With the unknown but potentially severe global impact of the coronavirus (COVID-19), NPI has begun seeing ripples in the world of IT sourcing with some vendors citing “troubles” in their supply chains. Will coronavirus impact IT pricing?

Similar to what we saw when new trade tariffs with China were announced, there’s a mixture of overstatement and real strain on vendor operations. Here are three areas of specific consideration:

Hardware vs. Software/Services 

While there’s real basis in worries of how coronavirus may impact hardware pricing, this sort of correlation doesn’t exist between global events and software/services pricing. Recently, Palo Alto announced a 5% price hike to their hardware products due to ‘tariffs’. However, not only did NPI witness uneven increases well above 5% in Palo Alto’s list pricing (in some cases going as high as 15%), we saw these increases were applied to the vendor’s software subscriptions and support costs in recent quotes. Even with real cost impacts, NPI finds it hard to justify using projected tariffs to justify increases to software and services that come out of California, India and other geographies – but notChina. NPI recommends clients stay updated on how best in class pricing targets   continue to move as vendors change price lists and policy.

Another issue we’re hearing clients and vendors talk about is available stock/inventory. With concerns that manufacturing will be impacted for months, vendor sales teams could convince businesses to buy more units than can be deployed right away. NPI recommends being vigilant in exploring alternatives when purchasing commoditized hardware at high volumes.

In certain cases, NPI expects the struggles of market leaders could open the door for competition. Many manufacturers are still operating at a limited capacity, and NPI anticipates impacts to preferred vendors for niche products like ruggedized tablets or POS equipment to force clients to consider alternatives.

Extra Attention to Collaboration Providers 

While much of the global economy looks to be negatively impacted by coronavirus, vendors of collaboration tools see this as an opportunity. Zoom Communications, Slack, and to an extent larger OEMs like Cisco or Microsoft could decrease pricing flexibility for relevant tools and product lines as they seek to capitalize on this demand spike. NPI advises clients to keep multiple solutions in the mix during major purchases, as the numerous vendors in the space offer a competitive atmosphere.

In summary, NPI advises the market to take everything with a grain of salt mixed with a grain of truth, and to treat each major purchase as an opportunity to test if what vendors are saying is fully rooted in reality or not. And don’t forget to wash your hands!

In a discussion that Hock Tan, President and CEO of Broadcom, presented to investors in August 2019 he offered his thoughts surrounding “franchises,” such as the recently acquired Symantec, and what is needed to drive profitability from them. Tan states that while business with small enterprises and SMBs tends to be less sticky, core Global 2000 accounts which comprise 75 percent of Broadcom’s business have grown because core IT infrastructure cannot be easily displaced or removed. Furthermore, according to Tan, some 80 percent of overall IT spend is spent on core infrastructure which can be considered “keep the lights on” reliable spend.

Tan makes no effort to hide Broadcom’s intent to focus on its bread and butter – large enterprise clients – where lock-in is most assured. It’s a solid strategy and Broadcom is by no means the only IT vendor to depend on this reality. The concern is how this vision is playing out in the IT buying trenches.

Competitive Leverage Critical to a Broadcom Renewal

NPI’s recent Broadcom deal experience suggests enterprise clients seem to be given few, if any, options at renewal time. New purchases appear to have more of a ‘take it or leave it’ overtone. And customer service has been stated to be abysmal. For many clients, it may now be time to proactively seek out options and/or ensure their current licensing model has a stable and predictable future run rate.

Another reason to seek competitive leverage? Broadcom’s post-acquisition strategy. Recent acquisitions include Brocade Communication Systems in November 2016, CA Technologies in November 2018, and most recently Symantec (Enterprise Security) in November 2019.

NPI has seen dramatic changes in customer relationships between clients and each of those recently acquired companies. Understanding where new winds may be taking the relationships, some clients have begun to evaluate alternative solutions and begin internal discussions of how these changes may impact long-term spend and IT strategy.

The importance of those discussions is amplified by the nature of Broadcom’s growing portfolio of offerings. The company is acquiring ‘core’ technology critical to client operations. Brocade brings data center fabric hardware to the infrastructure, CA offers up critical infrastructure software, and Symantec tackles enterprise security. Each of these pieces play a critical role, which makes change without risk to the stability of the infrastructure difficult. Expanding its footprint within the IT “core” through acquisition is a key part of Broadcom’s revenue strategy.

Customers must approach any upcoming renewal with a firm exit plan option. Broadcom, like most enterprise IT vendors, is well-trained to see through smoke-and-mirror attempts to leverage competition. Customers should come to the table with solid alternatives (particularly smaller-sized enterprise clients) that meet their requirements, and realistic timeframe estimates for potential transition.

Upon internally understanding exit options, the negotiating team should inspect renewal pricing/discounts, pricing lock-ins and future IT requirements. Is renewal pricing in line with fair market value targets? If additional licenses are required, will Broadcom honor prior pricing and discounts or will you see a pricing increase? NPI notes one scenario where a client wasn’t able to finalize a Broadcom purchase prior to the acquisition of Symantec. The client saw a 4x increase in pricing with the Symantec team unwilling to consider anything less! A true ‘take it or leave it’ with no additional negotiation.

Keeping a pulse on vendor behavior is just as important as keeping a pulse on pricing and terms. Understanding how changes to a vendor’s business strategy will impact your business is paramount in today’s fast-changing IT landscape – and crucial to gaining buyer-side leverage.

