles as evidenced by the (bundled….) way many of its newest offerings have been structured. Second, Microsoft is quite the expert at this approach, which gives a boost to some individual products that may not be best of breed when compared to the competition. In these cases, Microsoft does a pretty good job of creating a compelling financial offer.

But the question remains – do Microsoft’s software bundles make sense? It’s an easy question to answer if you need all components of the bundle. But that’s typically not the case. Enterprise customers need to perform their own analysis to determine if a bundle truly meets their usage requirements and represents the best deal.

Deconstructing Price for Microsoft Software Bundles

Microsoft has a lot of smart people determining which solutions get bundled together, and demand across disparate products isn’t always a driver. We typically see an in-demand product included in a bundle along with products that may not be best of breed. Microsoft’s goal, obviously, is to create market share for those laggard products. Your goal should be to calculate the realized value (to you) vs. Microsoft’s price.

Let’s use the M365 E5 Security offering as an example. Included with the M365 E5 Security Suite are the following products: O365 ATP Plan 1 & 2, Azure ATP for Users, Cloud App Security, Azure AD P2, and Windows Defender E5.  It’s an easy calculation if you need all of these components. In fact, a Level D Enterprise Agreement customer will receive a 43.29 percent discount by purchasing the bundle.

But what happens if you need only certain components of the bundle? Or, harder, what happens if you have different quantities of users that need certain components? Or, harder yet, what if you have an existing agreement for competitive products that won’t expire for a year or so?

You’ll need to perform some calculations to determine your realized value. Let’s assume you have 20,000 users in the organization and everyone needs to use ATP Plan 1 & Plan 2. Well, that’s great – you’re almost halfway to justifying the $10.56 per user per month. ATP Plan 1 & 2, purchased on an ala carte basis is $5.24 per user per month.

However, the conversation becomes a bit more complex if you don’t need the rest of the components for the entirety of the organization. Suppose you could be convinced to have 5000 users use Azure AD P2 to take advantage of Azure Identity Protection for your home-based workers? It wouldn’t make sense to buy the E5 Security SKU for everyone if only a quarter of the users in the organization would use one of the major components, despite everyone using ATP Plan 1 & 2.

What happens if you are using another cloud access security broker and have a subscription for another year or two? When considering Microsoft’s software bundles, the company expects you to pay for the entirety of the bundle for the entire term of your enrollment, and hopefully (from Microsoft’s perspective), for all users in your enterprise. With this in mind, Microsoft’s approach becomes quite expensive.

Calculating the True Value of a Software Bundle

It makes sense, both from a financial justification and negotiation perspective, to calculate the value your company will realize based upon your intended consumption of various software bundle components. Often, it’s an easy calculation – generally, if you need 60 percent or more of Microsoft’s components, the price savings will justify the bundle purchase. However, it becomes a more complicated calculation when you consider your deployment velocity for the various components. Most clients won’t deploy all of new products on Day 1 for a variety of reasons – competitive products, IT manpower, etc.

NPI’s Microsoft licensing experts have assisted clients with optimizing hundreds of EA renewals and because bundles are now so prevalent, in almost every case we are now helping clients build a model that provides financial justification for the software bundle (or not – both scenarios are valuable to understand). The output of the analysis is very helpful in negotiating with Microsoft. The deployment velocity models we build are particularly insightful and powerful – they help client stakeholders assess the purchase from a new perspective, and they can be a game-changer for optimizing licensing and cost for large EA renewals.