Today, NPI announced some exciting news. Falfurrias Growth Partners, a leading private equity fund focused on growth-oriented businesses, has made a significant investment in our business. This marks a pivotal moment in NPI’s journey. It enables us to accelerate our growth trajectory and delivery of new AI-powered solutions that are purpose-built for helping IT procurement practitioners secure world-class IT purchase outcomes.

You can read more about the investment announcement here.

For the past 20 years, NPI has been committed to helping large enterprises eliminate IT overspending. In the last five years alone, NPI has analyzed over $75 billion in IT spend. We’ve identified over $9 billion in savings. Our clients include 120 of the Fortune 500 and some of the world’s most recognized brands. This is a testament to the value we provide to IT procurement practitioners day in and day out.

In 2024, we’ll be delivering new innovations and tools that make it easier for IT procurement practitioners to negotiate with unparalleled ease, speed, and confidence. Stay tuned!

Contact NPI today to learn how we can turbocharge IT procurement excellence within your organization.

Microsoft announced the general availability of Microsoft Teams Premium in February 2023 to much fanfare as well as a few criticisms. While the debut of several AI-powered features were received enthusiastically by some enterprise users, the vendor also stirred frustration when it announced some features that were previously free in the standard edition would now only be available in Teams Premium.

The enthusiasm surrounding Microsoft Teams Premium has underscored just how pervasive Teams has become across the enterprise sector. Microsoft Teams is the ubiquitous collaboration hub for Microsoft 365 productivity suite users. Microsoft has done an excellent job of including Teams with its popular productivity products and offered the standard edition of Teams as a free download in 2023. While the free edition is no more, most enterprises have rights to Teams through their M365 subscriptions.

Teams Premium, however, requires an upgrade and is priced at around $75 per user per year under the Enterprise Agreement program. Considering that’s about 20% of the annual M365 E3 subscription cost, buyers need to consider whether the Premium edition is a worthwhile investment. Microsoft highlights several features: Intelligent Meetings, Personalized Meetings, Protected Meetings, Advanced Webinars with support for large numbers of users, and Advanced Virtual Appointments.

Leveraging AI for a More Productive and Inclusive Meeting Experience

From a global user perspective, the most exciting new features of Teams Premium are the AI-powered meeting features, like live translation and intelligent recap. Teams Premium will provide live translation in the user’s native language for 40 different languages. This is offered via Azure cognitive services and is just one example of how Microsoft’s Artificial Intelligence capabilities will provide significant benefits. Microsoft also offers Intelligent Meeting Recap – auto-generated chapters in recordings, AI-generated notes and tasks, and various timeline markers for significant events during the meeting.

Microsoft offers customized meeting templates on the Personalized Meeting front to ensure a consistent meeting experience and adherence to corporate compliance requirements. Administrators can brand meetings and customize the joining experience and team backgrounds.

From a Protected Meeting perspective, meeting organizers can apply sensitivity labels to the meeting and any published content to protect information and prevent attendees from leaking sensitive or confidential information. The organizer can also restrict the meeting attendee list, stop the meeting from being forwarded, and control who can record the meeting.

Enhanced Features for Workgroups and Large-Scale Events

Teams Premium was designed to work well for workgroups within the enterprise, but is also more than ready to accommodate larger meetings. Teams Premium supports speaker bios and multiple co-organizers. The new edition highlights a Virtual Green Room where presenters and meeting hosts can chat and stage content before the event begins, and a virtual waiting room where meeting attendees can engage while waiting for the event to start. Event organizers can see content shared in the Green Room and make it, and any associated presenter, live to the meeting participants.

Teams Premium also supports third-party hosting services for extensive meetings – Microsoft offers an Enterprise Content Delivery Network (eCDN) with optimized network performance for video streaming and distribution. The Advanced Virtual Appointment capabilities of Teams Premium helps streamline appointment management and allows administrators to set up and manage scheduled and on-demand virtual appointments.