By now you’ve heard of Microsoft Enterprise Mobility + Security, and chances are, you’ve purchased the EMS E3 suite under your Enterprise Agreement. But… what, specifically, is this product? And what are Enterprise Mobility + Security pricing and options?

Microsoft will tell you that EMS is “an identity-driven security solution that offers a holistic approach to the security challenges in this mobile-first, cloud-first era.” It’s certainly all that and offers some great products for very competitive prices. The EMS product also includes the building blocks for Microsoft’s Azure solutions – you’ll likely be an EMS customer if you are using Azure.

In addition, EMS is a product bundle of individual cloud security products, most of which can be purchased on an a la carte basis. In fact, Microsoft likes bundles so much that you’ll see the EMS product bundled within other products.

So, what’s included in the EMS E3 and E5 suite? Let’s take a look.

Here’s what’s included in EMS E3:

• Azure Active Directory Premium P1 – an identity management solution that combines on-premise directory services, cloud directory services, application access management through Single Sign On capabilities.
• Microsoft Intune – mobile device and mobile application management
• Azure Information Protection P1 – data protection for use both inside and outside your organization.
• Microsoft Advanced Threat Analytics – Advanced Threat Analytics (ATA) is an on-premises platform that helps protect your enterprise from multiple types of advanced targeted cyberattacks and insider threats.
• Azure Rights Management (part of Azure Information Protection) – a cloud-based protection service that uses encryption, identity, and authorization policies to help secure your files and email, and it works across multiple device – phones, tablets, and PCs. Information can be protected both within your organization and outside your organization because that protection remains with the data, even when it leaves your organization’s boundaries.
• Windows Server CAL – the Windows Client Access License.

And here’s what’s included in EMS E5:

• Azure Active Directory Premium (AADP) P2 – includes AD P1, as well as identity protection and identity governance. A good summary of capabilities can be found here.
• Azure Information Protection P2 – builds upon Azure IP P1 for automated discovery and classification of sensitive information within your organization.
• Microsoft Cloud App Security – is a Cloud Access Security Broker that identifies the use of SaaS and PaaS services within your organization and the associated usage patterns of these services. Cloud App Security detects usual behavior across cloud apps and will automatically limit unusual behavior to better protect your organization.
• Azure Active Directory [AD] Identity Protection (as a feature of AADP P2) –automated detection and remediation of identity-based risks, including atypical travel, anonymous IP addresses, unfamiliar sign in properties, and more.
• Azure Advanced Threat Protection – a cloud-based security solution that leverages your on-premises Active Directory signals to identify, detect, and investigate advanced threats, compromised identities, and malicious insider actions directed at your organization.
• Azure AD Privileged Identity Management (as a feature of AADP P2) – Azure Active Directory (Azure AD) Privileged Identity Management (PIM) is a service that enables you to manage, control, and monitor access to important resources in your organization.

If you are already an M365 E3 (or E5) customer, you have rights to EMS E3. The M365 E3 bundle includes Office 365 E3, the Windows OS E3, and the EMS E3 product. All of these bundles are licensed on a Per User basis.

While NPI often advises clients to “beware of the bundle,” there are instances where bundling delivers real savings (assuming there is real product utilization across the bundle). EMS certainly falls into this camp.

For example, for an EA Level B customer, the savings when purchasing EMS E3 as part of the M365 E3 bundle vs. purchasing the individual components are around 5%. The savings are MUCH MORE SIGNIFICANT (over 50 percent!) when stepping up from E3 to E5 vs. purchasing products on an a la carte basis.

Remember – whether it’s for EMS or another bundled Microsoft offering, it’s important to break down pricing to a line item level and model out the cost of the various purchase options before you sign on the dotted line!

(Note: This post was originally published in September 2018 and has been updated to reflect current Microsoft sourcing best practices.)

Microsoft’s EA program is designed for firms that are making large commitments to Microsoft products. There are three types of products one may purchase under the Enterprise Agreement: Enterprise Products, Additional Products and Online Services.

The “Enterprise Product” is what makes an Enterprise Agreement, well, “enterprise.” There are several products that are classified as enterprise-level – Office Professional, the Windows Operating System, the Core or Enterprise Client Access License, and some Office 365 subscriptions. A customer must elect to purchase an “enterprise” product for all of its Qualified Users or Qualified Devices. You wouldn’t be able to say, for example, we have 10,000 devices but let’s sign an EA for 5,000 devices. The “Additional Product” covers most other products – Visio, Project, Windows Server, Exchange Server, etc. – and these products may be purchased on an à la carte basis.

You will receive perpetual use rights for Enterprise and Additional Products at the conclusion of the Enterprise Agreement. Online Services, however, are those products for which you will receive temporary use rights only during the term of the agreement. You never receive perpetual licenses for an Online Services product. Microsoft is, of course, moving to a subscription model for many of its products, especially the Microsoft 365 products.

One of the benefits of the EA program is that you are only required to count the perpetual deployed licenses once a year. Said another way, once you have added a perpetual license to the agreement, you are permitted to deploy as many instances as you wish throughout the year. However, you are required to count the number of incremental licenses deployed and submit payment to Microsoft at the end of the year. The Online Services products are typically licensed on a monthly basis, yet Microsoft does permit you to place a reservation (essentially placing an order) in the month in which you begin to use the incremental Online Services and defer payment under the end of the year.

