This blog article is a transcript from the special guest episode of The Practical 365 Podcast, ‘Office 365 License Management: How to Be an IT Investment Superhero with MVPs Sigi Jagott, MVP & Quadrotech CTO Paul Robichaux, and licensing expert Ben Marshall.
Our Office 365 License Management Experts
Sigi: So, Paul, can you tell us a little bit about yourself?
Paul: Sure, I’m a long-time Microsoft MVP, Sigi and I have known each other an embarrassingly long time. In fact, we both had hair back when we first met! Now I’m the Chief Technology Officer for Quadrotech, where we make migration and Office 365 management tools.
Sigi: Cool! So, Ben, what about you?
Ben: Yeah, so I have been in IT for almost 30 years. I worked in an IT shop as a Lead Enterprise Architect/Chief Architect for enterprise-sized companies in San Antonio for 20 years. Then, crossed over to the dark side where I’ve been doing licensing professionally for almost 9 years. So, now I’m here at Blue Chip.
How could you save your IT investment with Office 365 license management?
Sigi: Cool, so you’re a licensing specialist? Correct, Ben? It’s important because it could save money, so what’s new in the world of licensing?
Ben: Yeah, so there’s a lot of surprising things that happen that we come across still today, and then there are some new things that we’re kind of expecting. The surprising things are, we’re still moving from a perpetual licensing strategy to a subscription. So, what that means is, under a perpetual licensing strategy, I would purchase the rights to a version of the software that I could use forever under that version. That’s perpetual licensing. That’s what we know as license and software assurance which usually goes with that.
In the world of Microsoft subscriptions, on the other hand, it is a monthly fee to access the current version of that software. Office 365 is probably the most famous right now. When you stop paying that subscription, you stop having the ability to use it. So that’s the first thing. Buying cloud subscriptions is another issue which is a big confusion that I see. As we talked to our big clients, when we say cloud subscriptions, they automatically think that there is no need to worry about my on-premises assets. The fact is that these subscriptions carry on-premise entitlements.
So, there is a strategy where you can do a cloud license strategy – full up – and cover the assets that still live in your data center. So, we have to have that conversation a lot. Then the new licensing vehicles are changing rapidly right now. So, the SCE, which is a Server Cloud Enrolment, is a version of the enterprise agreement, which means it has certain rules that you have to adhere to as you buy this software. That’s going away, and they’re pushing clients that used to purchase through that vehicle to the new modern commerce agreements for Azure. Or, to an MPSA or a Cloud Solution Provider. So, there’s multiple vehicles moving around there, but those are evolving almost daily it seems like. It just gets to be out of hand at this point.
Sigi: Wow! So, you are developing successful licensing strategies for your customers and people. So, what’s the one critical thing that comes to your mind which is the most important thing for a successful license strategy? Paul, what do you think about that?
Paul: I mean, really, I think of it as being two things that are very closely related together. Being able to figure out exactly what you need and buy it. And then, using everything that you bought, so that you minimize the amount of money and time that you’ve wasted buying things that you can’t use or don’t use.
Sigi: So, you’re saying somebody would buy something that you do not use?
Paul: Oh, it happens all the time. People, number one – Ben probably has a lot more to say about this – Microsoft has probably got better licensing negotiators than you do. Right? They do it professionally. IT people avoid licensing discussions, it’s like asking your old aunt how she’s doing after surgery. Nobody wants to have that conversation. Microsoft people have it all the time and they’re very good at it. But the other thing is, it’s easy to accidentally buy more than you need because you don’t know what your users are doing, and you don’t know how they’re using the licenses. Ben, I’m sure you see that all the time in your practice?
Ben: Oh, I do, you know, one of the most common comments when I hear somebody that’s done that is #1: “I just bought one SKU because it fits everybody and if they don’t use it all and that’s ok”. And, #2: that process of understanding what they could get use out of and what they need out of it is overwhelming, it takes a lot of resources and it takes a lot of conversations with your end-user community and your administrative community within your own IT shop. So yeah, it happens all the time.
The key here is, like Paul said, you have to understand what functions you’re going to use out of these products. When I have these conversations with clients, I always tell them “Okay, we can’t talk about the product during this part of the conversation. I need to know what it is you need functionally to run your business. You know what? If your users don’t need anything but email, we need to just buy them an email. We don’t need to buy them a full suite of products”.
And so, gone are the days where the concept of, “Well, if I can buy it now, I might use it later”. That’s another excuse that I’ve heard. You know, if it wasn’t important when you’re spending all that money, it’s not going to be important later down the road, because we’re still trying to focus on running the business, right? So, we go through that process.
Another component to that is: as we figure out how to use everything we’ve bought, so let’s say we’ve taken that step, we’ve made those purchases and we’ve identified what we need. We made those purchases, and then we deploy it. The next thing you have to be able to do is to see that you’re using all of the software that you purchased. For years IT has focused on measuring their performance. Are the servers performing at peak? Can we consolidate servers? Can we consolidate virtual machines? Can we consolidate virtual farms? That’s been a discussion forever and we can manage and measure those right? But only recently can we actually see what every user is doing within the packages that were buying.
Sigi: I agree in the past, basically the money was under server licenses, correct? And so, optimizing them saved you money. But nowadays in the cloud this is not the case anymore and you are absolutely right. I see the same, the licensing and the money goes into the user centric approach. This is really what causes an impact on how much money you spend.
Also, we talked about that the size of the company is also key here. The larger the company, the more features they buy that they don’t use, correct Ben?
Ben: Yeah, because that’s where you run into that whole concept that “I’m not going to spend time on this. I’m just going to buy this one package because it fits for everybody”. You see that a lot because they don’t want to spend time on it.
Sigi: Well it’s not only time, it’s also in the budget. Remember, Paul, large companies assign one budget, and they want to get rid of that budget. The budget is there, and it stays for a year. So, if I get less budget, then there’s a problem. Correct, Paul?
Paul: Yeah, in fact, one customer that I talked to had about 40,000 seats in their enterprise and they said that they refer to it as ‘government cheese’. They pay one price per person. It covers the licenses and they don’t know the IT department. It’s not their money. The money comes from the business and so IT people have no incentive to try to figure out whether they’re putting the right license with the right person.
But also, another thing that they told me that I thought was really insightful. They have purchasing people! So, there are people who sit in a building on their campus who do nothing but work with Microsoft or Oracle or the people who make toilet paper to get the best possible deal for the company. What the IT people ask for, and what the purchasing people negotiate and buy, are not always the same. So, sometimes they ask for a small SKU. They say, okay we need E3’s for everybody and Microsoft says, “Oh well, only for only a dollar more you can get an E5 and five is more than three”. And so, the purchasing people end up buying more or more quantity than the IT people asked for in the first place.
Ben: Yeah, just to add in on that. I have this conversation with clients, too. Your procurement people, your purchasing people, a lot of time they’re compensated based on the negotiation outcome so if they can save on the deal, they get bonused.
Sigi: Discount by the highest price and you get the most discount, probably.
Ben: That’s exactly right. So, if you’re having a discussion with the procurement person and you identify the fact that they don’t even need that software at all, that doesn’t jive with their procurement or with their compensation plan. So, they will still make the purchase because they’ve got preliminary approval, but they will show that they saved with some type of discount and get compensation.
So, I always – and I think I’ve written a blog article on this as well – your purchasing strategy has to match with today’s buying strategies. We all need to be retrained; we need to adjust how we do business because the world of licensing has changed that much.
In part two, the industry experts will deliberate what trends and changes they have seen with Office 365 licenses over the past few years.