Buyer Insights for Microsoft Teams Premium

There’s a lot to like about the new Teams Premium, and large enterprises may care most about the security, meeting branding, and support for large meetings – all of which will help the organization offer a truly exceptional meeting experience. But it’s also a real win for the individual user.

The live translation capabilities make Teams Premium a must-have if you’re a global user and the meeting is not in your first language. The intelligent meeting recap and the AI-generated meeting notes will allow participants to focus on the discussion versus thinking about taking notes and to-dos during the presentation.

From a pricing perspective, it’s mentioned above that the cost (EA Level C) is about $75 per user annually. But know that Teams Premium is sold as an additional product under the Microsoft Enterprise Agreement. And while Microsoft has been reluctant to offer discounts (yet!) on its new AI products, NPI routinely sees discounts on other products when added to the Enterprise Agreement. We also see our clients successfully challenge Microsoft on non-discounted purchases.

On November 22, 2023, Broadcom completed its acquisition of VMware leaving many wondering what the impact would be at a customer level. Fortunately, or unfortunately, depending on perspective, they didn’t have to wait very long. In the days following the acquisition, Broadcom made significant changes to VMware’s offerings that will affect countless enterprise customers. And this is likely just the beginning.

It’s fair to point out that VMware customers aren’t strangers to IT buying headaches. Thanks to its own aggressive acquisition strategy, VMware’s range of offerings has grown to over 40,000 constantly changing SKUs. Complex bundled offerings have been the norm and getting detailed line-item rates for them (or list pricing in general) has been notoriously difficult. Historically, deals for similarly scoped customer requirements have varied widely. Even renewals within the same customer relationship look vastly different between iterations.

Will Broadcom’s acquisition of VMware alleviate some of these challenges? It’s difficult to say. The vendor has already made licensing and pricing changes that will require careful navigation. And if previous acquisitions are any indicator, customers may find it more difficult to do business with “VMware by Broadcom,” despite Broadcom’s efforts to simplify VMware’s portfolio. Here is a preview of what enterprises can expect.

Aggressive Changes to Licensing Starting with the End of Perpetual Licenses

Customers have long lamented the complexity of VMware’s offerings and SKUs. VMware by Broadcom has seized this opportunity to simplify the VMware product portfolio by eliminating the sale of perpetual licenses, Support and Subscription renewals for perpetual licenses, and certain credits. From the announcement:

• A dramatic simplification of our product portfolio that allows customers of all sizes to gain more value for their investments in VMware solutions. The portfolio simplification across all VMware by Broadcom divisions stems from customer and partner feedback over the years telling us our offers and go-to-market are too complex.
• Complete the transition of all VMware by Broadcom solutions to subscription licenses, with the end of sale of perpetual licenses, Support and Subscription (SnS) renewals for perpetual offerings, and hybrid purchase program/subscription purchase program (HPP/SPP) credits beginning today (effective dates will vary). Additionally, we are introducing a bring-your-own-subscription license option, providing license portability to VMware validated hybrid cloud endpoints running VMware Cloud Foundation.

VMware by Broadcom will allow customers to continue using perpetual licenses with active support contracts and will continue to provide support as defined in contractual commitments. They will also provide pricing incentives via a trade-in program to buffer the cost of moving away from perpetual licenses. But the cost impact will likely be high for some customers as they’re forced to expedite the transition to cloud and subscription offerings.

Repricing Is a Real Possibility

VMware by Broadcom has said it will cut subscription list pricing in half for its Cloud Foundation hybrid cloud suite, although the base pricing remains unclear. On the surface, this could be good news for customers – but it’s too early to get a true and full picture of price comparisons and there is reason to be concerned that this is a one-off instance versus a trend.

Broadcom has a history of dramatic repricing of acquired solutions. Customers that lived through acquisitions like CA and Symantec have experienced price increases ranging from 60% to 400%. These deals also resulted in a slowdown in innovation and support for acquired products, which made it even more difficult for customers to tolerate higher costs.