So, how do you count the number of deployed instances of Microsoft products? Some clients utilize sophisticated asset management systems that enable them to scan their environment and create deployment reports on the fly. Others keep careful records of incremental deployments throughout the year. The larger the organization, the more complex the process. Ultimately, though, at the end of the year, you are required to submit a true-up report to Microsoft and pay for any incremental usage.

Adding New Products to Your Microsoft EA

Customers executing the Microsoft EA should be aware that the agreement has strictly defined processes for adding new products to the agreement. You may “add products” for products not previously ordered, or you may add incremental usage for previously ordered products via the annual “true-up” process:

(i) Adding new Products not previously ordered. New Enterprise Products or Enterprise Online Services may be added at any time by contacting a Microsoft Account Manager or Software Advisor. New Additional Products, other than Online Services, may be used if an order is placed in the month the Product is first used. For Additional Products that are Online Services, an initial order for the Online Service is required prior to use.

(ii) Adding Licenses for previously ordered Products.  Additional Licenses for previously ordered Products other than Online Services may be added at any time but must be included in the next true-up order. Additional Licenses for Online Services must be ordered prior to use unless the Online Services are (1) identified as eligible for true-up in the Product Terms or (2) included as part of other Licenses.  

Enrolled Affiliate must submit an annual true-up order that accounts for any changes since the initial order or last order. If there are no changes, then an update statement must be submitted instead of a true-up order.

(i) Enterprise Products. For Enterprise Products, Enrolled Affiliate must determine the number of Qualified Devices and Qualified Users (if ordering user-based Licenses) at the time the true-up order is placed and must order additional Licenses for all Qualified Devices and Qualified Users that are not already covered by existing Licenses, including any Enterprise Online Services.

(ii) Additional Products. For Additional Products that have been previously ordered under this Enrollment, Enrolled Affiliate must determine the maximum number of Additional Products used since the latter of the initial order, the last true-up order or the prior anniversary date and submit a true-up order that accounts for any increase

(iii) Online Services. For Online Services identified as eligible for true-up in the Product Terms, Enrolled Affiliate may reserve the additional Licenses prior to use, and payment may be deferred until the next true-up order. Microsoft will provide a report of Reserved Licenses in excess of existing orders to Enrolled Affiliate and its Software Advisor. Reserved Licenses will be invoiced retroactively to the month in which they were reserved.

This is an area of licensing that NPI frequently has to help clients think through.

Timing Considerations for Your Next Microsoft Enterprise Agreement True-up

When is the true-up due to Microsoft? The latest Enterprise Enrollment states the following:

(iv) True-up order Period. The true-up order or update statement must be received by Microsoft between 60 and 30 days prior to each Enrollment anniversary date. The third-year true-up order or update statement is due within 30 days prior to the Expiration Date, and any license reservations within this 30-day period will not be accepted. Enrolled Affiliate may submit true-up orders more often to account for increases in Product usage, but an annual true-up order or update statement must still be submitted during the annual order period.

This seems clear, indicating that for the first two years of your agreement the true-up is due at least 30 days prior to the agreement anniversary. The third year true-up? Within 30 days prior to the expiration date. Note use of the word “within” 30 days prior to expiration date versus “by.” Microsoft often (mistakenly) uses the latter interpretation and will inform customers this statement means the report is due 30 days before the agreement expires. While it is reasonable for Microsoft to understand the final year growth in order to prepare a Customer Price Sheet for the renewal agreement, your obligation is to simply submit before the agreement expires.

Online Reservations are the method used to add incremental users for online products, with the requirement that orders must be submitted on a monthly basis (in order to activate incremental users within the Microsoft portal). Using this method, payment is deferred until the next agreement anniversary date. Note that Microsoft does not permit license reservations to be added in the final month of the agreement. While most customers will know how many users they will need in that last month (and request a new reservation in the second-to-last month of the enrollment), sometimes very large customers may expect extended negotiations that may go past the agreement expiration date.

If you believe this may happen with your organization (it’s not terribly uncommon), it will be important to submit a reservation in the second-to-last month to cover your run rate for the last month, and perhaps the first month of the renewal agreement. Granted you’ll only be paying through the end of the current enrollment term, but you’ll have the benefit of being able to add those incremental users in the last month of the enrollment to tide you over for the last month, and – perhaps – the 1st month of the renewal term while you are still negotiating your renewal agreement.

Remember: Microsoft EA true-ups shouldn’t be conducted on autopilot. Like any Microsoft purchase or renewal, there’s opportunity for optimization.

Telecom costs are notoriously difficult to manage – so difficult that, despite a growing number of telecom expense management solutions in the market, most enterprises don’t have the resources or expertise to adequately manage their spend and instead take an autopilot approach to telecom cost control. Across NPI’s client base of 500+ enterprises, our data indicates the majority of enterprises overspend by 30 percent or more on their existing, negotiated telecom investments.

Complexity equals profitability for carriers and providers. Indecipherable rate plans, various fees and surcharges, confusing business terms, complicated device upgrade policies…it’s intentionally designed to boost carrier revenue per customer. There are 1,001 ways to overspend on wireless and wireline services, but in this blog post we focus on some of the biggest offenders as well as a few not-so-obvious culprits.

Top Telecom Overspending Culprits and How to Avoid Them

Inconsistent wireline pricing across multiple locations and/or regions. For organizations with dozens (or hundreds) of locations, it’s easy to lose sight of wireline spend for basic wireline services like MPLS, broadband, Ethernet, etc. There are often sizeable discrepancies in regional costs, above-market-value pricing and other hidden costs such as the improper allocation of credits. Organizations need to closely inspect spend as well as conduct price benchmark analysis to ensure they are paying a fair price for wireline expenditures. In some instances, it may make sense to negotiate postalized rates to counter regional pricing inconsistencies.

