Microsoft’s Cloud Economics Assessment – An Audit in Disguise?

By Dan Brewster

Director of Client Services, Microsoft, NPI

May 28, 2019

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Have you heard of Microsoft’s Cloud Economic Assessment? If you haven’t, stay tuned. The odds are you will soon enough and you can bet it’s more than what the term implies. In fact, it could lead to a software license audit.

As most large Microsoft customers know, a “SAM engagement” is really an audit in disguise. Microsoft has a large team of commissioned sales representatives responsible for initiating SAM engagements, resulting in $1B worth of incremental annual revenue to the company. We are now seeing signs that a “cloud economics assessment” or “cloud productivity assessment” can also be an audit in disguise.

A New Audit Term in Town – Microsoft’s Cloud Economics Assessment

Cloud economics assessment engagements are Microsoft-funded (“won’t cost you a dime!”), and all include an automated discovery process using Microsoft tools. This discovery process will scan your network, reporting on all instances of Microsoft products it finds and then the Microsoft team will begin the reconciliation process. This process maps the discovered data against the Microsoft License Statement (see my prior webinar on the MLS here), resulting in an Effective License Position report.

If you do find yourself in a shortfall situation, Microsoft is going to want remediation immediately – this often comes with a six or seven-figure price tag. And, of course, Microsoft no longer sells the older products that might have caused the non-compliance. As such, remediation will always be with the most current products in the Microsoft lineup. Here’s an example:

Suppose you had a license shortfall of 3,000 copies of Office Professional 2013. Since Microsoft doesn’t sell 2013 any longer, it will sell you Office Professional 2019. Sure, you can come up with about $1.2M to purchase license only. Or you could decide to add perpetual versions of Office to your Enterprise Agreement and pay about $676K a year for three years. Or, better yet, you can purchase Office 365 Pro Plus and pay only $406K a year.

It seems like a pretty easy conversation – we didn’t plan for this added cost, so let’s spend as little as possible and sign up for the $406K. But, as the cloud has taught us, it’s not that black and white. The Office 365 Pro Plus is a subscription product and that $406K is an annual spend – forever. Since you’re moving to a subscription product, perhaps O365 E3 makes sense – you’ll get Office Pro Plus, Exchange Online, SharePoint Online, and Skype for Business Online. All for the low cost of $18.80 per user per month. But for those 3,000 users, it works out to just under $700K a year.

The kicker, of course, is that you would receive perpetual use rights for Office and get to run Office Professional 2019 (or whatever was current at the end of your EA) forever if you had simply added Office to the EA. And let’s not forget that the $1.2M license-only purchase would be less expensive over time.

A key remediation outcome (from Microsoft’s perspective) on any audit shortfall is to move you to Microsoft’s cloud products. Many customers derive tremendous value from Microsoft’s cloud offerings and there are benefits for those ready and willing to move the cloud. But the pressure of audit situations doesn’t give you time to carefully analyze the most cost-effective licensing strategy for the long term.

The Cloud Economics Assessment is sold as a process to help you consider your licensing options and analyze ROI internally (which you should). But don’t forget when you hear “Microsoft Funded,” their goal will be to find a license shortfall to force you to have the conversation according to Microsoft’s timeline. If the goal were truly as simple as “consider the ROI of Microsoft’s cloud,” why would a discovery process of your on-premise products be required?

NPI recommends that you evaluate cloud migration and the potential ROI on your own timeline, and to carefully consider whether sharing your current deployment details with Microsoft – or any vendor – is prudent. One option to consider is conducting your own cloud economics assessment independent of Microsoft so you don’t expose yourself to audit risks. Many of NPI’s clients want help identifying the ideal workloads to migrate to Azure, and quantifying the Azure cost – NPI now offers this service if you’re interested.