Get Ready for Tougher Negotiations

Broadcom’s reputation for tough negotiation tactics has left many customers apprehensive about their bargaining power for upcoming VMware purchases or renewals. And for good reason. Broadcom doesn’t always play fair once an acquisition has been absorbed. Negotiations can be “all or nothing.” Often, customers have no choice but to switch vendors if they can’t get on board with new pricing and terms. This should be a wake-up call to VMware’s customer base given the vendor’s deep entrenchment in the enterprise IT ecosystem.

The fallout from Broadcom’s acquisition of VMware is ongoing and, despite the bold changes already announced, the acquisition is still fresh. It’s too early to determine exactly how these changes will play out for existing customers with upcoming renewals. But the writing is on the wall. There will be massive changes and enterprises with sizeable VMware spend should start strategizing their cost mitigation approach.

Until a clearer impact picture emerges, NPI recommends enterprise customers do the following:

• Perform price benchmark analysis on any upcoming VMware purchase and renewal. Now is not the time to let your guard down on price negotiations. Securing and locking in the lowest price possible at time of purchase or renewal is key. Broadcom is your new business partner now – and they are vigilant about extracting the maximum revenue from each client, even if the client relationship is on the line.
• Make informed licensing decisions. Analyze and select the options that best align with your current and future requirements. Seek granularity for bundled offerings to avoid overpaying for unnecessary functionality. NPI will provide guidance as we learn more about the in-the-trenches impact of licensing changes.
• Start evaluating competitive alternatives. To say that VMware is entrenched into the enterprise IT ecosystem is an understatement – their customers include 100% of the Fortune 500. But licensing and pricing changes have the potential to shift dynamics, but only if VMware by Broadcom senses a credible competitive threat. Begin competitive evaluations now (they take time, as do the migrations) and be prepared to come to the negotiation table with suitable alternatives and a realistic timeframe for potential transition.

The VMware by Broadcom situation is evolving quickly. We will keep you updated as things unfold, and changes make their way into actual deal pricing and negotiation experience.

Do you have a VMware purchase or renewal on the horizon? NPI can bring clarity, confidence, and cost savings. Contact us today.

In September 2023, Cisco announced end-of-sale and end-of-life dates for its hyperconverged infrastructure (HCI) solution. The last date to order the product will be September 11, 2024, and software maintenance releases and bug fixes will no longer be issued after September 11, 2025. This announcement came less than a week after Cisco announced a strategic partnership with Nutanix, a competitor in the HCI space, to offer “Cisco Compute Hyperconverged with Nutanix.”

Cisco’s announcement wasn’t a surprise to those closely following the HCI marketplace. Despite strategic acquisitions and investment, Cisco’s product HCI roadmap has been lagging for some time. Over the last decade, it’s become clear the vendor’s top innovation priority is its UCS products, which run other HCI solutions. A strategic partnership with Nutanix allows Cisco to maintain its core focus on UCS while giving customers an “approved” option that still generates revenue.

But the announcement isn’t insignificant. The Cisco HyperFlex product line contains over 200+ product SKUs and there are plenty of enterprise customers that use HyperFlex to reduce infrastructure costs, increase IT agility, and improve application performance.

The problem is that HCI solutions require a significant investment and can be difficult to switch away from once entrenched into the enterprise IT ecosystem. This may catch some enterprise IT and IT procurement groups off-guard. Here are some things to consider as you strategize next steps for your Cisco Hyperflex investment:

Review Pricing Around Existing Hyperflex Agreements ASAP

While the end of sale and end of software maintenance releases date are in the near-future, Cisco’s will allow existing customer renewals and support contracted customers beyond those dates. NPI advises customers gain clarity on Cisco’s sunset timeline, explore renewal options and, if applicable, secure the most favorable pricing possible. This will help protect the IT budget as you determine a switching strategy that works best for your requirements.

Understand Cisco’s Preferred Alternative to HyperFlex

According to Cisco’s FAQ, customers can migrate from the HyperFlex solution to Cisco Compute Hyperconverged with Nutanix on qualified HyperFlex M6 hardware and with the purchase of a new Nutanix software license. There will be no direct credit for existing HyperFlex licenses although Cisco has said it is working on “a number of migration offers” to reduce the cost of switching.

