Over the last few quarters, NPI has seen an increasing number of VMware Enterprise Licensing Agreements (ELAs) that include some amount of tokens. For the uninitiated, token-based ELAs include what are essentially “credits” to be exchanged later when the customer needs a new license. The benefits of this arrangement are (1) flexibility for the customer and (2) the avoidance of having to pay support until after the token has been exchanged for a license.
Unfortunately, these benefits have historically come at a price. Token-based ELAs typically come in the form of an EPP (Enterprise Purchasing Program) or HPP (Hybrid Purchasing Program) and receive less discounting.
This is where things get interesting. In addition to seeing an uptick in ELAs containing varying degrees of tokens, we’re seeing varying degrees of discounts applied to these token-based ELAs. Market forces are most likely driving this behavior from VMware, but there are still a few caveats to take into consideration if you’re exploring token-based ELAs with the vendor.
First, tokens are “use it or lose it” – any unused tokens over the term of your agreement are forfeited. Additionally, the universe of potential licenses that can be exchanged for tokens must be specifically identified and captured in your ELA exhibit. In other words, if you have a token-based ELA and need new licenses that aren’t covered in your ELA exhibit, you may not be able to take advantage of ELA pricing for those licenses. There’s also a bit more cost exposure when exiting a token-based ELA compared to a traditional ELA as it relates to calculating ongoing support for licenses obtained during the term of the agreement.
Be sure to have a VMware licensing expert on your side of the table if you’re entering the token game so you can capitalize optimally on the benefits, and avoid the pitfalls.