Just like Microsoft’s pricing and licensing, Microsoft negotiation tactics have evolved over the years. One example is timing, specifically how to leverage Microsoft’s fiscal year-end (June 30). In the past, enterprises were advised to wait and negotiate their agreements closer to Microsoft’s quarter- or year-end. That’s not the case today.
Microsoft’s fiscal third and fourth quarters are January through June and at least 65 percent of clients’ EAs renew during this time period. About 40 percent of renewals are in fourth quarter. By the time June arrives, Microsoft’s deal desk is at max capacity and that makes material pricing and terms concessions harder to secure. But that doesn’t mean customers can’t leverage year-end timing to their advantage – they just have to be smarter about it.
A Smarter Way to Leverage Timing in Your Arsenal of Microsoft Negotiation Tactics
Timing is still a critical factor in securing favorable negotiation outcomes with Microsoft. The challenge now is customers should increase the amount of runway for a number of reasons.
Navigating changes to pricing and licensing is one of them. Microsoft is focused on growing cloud revenue more than ever and one strategy is to increase costs and unit pricing on current clients at renewal time. It’s not uncommon for customers who were incentivized to the cloud with aggressive discounts to find they have a target on their back as Microsoft seeks to “aggressively reign back discounts…”as noted by a former Microsoft sales executive. With the introduction of the new cloud-based pricing (departing from per-Device pricing), commercial clients (both public and private sector) have experienced the pain(s) of this firsthand during their last renewal.
With this move to a cloud-based licensing structure and SaaS model, there is a new set of confusing options to consider. Information on some of these options can be found in the public domain and accessible to customers for vetting and advance planning, but about half reside in Microsoft’s private domain as ‘hidden and reserved’ options for certain situations and customers. You will want to leave yourself some time to analyze the options Microsoft puts in front of you.
Come Armed with Information and the Right Expertise
Microsoft is as willing as ever to get more creative and aggressive. It does take finesse and expertise to navigate Microsoft’s processes and roadblocks, but done correctly it can drive substantial benefits and results.
Multiple iterations of negotiation (3 to 5) are common – and encouraged when skillful price benchmark analysis and Microsoft license optimization expertise is applied. In the graph below, you can see how one customer had seven (7!) distinct iterations that ultimately resulted in much more savings. Sticking to a plan and targeted benchmarks will be key in managing towards those ultimate goals.
Microsoft Discounts Over Negotiation Iterations
If you have a renewal in 2021, NPI can help you get the best deal. We can review your current agreements and your organization’s current- and future-state requirements to determine how we can drive the best possible outcome for your Microsoft purchase or renewal. Our Microsoft licensing experts can provide decision support that help you make confident decisions about your renewal requirements.
Note – if your upcoming renewal is at least four months away, it’s smart to perform an M365 Usage Optimization Assessment to get a fact-based baseline for your demand definition. (Renewals aside, before your next true-up, remember that an M365 Usage Optimization Assessment can identify unused licenses and dramatically reduce your true-up quantities.)
The bottom line is this: It’s no longer a best practice to wait until the last minute. Give yourself some time to understand and analyze your Microsoft licensing options.