Evaluate Competitive Alternatives

If you don’t want to migrate to Nutanix, there are two things you should know. First, start evaluating the competition ASAP. Keep in mind that HCI alternatives like VMware and SimpliVity will be looking to capitalize on Cisco’s soft exit. Expect disparity in deal pricing and contractual business terms as these vendors feel out their leverage. NPI can assist in helping you determine if your deal pricing is best-in-class as well as guide negotiations. Second, if you don’t want to migrate to Nutanix, you can repurpose existing Cisco HyperFlex hardware as standard Cisco UCS.

Non-Cisco HCI Clients Should Also Review Their Agreements

Because of Cisco’s announcement, NPI anticipates there may be increased pricing pressure for customers of other HCI vendors (e.g. VMware and others) as they adjust selling strategies to accommodate for market conditions. Again, perform IT price benchmarking on all purchases and don’t approach renewals on autopilot.

Cisco UCS Customers Should Scrutinize Upcoming Purchases

Finally, Cisco’s other related solutions like UCS will likely see some pricing shifts as the vendor tries to recoup any lost revenues. The same advice as above applies – review any upcoming UCS purchases to ensure pricing is at or better than fair market value range, and that contractual terms are optimized for cost and flexibility.

If you need help benchmarking pricing for your Cisco purchase or renewal, NPI can help. Contact us to learn more.

On a monthly basis, Microsoft can change the use rights and offerings for their license agreements and these changes can be found on their Product Terms page. This page isn’t very intuitive, and changes are often hard to spot. One such example is the recent removal of O365 from Microsoft’s Enterprise Agreement offerings.

In the third quarter of 2023, Microsoft quietly changed the availability of some of its Frontline offerings. This included the removal of Office 365 F3 from all programs except the Microsoft Customer Agreement (CSA or Direct).

The Frontline licenses have been a great addition to Microsoft’s licensing options, but can only be assigned to users who satisfy one or more of the following conditions:

• Uses a primary work device with a single screen smaller than 10.9”
• Shares their primary work device with other qualifying Microsoft 365 or Office 365 Frontline Worker licensed users, during or across shifts

What Does O365 F3’s Removal Tell Us?

It is Microsoft’s prerogative to change the licensing terms for their products as they see fit. Compared to some of Microsoft’s other licensing adjustments, the removal of O365 F3 is not that big of a change. But it does impact customers as the alternatives are not apples-to-apples in terms of cost or capability. It also provides a glimpse into Microsoft’s licensing strategy and perhaps where it could be going in the future.

O365 F3 didn’t fall neatly into Microsoft’s Enterprise Products or Additional Products categories. Enterprise products, such as Office 365 E1/3, EMS E3/5, Windows E3/5, and M365 E3/5, carry contractual requirements. Each qualified user must be licensed with the appropriate Enterprise product. A qualified user is a person who: (1) is a user of a qualified device, or (2) accesses any server software requiring an Enterprise Product Client Access License or any Enterprise Online Service.

Additional Products means any Product identified as such in the Product Terms and chosen by the Enrolled Affiliate under the Enterprise Enrollment. Additional Products do not have any contractual requirements and a customer can pick and choose which Additional Products to cover with Software Assurance via the Enterprise Agreement. O365 F3 was an outlier to the Additional Product offerings in that there are pre-qualifications to buying it (see above).

Implications of the Removal of O365 F3

The removal of O365 F3 from Microsoft’s Enterprise Agreement offerings suggests the vendor is no longer interested in the licensing granularity that was possible with O365 F3. Instead, Microsoft wants to force customers to license Frontline workers with either the M365 F1 suite or the M365 F3 suite.

While O365 F3 was an economical option for Frontline workers, it is important to note that these replacement options include the full Enterprise Mobility and Security Suite E3, at a fraction of the cost of the standalone EMS E3 offering.