Inability to align wireless usage with carrier/provider options. Aligning actual voice and data usage to carrier/provider plan options is no easy task. Will it be based on individual consumption or pooled? Will the user require features not covered in the primary plan? What about international usage requirements? The only way to match consumption with the correct subscriptions is to know the usage profile of each individual user – and this is not a one-time event. NPI recommends that enterprise customers with more than 5,000 subscribers review consumption and adjust subscriptions monthly.

Low visibility into wireless churn and rogue purchasing. At enterprise scale, visibility into telecom spend – particularly wireless – can be difficult to achieve. Who’s using which devices? Are (and how are) these devices being used? How are growth credits and waivers being tracked and applied? What about device subsidies? Is there rogue purchasing happening outside of corporate protocol? These questions are foundational to enterprise wireless demand management and telecom optimization, but the answers remain elusive to most companies. It’s important for companies to centralize wireless spend and enforce strict purchasing/cost management protocols that ensure usage and service selection are continuously (and accurately) aligned.

Inability to leverage customer value and volume. The most damaging result of low visibility into telecom usage and decentralized spend is the inability to negotiate effectively with carriers and providers. Customers that know the details of their consumption and costs are best positioned for effective contract negotiations – especially those that can demonstrate potential for growth.

Failure to secure best-in-class rates, discounts and incentives for wireless services. The wireless cost management landscape changes day by day. Most companies don’t have the internal resources, deep understanding of wireless carrier plans and street-pricing insight to confirm if they’re paying a fair price. The good news for customers is there is tremendous competition, and resultant downward price pressure. At the same time, it’s becoming more difficult to get carriers to provide device subsidies and discounts. To eliminate overspending, NPI advises companies to benchmark wireless spending as well as make sure they have the negotiation bench strength required to extract competitive incentives from carriers – including early termination fees and credits, device subsidies, minimum annual revenue commitments, etc.

Poor compliance monitoring. Regular auditing of telecom invoices is needed to identify and remediate billing errors – which are surprisingly common. Companies should not only review adherence to contractual pricing, but also adherence to discounts and incentives covered in their carrier/provider agreements. Note that these “telecom audits” should be an ongoing exercise – meaning costs need to be monitored in real time (“Are our invoices correct?”) as well as ad hoc based on customer-specific triggers (“Did we receive new activation credits for last quarter’s account growth?).

Contact NPI today for all your Telecom questions.

The Microsoft enterprise agreement renewal isn’t what it used to be – especially when it comes to discounts and on-premise renewals.

Many, if not most, Microsoft clients have jumped on the Office 365 bandwagon and are consuming subscription products from Microsoft. If you’re one of the holdouts, you’ve probably heard that Microsoft will refuse to discount Software Assurance for on-premise renewals – which can be particularly painful if you have previously enjoyed attractive discounts.

The simple truth is Microsoft has told Wall Street that its growth will be fueled by M365 E5 and Azure. Coupled with the fact that the company is not paying commissions to its sales representatives for on-premise renewals, customers attempting to renew an on-premise-only deal face an uphill battle.

Many feel that it is only a matter of time before they’ll have to acquiesce and move to Microsoft’s cloud products. And Microsoft is quite adept at making that happen by offering discounts to overcome objections. The reality is that if your expiring agreement was valued at $10M a year, and you previously received a 20% discount, that’s $6M over three years. Who wants to face a $6M price increase as a result of losing a discount? Microsoft will gladly retain your discount if you purchase the offerings it wants you to purchase – let’s say M365 E5. On the surface, this seems like a palatable deal. Yes, the price went up a bit, but you were able to retain that 20% discount (which is now >$6M).

Important Considerations for Your Next Microsoft Enterprise Agreement Renewal, Particularly When Moving to Cloud Offerings

Clients will sometimes overlook important considerations when moving to Microsoft’s cloud products as part of their Microsoft Enterprise Agreement Renewal. First, realize that subscription products require you to either renew the subscription or stop using the product at the end of the agreement term.

Second, using the example above, Microsoft will want payment for all the components of the M365 E5 bundle, regardless of whether you are using the products. That’s a big deal. Let’s say you’ve just signed an agreement for M365 E5, but still have a contractual obligation to VMWare due to your use of AirWatch. Get ready to pay for both agreements.

Finally, consider how quickly you will be able to deploy the products you’ve just purchased. Microsoft will require payment up front for all of your enterprise users – even if it takes you 2+ years to deploy M365 E5.

A valuable exercise is to determine both your intended consumption of the products. Generally, the component cost of the bundles is approximately 40% of the à la carte pricing. Using this rule of thumb, you can calculate the price you are paying for unneeded components.

In addition to the consumption conversation, it’s worthwhile to consider deployment velocity – or how long it will take you to deploy the components of the subscription products. Remember, Microsoft wants you to pay 100% of the subscription product for all users on Day 1 of the agreement. This approach may not make sense for some roll-out scenarios.

NPI strongly recommends that customers model their consumption and deployment velocity, and factor the findings into their discussions with Microsoft. We know from first-hand experience with our clients that this important exercise can save you a lot of money on your next EA renewal.  

The list of things that affect the outcome of IT vendor negotiations is long. We spend a lot of time on this blog talking about licensing and subscription pricing and optimization, as well as what’s driving vendor behavior – all of which critically shape whether your organization will receive a “fair deal” on IT purchases and renewals.