It will be interesting to see what changes, if any, Microsoft make to their product offerings under the Enterprise Agreement moving forward. As Microsoft’s product and revenue strategy evolves (particularly as it related to AI), enterprise customers should have resources at the ready to spot and interpret licensing changes as well as model cost impact and alternative licensing scenarios. This understanding will go a long way in helping Microsoft EA customers effectively strategize purchases and renewals with an eye towards cost optimization.

Interested in learning more about Microsoft’s recent licensing changes? NPI’s Microsoft Cost and License Optimization experts can help. Contact us to learn more.

Despite the critical nature of IaaS and PaaS, it’s not uncommon for customers of the industry’s largest hyperscalers (e.g. AWS, Azure, Google Cloud) to overlook some of the fine print in contractual business terms. One example is the “end of term” clause in AWS and Google Cloud agreements. The verbiage should set off alarm bells for anyone in enterprise sourcing, legal, or risk management.

Example text from each supplier is illustrated below:

Both suppliers make it clear that all discounts and special pricing will revert to then-current published list prices upon expiration of the term. Large enterprise customers could see their costs go up by a staggering 25% to 35% or more.

It’s Not Just Cost Risk – It’s Leverage

The negative implications of these end-of-term clauses go beyond a jump in cost. The clauses effectively give all the leverage to AWS and Google Cloud as a contract comes due for renewal. An enterprise customer with significant spend on either platform will either risk what AWS or Google Cloud offers (which typically comes in the form of greater spend and vendor entrenchment) or risk reverting to list prices.

This approach is very different compared to traditional data center outsourcing agreements. Those agreements typically had specific clauses on how to handle the end of term. For example, on a five-year outsourcing or managed services agreement, the contract typically defined PxQ pricing (price multiplied by quantity) for an extended term. Additionally, they often included a clause for transitions in the event the client did not renew for a new term. The transition clause would also define PxQ pricing and support for a negotiated period of time following the end of term to allow smooth transition to a different provider.

Pushing Back on AWS and Google Cloud’s End of Discount Term Clause

Thus far, AWS and Google Cloud have shown little flexibility in amending the clause. NPI recommends all enterprise customers challenge AWS and Google Cloud on the clause, especially before committing to a significant spend. To negotiate effectively, customers need to be prepared to offer a substitute. If more customers begin to press on this issue, the vendors may begin to address it.

One suggestion is to require all discounts and special pricing continue to be in effect on a month-to-month term as long as the customer and vendor continue to negotiate in good faith on a new Discount Term. If the parties can’t agree within a negotiated period of time, the discounts and special pricing could remain in effect for a transition period regardless of monthly spend.

Sourcing with AWS and Google Cloud – Expert Negotiation, Careful Optimization Required

Just like outsourcing contracts, contractual business terms for cloud purchases and renewals must be carefully optimized. This is becoming increasingly important as large enterprises increase their cloud usage, and as hyperscalers seek ways to increase profits and grow market share.

AWS and Google Cloud’s end-of-term clause is just one example of revenue strategy tactics cloud providers use to stay two steps ahead of customers. And one example of why it’s absolutely necessary for customers to negotiate contractual business terms that optimize cost and flexibility alongside current- and future-state requirements.

Negotiating an enterprise-scale agreement with AWS, Google Cloud or Microsoft? NPI’s IT sourcing experts can help. Contact us.

Verizon Business recently announced the sunsetting of its BlueJeans video conferencing solution, which it acquired only a few short years ago in April 2020 for $500M. At the time, the acquisition made sense for the telco giant as the pandemic forced many people to work remotely. But three years later, Verizon has decided to refocus its efforts on other priorities that include driving sustainable growth within fixed wireless, 5G private wireless and mobile edge compute solutions.

The decision to sunset BlueJeans isn’t surprising to those that followed the acquisition post-deal. The video chat business is both competitive and costly, and Verizon struggled to contend with the popularity of Zoom, WebEx (Cisco), Microsoft Teams, and Google Workspaces. Since the first of the year, Verizon hasn’t even mentioned BlueJeans during its quarterly earnings calls.

Here is the announcement from Verizon: “BlueJeans by Verizon products and services will be retired in the first half of 2024. Timelines for service availability will vary; however, if you are an existing customer, rest assured that you can continue to use your BlueJeans services as usual for now. We are getting in touch with all our customers regarding their specific service end dates, and our teams will be available to assist you once the transition begins.”

While Verizon has given enterprise customers some runway to migrate to a new solution, many could find themselves in the lurch if they don’t start preparations sooner than later. Forced migrations of key productivity and collaboration solutions often lead to customers paying above fair market value prices for competitive solutions. NPI recommends those enterprises invested heavily with BlueJeans begin a strategic search for a replacement as end of support looms.

Evaluate Market Pricing for Current (BlueJeans) and Prospective Solutions

NPI anticipates most large enterprises will not be able to continue using a collaboration platform like BlueJeans without a formal support plan that includes critical patching updates and actual helpdesk access, for example. These applications are often key to operational success so NPI wouldn’t expect solutions without them to meet most firm’s security requirements.

Although it may not be possible, NPI recommends those moving away from BlueJeans to remain vendor agnostic while protecting the reason new solutions are being sought. Competing vendors could use this opportunity to hike up initial offer prices to unsuspecting shops. NPI can assist as an impartial observer to help assess such RFP pricing exercises to ensure vendors don’t take advantage of any situational circumstances like this one.

Check Renewal Timelines and Contractual Language Against Timelines to Switch

As part of any due diligence, NPI recommends immediately identifying agreement expiration dates and to contact BlueJeans/Verizon for any options regarding existing deals. Those close to expiration dates may seek extensions instead of immediately switching away from the platform, for example.

NPI finds collaboration solutions like BlueJeans tend to have lower switching costs than many IT areas, but at the same time they are tightly intertwined with daily operations that still can make this an important and sensitive area. NPI suggests making sure at least two or more alternatives are identified as part of the process to evaluate new solutions.

Enterprise telecom costs are notoriously difficult to manage – they typically span multiple providers and it’s impossible to keep track of constantly changing services and usage requirements. Verizon’s decision to retire BlueJeans is a good example of how unanticipated change and complexity can lead to overspending if enterprises aren’t prepared.

Impacted by Verizon’s decision to sunset BlueJeans? NPI can help your enterprise formulate a migration strategy that ensures you don’t overpay. Contact us.

SAP has long held a significant and relatively conservative presence in the enterprise IT landscape. The vendor’s more recent push to the cloud (and resulting solutions and programs like S/4HANA Cloud and Rise with SAP) have revealed new agility – a positive for their customers’ fast-changing technology ecosystems. However, the vendor’s recent support fee increase has raised eyebrows and concerns. Effective January 1, 2024, SAP will increase the maintenance fees for existing contracts for SAP Standard Support, SAP Enterprise Support, SAP Product Support for Large Enterprises.

Despite expectations that SAP’s on-premise support fees would increase by around 3% (as they did last year), the software giant has recently announced it will again increase support prices by local CPI rates with a cap of 5%. The vendor seems to be hinting at positioning larger increases as a potential new norm.

It’s clear this is one more way SAP is “motivating” companies to transition to its cloud solutions. But the size of the support fee increase has caught some customers off guard. For enterprises that continue to make substantial investments in SAP’s on-premise solutions, this hike will likely put a strain on IT budgets.

Here are some tips to help enterprises minimize (or fully negate) the impact of higher SAP maintenance costs:

As a preemptive action, enterprise customers even remotely considering a shift to the cloud should start assessing SAP’s cloud solutions now. This will help sidestep the potentially significant annual price escalations for on-premise support.

NPI recommends looking at more than one approach to SAP cloud and to consider at least two viable go-forward options from a full/minimum perspective. This is an easy first step in improving pricing transparency and negotiation leverage.