Another critical factor is alignment of the buying team. It’s not just intel about market pricing and points of leverage that creates a favorable outcome – it’s how well every member of your buying team is aligned around a shared process and protocol for interacting with vendors. I’ve seen many good deals fall apart because this aspect of IT vendor negotiations is overlooked.

Vendors Are Working a Playbook. What’s Yours?

Fact: IT vendors have some of the most highly skilled sales professionals out there. They are expert negotiators and every interaction they have with your organization is intentional, well planned and designed to maximize the value of the deal they’re pursuing.

Many turn to organizational reporting resources like Discover.org to gather information about your team, spend and organizational hierarchy. This allows them to gauge who the real decision makers are, other stakeholders, relationships (e.g. who is influencing who) and where they need better targeting and account penetration. It’s not uncommon for a vendor’s sales team to assign internal resources at different levels to different people within your organization as a way to gain knowledge and insight, assess risks and help with the sales process.

How to Arm Yourself Against the IT Vendor Sales Machine

Team alignment is fundamental to strong IT vendor negotiations. All vendor communications and interactions need to happen under the purview of a shared internal protocol and process. Who in your organization is a target for vendor communications? Who in your organization is allowed to speak to whom on the vendor side? What is each person’s role and what are they allowed to share with vendors? When do certain team members need to “go dark” or tell the vendor they don’t know any details?

Here’s an example of how this plays out: NPI was involved in a negotiation between one of our clients and a large ERP provider. It was clear that the vendor had assigned a VP to the client’s CIO, a regional sales rep to the director of IT, and the main sales rep to another director. During our frequent team meetings, we discovered that all three vendor resources had sent a series of similar questions worded in slightly different ways to the CIO and directors. It was obvious the vendor was trying to assess the risk of not getting the deal and to verify that our client’s position was consistent. Had the team not been aligned, the vendor would have undoubtedly gained the leverage it needed to secure higher pricing, lower discounts and/or terms that would have been more unfavorable to the client.

Without team alignment, getting the best deal for your organization is put at risk. What is seemingly a simple “water cooler” discussion with a vendor could end up jeopardizing your entire strategy and negotiation position. Every member of your team should be aware that negotiations start at “hello” and the information they provide could have a significant impact on the outcome.

Microsoft’s investment in Azure is paying off. According to CEO Satya Nadella, more than 95 percent of the Fortune 500 run their workloads on Microsoft’s cloud and, per the company’s most recent earnings statement, Azure revenue was up 64 percent year over year.

This investment has led to several new Azure services in 2019, including the Azure Stack HCI Solutions and the Azure Data Box Edge. Both of these products are designed to promote the consumption of Azure within the enterprise, particularly with respect to developing cloud applications using Azure services.

Microsoft’s Azure Stack HCI Solutions are intended to ease the development of cloud applications that use on-premise Azure services. This will be a welcome enhancement for customers that must keep applications in house for regulatory reasons. Additionally, the Azure Stack HCI solutions facilitate the ability to run virtual machines on hyperconverged systems. A key tenet of a hyperconverged system is the tight integration of compute, storage and virtualization (amongst other) resources. This advancement signals Microsoft’s hopes to be a one-stop shop for enterprises that use hyperconverged systems.

The Azure Data Box Edge product offers both online and offline data transfer options, and even some local compute capabilities. The goal, however, is to move your data to Microsoft’s datacenter to use the company’s Azure services. While the economics of Azure can be debated based on your situation, know that Azure investments are typically “forever” investments.

Things to Consider for Microsoft Azure Negotiations

Azure dates back to October 2008 with Microsoft’s “Project Red Dog” and the company has come a long way in the last 10+ years. Today, Microsoft offers a multitude of compute, storage, AI, BI and development options, and supports mainstream applications like SAP, Oracle and – of course – Microsoft SQL Server.

Does Azure make sense for your business? Like a lot of Microsoft questions, the answer is “it depends.” If you are developing a new solution, application or capabilities and there are not existing on-premise investments to consider – then, yes, it’s certainly worth considering. If you’ve already made significant investments in hardware, application development and people – maybe not. It’s well worth the time to stay current on Microsoft’s offerings to determine if you can reduce on-premise costs.

As mentioned above, Azure investments typically end up being “forever” investments. Know that these are subscription services and even if Microsoft offers compelling pricing to move to Azure today, the company can always increase costs in the future. Microsoft has told Wall Street that the future of the company will be through its cloud technologies, and we can expect Microsoft’s annual earnings to bear this out.

Regardless, there are only two ways to increase revenue in the cloud: sell more services or raise prices for existing customers. NPI recommends companies invest in Azure with eyes wide open and seek terms that limit vendor price increases over time.

Software asset management – it’s a term we find ourselves running into at multiple intersections these days. Our clients are talking about it more than ever as they try to wrangle ever-growing software portfolios. So are the vendors our customers do business with (for different reasons… more on that later). The discipline has been around for quite a while, but the need for it has become more urgent for a number of reasons.

It’s been estimated that the average enterprise uses 500+ software applications. That’s a conservative estimate given the role the cloud continues to play in growing and shaping the enterprise software portfolio. Sanjay Beri, CEO of cloud app analytics and policy firm Netskope, recently suggested that medium and large-sized businesses use anywhere from 300 to 400 cloud applications today.