Optimize Current On-Premise Environments

If you’re not ready to migrate to SAP’s cloud solutions, then it’s critical to optimize your current on-premise environment and agreement for savings. Yes, SAP negotiations can be tough – particularly for customers that don’t have the leverage of a major expansion or cloud investment. But there are other paths to savings.

Even if there’s resistance to shift to the cloud immediately, there’s potential value to be unlocked from current deployments. NPI has observed that a number of SAP clients operate sub-optimally. By refining setups and reorganizing licenses, firms can realize substantial annual savings. Achieving this typically requires deep SAP licensing and negotiation expertise – so be sure to arm your IT procurement team accordingly.

Now is the Time to Optimize Your SAP Estate for Savings

SAP’s recent support fee increase highlights why it’s more important than ever for businesses to be proactive, informed, and strategic in their approach to SAP cost management. Whether this cost increase pushes you to explore SAP’s cloud solutions or maximize your current estate, ensure you’re making decisions that safeguard your IT budget.

If you’d like to learn more about how you can mitigate SAP’s recent support fee increase, NPI can help. Contact us to learn more.

In October 2022, Microsoft quietly introduced key amendments to licensing requirements for Windows Server/CIS. These changes were a conscious deviation from Microsoft’s stringent approach to licensing products in cloud and virtualized environments. At the time, Microsoft had been criticized by enterprise customers for its lack of flexible licensing policies. That sentiment had spilled over into accusations of anticompetitive behavior. In response, Microsoft issued two major Windows Server licensing changes that introduced much-needed flexibility.

The first was the ability for customers to license Windows Server via virtual cores instead of the previously required physical cores. As we covered in a previous post, Microsoft used to require you to license all the physical cores in the server. While this made sense for some customers, it wasn’t an ideal situation for all – particularly those considering purchasing large hosts for virtualization that may include non-Microsoft virtual Operating Systems on the server. The second change was a decrease in the minimum cores per VM running in Azure from 16 to 8 core licenses.

Cost Implications of Changes to Microsoft Windows Server Licensing

The cost implications of Microsoft’s adjustments to Windows Server licensing are noteworthy. Some enterprise customers now require significantly fewer Windows/CIS Datacenter licenses since they don’t need to license the entire physical cluster leading to on-shelf deployments.

Additionally, Microsoft’s restrictive stacking rules do not impose penalties at a per-VM level. That means enterprises now can use the Windows Server/CIS Standard SKU, which is considerably cheaper (usually four times less costly) than the former mandate to deploy Datacenter at the cluster level.

New Windows Server Licensing Changes Present Rare Opportunity for Savings

Over the past year, NPI has witnessed the real-world impact of Microsoft’s latest Windows Server licensing changes on enterprise customer spend. As we’ve helped clients optimize their Microsoft Enterprise Agreement renewals, as well as through our work helping clients with software audit defense and readiness, we have noticed a remarkable decrease in the number of required Windows Server Datacenter licenses. Furthermore, we have uncovered significant cost savings opportunities for clients that rebalance ongoing Software Assurance with cheaper Windows/CIS Standard.

It’s not often that changes to Microsoft’s licensing rules work in favor of the customer. In most cases, new licensing updates mean higher costs. This is a rare exception. NPI strongly advises organizations to seize the savings opportunity offered by Microsoft by adjusting their Windows Server SKUs (Datacenter/Standard) and optimizing their server footprints. We recommend enterprise customers establish an effective license position (a License Position Assessment in NPI parlance) prior to their true-up or renewal. This will help ensure the Windows Server environment is appropriately sized to maximize the benefits of Microsoft’s changes.

If you’d like to learn more about how these changes can benefit your Microsoft estate, NPI’s Microsoft license optimization analysts can help. Contact us today.

Microsoft’s eagerly awaited Copilot pricing has been announced at Inspire, the annual partner conference for the Redmond-based software giant. While details are still sparse on specific pricing for the Enterprise Agreement program, Microsoft did state the following:

“We’re sharing that Microsoft 365 Copilot will be priced at $30 per user, per month for Microsoft 365 E3, E5, Business Standard and Business Premium customers…” 

Since the Microsoft Copilot pricing announcement, there have been more than a few negative reactions on the exorbitant price point for Microsoft 365 Copilot. It’s much more expensive than what many customers expected, and could have a ballooning effect on Microsoft 365 spend. A company of 10,000 employees can expect to pay $3.6M per year – which will be more than some customers are willing to spend and likely result in customers licensing Copilot only for specialized knowledge workers.

But the threshold of what enterprise customers are willing to pay for certain use cases has yet to be determined. For some use cases/user profiles, it could be worth the cost depending on Microsoft’s ability to move the productivity needle. Currently, Microsoft 365 Copilot is in private preview with approximately 600 customers.

As predicted, Microsoft will offer a free version of Copilot – Bing Chat Enterprise – which will be free for Microsoft 365 E3 or E5 customers. Or if you’re not yet using M365 E3 or E5, Bing Chat Enterprise will be available for $5 per user per month. There is a caveat though: it appears that Bing Chat Enterprise requires you to use Microsoft’s Edge browser (perhaps the browser wars aren’t over?). In any event, it’s worth looking at Microsoft’s implementation of AI-powered chat. Microsoft states that your data is protected and will not leak outside of the organization, nor will be it used to train the Microsoft large language models.

Microsoft 365 Copilot Benefits are Numerous – But Not Without Hidden Cost Implications

Microsoft 365 Copilot is certain to be of interest to enterprise customers as it will go far beyond a chat-type implementation of a public search engine. Microsoft 365 Copilot will combine your own data stored in the Microsoft 365 applications (Word, Excel, PowerPoint, Outlook, Teams and more) with the power of a large language model (LMM) to “turn your words into the most powerful productivity tool on the planet.”

Copilot will be integrated into the Office product to help you create first drafts, enhance spreadsheets, and create professional-looking presentations in just a few simple steps. Additionally, Microsoft Copilot will include a Business Chat functionality that works across the LLM, the Microsoft 365 applications, and your data (calendar, emails, chat, documents, meetings, and contacts) “to do things that you’ve never done before.”

It should be noted that some of the capabilities Microsoft is touting for the average Office user generally exist in the product today, yet they may be difficult to learn. Perhaps one advantage we’ll see with Microsoft 365 Copilot is an increase in skills of the Office user.

The real advantage to enterprise AI, though, is the integration of the LLM with your enterprise data. Microsoft states “the key to unlocking productivity in business lies in connecting LLMs to your business data,” which is likely code-talk for “move your enterprise data to Azure” where it can be readily analyzed by the LLM. So this will lead to significant increases in your Azure spend. Microsoft states that Copilot is built on Microsoft enterprise-grade security, privacy, identity, and compliance policies meaning that your data is isolated and protected within your Microsoft 365 tenant.

Things to Consider Before Purchasing Microsoft Copilot

Customers should expect Microsoft’s sales teams to aggressively push Copilot during Enterprise Agreement renewals. The vendor’s investment and focus (and resulting investor and press coverage) indicate reps will be highly incentivized to get customers to purchase the SKU, which could create buy-side leverage to pursue higher discounts on other products or total deal amount.

While it’s too early to say whether the company will offer significant discounts for Copilot, it’s important to remember that Copilot is priced near the cost of the basic M365 E3 subscription. And there will be a lot of dependencies on the Copilot product that will drive up overall Microsoft spend. Case in point: the “security, identity, and compliance” provisions noted above are all capabilities offered with the M365 E5 product. Given the deep integration upon Microsoft’s advanced editions of the security, identity, and compliance products, it’s a given that a robust Copilot deployment will rely heavily upon M365 E5 subscriptions. Coupled with the likely increase in Azure commitments, Copilot may very well be revolutionary on several fronts – not the least of which is increased customer spend.

Interested in optimizing and reducing your enterprise spend with Microsoft? NPI can help. Contact us to learn more.