The reality is most companies don’t have a clear view of what software applications (cloud or on-premise) are actually being used across the business – and that’s a serious concern as the risks associated with not knowing become more severe. Software spending, particularly in the cloud, continues to accelerate. Over-licensing and over-subscription are rampant in the enterprise. Functionality redundancies across applications, services and tools are commonplace. Purchases made outside of master agreements routinely occur and often at the expense of previously-negotiated pricing and discounts. One net result is enterprises are spending far more than they should on software because they have inconsistent (or non-existent) software asset management.

An equally significant threat is software license compliance. Poor visibility into what software licenses the organization owns, where they are installed, who’s using them and how they are being used – and how all of those factors compare with product use rights – create ripe conditions for unintentional noncompliance. Extreme examples include SAP’s cases against Diageo and AB InBev, in which the vendor sought $71M and up to $600M respectively in licensing back payments and damages.

Other asset management concerns include: Is maintenance/support on autopilot? Are there opportunities to forego or downgrade support on certain software? Conversely, how are upgrades, updates, patches being handled to protect the organization against security threats?

With so much on the line, it’s no wonder software asset management (SAM) is getting more attention these days.

What is Software Asset Management?

Software asset management, like its parent IT asset management, is a set of practices that manage and optimize the purchase, deployment, maintenance, utilization, and disposal of software applications within the business. SAM is also its own software category with vendors like Flexera, Snow, Aspera, and ServiceNow leading the way.

It’s also a path for certain legacy enterprise vendors like Microsoft to extract new revenues from clients. Case in point: the Microsoft Software Asset Management Engagement. Microsoft bills it as “(a way) to help you get the most from your software investments, ensure that you are licensed correctly, and implement the right policies to properly manage your company’s software assets.” But anyone who’s participated in one knows that it’s actually Microsoft’s way of taking a look under the hood to inspect for software license non-compliance. While the reasons that Microsoft lists for doing a SAM engagement are absolutely valid and consistent with SAM best practices, make no mistake about it: The primary reason that Microsoft pushes SAM engagements is to generate revenue.

(Side note: here’s another post on what you can do to better manage your Microsoft software estate without engaging Microsoft).

Most enterprises have embraced SAM, although the formality and sophistication with which it’s deployed varies widely by organization. Some have teams, asset management software and processes specifically devoted to SAM. Others are just dipping a toe in the water.

5 Benefits of Software Asset Management

SAM delivers many benefits – some more impactful than others. Here’s our perspective on the top five based on what we see across our enterprise client portfolio:

Proper visibility into and management of your software portfolio enables you to identify multiple opportunities for IT savings. Examples include:

• Are you over-licensed or over-subscribed?
• Are you paying support for unused (or underused) products?
• What software license agreements are up for renewal and when? How much runway do you need to prepare?
• Are there functionality redundancies across the portfolio? Can you eliminate and/or consolidate certain products/services?
• Are purchases being made outside of master or enterprise agreements with your large vendors?
• Are enterprise agreement purchases being priced according to negotiated pricing and discounts?
• Are all software purchases across the enterprise being approved and executed according to IT sourcing policy?

2. Lower Risk of Software License Audit and Penalties

The volume of software license audits is increasing as are the penalties vendors hand out. Vendors like Microsoft, SAP, IBM and Oracle bank on customers’ lack of visibility into the software estate and understanding of product terms. Companies that employ strong SAM processes and tools are better able to understand how software assets are being deployed and used. Those that demonstrate strong SAM capabilities can reduce their risk of a software license audit and avoid or minimize noncompliance penalty fees.

Note: Conventional SAM tools and processes only go so far. To fully minimize audit risk, you must have a deep understanding of vendor-specific licensing and subscription programs as well as product use rights and terms.

Strong software asset management is the first step in optimizing licensing and subscriptions across the software portfolio. As noted earlier, it helps eliminate overbuying and over-licensing. It also provides a baseline for selecting best-fit license types, building in maximum flexibility based on current and future-state requirements, and minimizing the risk of cost-oriented surprises.

How well you manage your software assets can have a direct impact on your ability to fight against cybersecurity threats. Mature SAM processes are version-aware, and provide visibility into aging assets that need to be updated or eliminated. They scan for unauthorized software. They keep authorized user rosters up to date. A recent Harvard Business Review article sums it up nicely: “That’s because cyber criminals are opportunists who seek the path of least resistance. Rather than wasting efforts attacking hardened firewalls, they instead snoop out the often-overlooked back doors to a company’s network, such as unsupported or unapproved software, abandoned user IDs, poor password protection, or the unmanaged server under an IT analyst’s desk.”

5. Better IT Asset Utilization

The shift to on-demand computing has forced companies to take a closer look at how they consume IT resources. How are IT infrastructure and software being utilized? At what capacity and by how many users? Are there new or existing licensing or subscription programs that are better suited to the business’s current requirements? Are changes in virtualization strategy or server infrastructure going to lead to licensing consequences? Effective SAM tools and policies are foundational to these inquiries, and the cost modeling that accompanies them.

Congratulations! You’ve purchased ServiceNow. Now it’s time to make its broad suite of capabilities work for your organization. That takes us to the topic of ServiceNow implementation. What’s the right approach to ensure success? What can you do to make sure your investment and effort doesn’t turn into shelfware? And, of critical importance, which implementation partner is best for you?

Given the expanse of service management in the enterprise and its numerous applications, these considerations are very real. Aside from making sure ServiceNow pricing is at or below fair market value, the most important cost aspect of your ServiceNow investment will be implementation. The way you handle implementation will have significant bearing on the ROI you receive.

In this post, we’ll discuss several considerations that will lead to a successful ServiceNow implementation, higher adoption across the enterprise, and – ultimately – greater ROI.

ServiceNow Implementation Plan Checklist: Preparation is Key

There are a few things you can do to make sure your ServiceNow investment delivers value and savings for the long-term:

• Have a plan. You bought ServiceNow for a reason. Formulate an implementation plan based on your top use cases. The goal is to get the tool implemented and adopted. Stick to the next 6 months’ timeframe to get the foundation set, then expand from there.
• Time to value. ServiceNow and its partners encourage Agile-style implementation to achieve quick user adoption. This is a proven methodology and much more effective than an elongated, boil-the-ocean approach. A side bonus is that if your organization is not experienced with Agile implementations, this is a great way to gain exposure and training.
• Decide where ServiceNow ownership will reside. Where ServiceNow oversight resides and who is on the team will greatly affect adoption within your organization. The team should have direct exposure to lines of business because it’s an enterprise service management platform, not just an IT operations tool. The team should be comprised of people that have scripting capability and can work not only with IT but also with business areas to identify how existing processes can be easily automated.
• Start with the basics – the common approach. Companies buy ServiceNow for different reasons, and even though it’s an enterprise service management suite, the typical initial use case still centers around replacing an outdated, cumbersome legacy IT service management (ITSM) application. By taking this approach, your organization will focus on first getting the IT organization right, enabling you to then replicate the process to other business areas such as HR, finance or customer service. Our advice is to become familiar with the typical ServiceNow implementation roadmap that will set the core functionality in place during the first 4 to 6 months.

Which ServiceNow Implementation Partner is Best for You?

Using an experienced implementation vendor is a must. So what are your options? They fall into two buckets – ServiceNow Professional Services or a vendor partner. How do you know which one is the right fit for your implementation? Let’s take a look at both options.

OPTION #1: ServiceNow Professional Services (PS)

ServiceNow PS is the gold standard of implementations. They are the ultimate ServiceNow product authority, often leveraging resources that have been involved with new product releases and features since their development stage.

ServiceNow PS employs a QuickStart, Agile-oriented methodology focused on time-to-value and knowledge transfer for the customer. Simply put, the concept focuses on short development sprints comprised of a few weeks rather than months, and embraces a “we do, we do together, then you do” model to ensure that the customer can support their ServiceNow environment post-implementation.

First-time, basic implementation of Service Management Suite functionality such as Incident-Problem-Change, Knowledge Base build out and migration, Service Catalog build out, and Asset Management.

Because ServiceNow PS resources are the ultimate authority and scarce in availability, they will be highly priced. ServiceNow PS staff is limited, so they tend to focus on core functionality versus projects that require a high degree of customization, ServiceNow niche product implementation, or specific industry or product use cases. Because of this, ServiceNow PS availability can also be limited based on the timing of your implementation.

More so than many software companies, ServiceNow runs a tight implementation vendor ecosystem that promotes deep knowledge sharing and training across the ServiceNow Community. ServiceNow is very transparent about recommending when a vendor partner may be the best approach depending on the customer’s timing and goals, especially if cost is a large consideration. There are four types of partners in the ServiceNow ecosystem:

• Generalists: These partners handle the basics (Incident-Problem-Change, Knowledge Base and Service Catalog build out, Asset Management), are an extension of ServiceNow out in the field, have a lot of implementation experience, and bill at a lower cost. Generalists typically have resell capability as well.
• Global System Integrators (GSIs): These are typically integrators that have large ServiceNow practices as well as business area domain knowledge. They are heavily invested in ServiceNow globally, involved in customizing certain modules and have deep business process expertise. What they lack in volume, they make up for in depth. As such, they come at a significantly higher cost than a generalist. GSIs will have resell capability.
• ServiceNow Product Specialists: These partners tend to focus on a specific ServiceNow product niche such as ITOM, PPM, GRC, etc. They may also have experience integrating these ServiceNow products with other related products in that space such as Splunk for ITOM or MS Project for PPM, for example.
• ServiceNow Application Builders: Some partners have developed a custom ServiceNow application to address use cases specific to a business function or industry. Examples are HR onboarding and case management solutions, healthcare device asset management applications, and time-reporting solutions.

ServiceNow’s implementation partners typically adopt a similar QuickStart, Agile-oriented methodology and provide their services at a fraction of the cost of ServiceNow PS. An added bonus is they often have more all-around implementation experience than ServiceNow PS. In other situations, a partner is highly recommended for niche-oriented projects that ServiceNow PS will not have the bandwidth or experience to handle.

First time, basic implementation of Service Management Suite functionality as well as niche product implementations.

The evaluation process can be a little cumbersome especially if you are comparing a GSI against a smaller generalist or niche partner. Resource availability can be an issue for smaller and niche partners. There is also more of a quality risk when going with a non-ServiceNow entity simply because they are not ServiceNow.

Remember: It’s Not a One-and-Done Event

Once you’ve implemented the basics, you’re only just getting started. Schedule a roadmap planning session with key members of IT and business senior leadership – and revisit the roadmap every 6 months. This will enable you to expose the organization to how ServiceNow can automate key pain areas within the organization and prioritize your ServiceNow projects. By taking these steps, you will maximize your success with the solution, increase adoption and time to value, and be in the driver’s seat for future ServiceNow investments and renewals.

This blog post was originally published on March 31, 2017 but has been updated to reflect the latest changes to ServiceNow’s solutions and implementation best practices.

Still in an agreement where you’re purchasing Office 365 Enterprise E4 (O365 E4)? You’re not alone. While this offering was retired in 2017 and Microsoft permitted customers to switch to a new plan at any time, Microsoft did not require that switch until renewal time. Now, many enterprises are facing that milestone – a renewal of their upcoming three-year Enterprise Enrollment. 

So, what are your options? The good news is there are several available. Figuring out which one is best for you, however, requires a little IT introspection.

O365 E4 Alternatives to Consider

For most E4 customers, there are four options available. Each requires that you understand not only what you used from the O365 E4 product, but also your future needs:

Option 1 – Move to Office 365 Enterprise E5 (O365 E5). As a “premium” subscription (and a subset of what is called the complete and intelligent solution of the Microsoft 365 E5 SKU), Microsoft makes O365 E5 available to get all the services and functionality included from your current O365 E4 subscription, as well as the gateway to receiving new bells and whistles for users such as advanced tools for collaboration, analytics, security, interactive reports, dashboards and data visualization. This option promotes its ability to offer more control over data security and compliance with built-in privacy, transparency and refined user controls. 

Option 2 – Office Enterprise E3 + Skype for Business Cloud PBX (renamed Phone System). This option provides call control features of traditional on-premise phone systems, including call forwarding, call parking and delegation. Phone System is sold as User subscriptions and does not include calling plans. However, both Domestic and International Calling Plans are add-on options.

Option 3 – Office 365 Enterprise E3 + Skype for Business Plus CAL. Microsoft promotes this option as the one that most closely maps to the functionality O365 E4 customers have currently without adding any additional functionality or features.

Option 4 – Switch to Office 365 Enterprise E3. With this option, O365 E4 customers will lose the subscriptions to Skype for Business clients for on-premise deployments.

It’s never too early to plan for the future. And, for many E4 O365 customers, the future (i.e. the renewal event) is almost here. If one of these options provides clear advantages to your organization based on your specific circumstances, consider this in your renewal discussions. If you’re not sure and would like expert advice on the best way to buy for your company, NPI’s Microsoft licensing and cost optimization consultants can help.

As previously discussed in another blog post, you should always seek assistance before you agree to a Microsoft audit. Why? It’s simple enough – the findings will rarely be in your favor and preparation is a must.

There are two ways in which Microsoft conducts audits. The first is called a Software Asset Management (SAM) engagement and it’s positioned as an effort to “help you understand what you own.” The second is a more formal affair where the company sends a stern letter notifying you of Microsoft’s intent to invoke the “Verifying Compliance” provision of the Microsoft Business and Services Agreement.

The voluntary effort, the SAM engagement, is by far the more common of the audit motions, especially with smaller organizations. It’s important for you to realize the SAM engagement is a sales effort, funded by the sales organization, and SAM engagement managers are commissioned sales reps carrying a sales quota.

As a former SAM engagement manager for Microsoft, I often heard from clients that they were compliant and had nothing to hide. Great, I’d reply, then this should be a quick process that validates your own internal findings. In reality, though, I knew we would often find a significant shortfall. Not because customers were intentionally non-compliant, but because it’s exceptionally difficult to remain compliant with the wide variety of Microsoft products and the various licensing options for those products. 

Before You Agree to a Microsoft Audit, Know These Common Licensing Shortfalls

The most common products to yield a licensing shortfall are Office, SQL Server and Microsoft’s development products. Here’s a more thorough explanation:

• Office: This is largely because it’s a more pervasive product and because the version of Office that ships with Office 365 is different than the perpetual use version of Office. Microsoft’s perpetual use rights version is the MSI (Microsoft Installer) while the version that ships with Office 365 is Office Pro Plus and is based upon the C2R (Click to Run) installer. While the products might otherwise seem identical, the on-premise perpetual use rights (MSI version) are not included with most Office 365 subscriptions. This is problematic as many Microsoft customers will initially purchase the MSI version, transition to Office 365 and not realize they will eventually need to migrate to the C2R version. Unfortunately, this ultimately leads to compliance problems.
• SQL Server: SQL Server is a complex product and can be licensed via the Standard or Enterprise edition. Over time, both versions have been licensed via Processor, via Core and on a Server/CAL basis. Standard edition is available today via Server/CAL or on a Per Core basis. Enterprise Edition is licensed (today) only on a Per Core basis. And, of course, your use of the product may require Software Assurance. SA is all but required for license mobility, which will be used in most virtual deployments. If reading this paragraph has caused your eyes to glaze over, or you find yourself rereading, then there you have it. It’s complicated stuff and that’s exactly why SQL license compliance issues are common.
• Development Products:
•  Microsoft development products are licensed on a per developer basis. That is, a named developer basis. It’s common for Microsoft customers to misunderstand this last point – that the license is assigned to a specific person. Most of the development products include a MSDN subscription that permits broad deployment of Microsoft products for non-production development or testing use. Microsoft will often claim that a development product found on a network share accessible by thousands of employees will require the purchase of the development tool for everyone in the organization! This can easily transform what you thought would be a benign audit into a multiple million-dollar license shortfall.

Expert guidance is crucial for any “flavor” of Microsoft audit, even (especially) for a seemingly benign SAM engagement. As described above, there is ample room for confusion and misinterpretation of license use rights and findings. Before you agree to a Microsoft audit, seek counsel from an independent Microsoft licensing expert!