Dramatic Price Increase for EA License Renewals
Costs can rise up to 43 percent in some cases.
Microsoft is raising licensing costs for Enterprise Agreement (EA) renewals dramatically according to calculations by Sacramento-based consulting firm Software Licensing Advisors. The analysis provides specifics in its "formula of the month" discussions, which are written by Paul DeGroot, a senior consultant to the firm and well-known expert on Microsoft's software licensing through his Pica Communications consultancy.
The firm's August post (PDF) explains how to separate the actual cost of the licensing from the combined figure on Microsoft's contract renewal forms. Microsoft doesn't break down the combined figure, but it includes Software Assurance costs along with licensing costs.
In a different post (PDF), Software Licensing Advisors points out how Windows licensing costs actually increase with Enterprise Agreements after three years, finding that an EA renewal of the Windows client operating system increases 43 percent because Microsoft doesn't renew at the expected discounted EA licensing price. Instead, Microsoft uses the more expensive Select or Select Plus agreement in its calculations.
Enterprise Agreements are for companies licensing 250 or more PCs. Select Plus is also for such organizations but offers a simplified version of licensing compared with the original Select licensing for enterprise customers, which Microsoft stopped selling in July of 2011. The point of Software Licensing Advisors' calculations is that most customers may simply assume that their renewals are based on the original EA price.
For instance, an EA for Windows may have started out with a price of $125.31, but it jumps to $179.31 at renewal, according to Software Licensing Advisors' calculations. For an organization with 2,000 computers, that amounts to "an extra $94,000 over a three-year renewal, due to this pricing sleight-of-hand," according to the consulting firm.
Andrew Wolfe, a senior product manager on Microsoft's Enterprise Agreement team, offered the following response today to DeGroot's calculations.
The Microsoft Enterprise Agreement is designed to provide a more flexible and clear licensing experience for our customers. it appears that the formula presented is more applicable to a Select Plus licensing scenario for Windows OS. In addition, the formula is unreliable to draw any conclusive results because additional discounts associated with either an enterprise wide or desktop platform commitment available within the EA Enterprise Enrollment are not taken into account. Furthermore, inclusion of licensing applications, CAL Suites, or Windows in an EA Enterprise Enrollment can help an organization build both simplicity and flexibility into the IT infrastructure while enjoying savings on top of the already discounted Enterprise Product licenses. Readers should also note it is not Microsoft's intent to hide price levels. Agreements are reached through open dialogue with customers; it is Microsoft's policy to be transparent to what their licensing costs will be and can compare the costs of the renewal agreement versus the previous agreement. For additional details on the platform enrollments available within the EA, please see the Microsoft Enterprise Agreement Program Guide on pages five and six.
Software Licensing Advisors was founded in June. Its Web site indicates that its consultants include former Microsoft employees. So far, the company has negotiated more than 200 Enterprise Agreements for its clients. In addition to providing consulting and licensing audit advice, the company offers seminars on Microsoft licensing.
The company is independent of Microsoft and advocates for alternatives to all-or-nothing renewals in some cases, which is how EAs are designed. Software Licensing Advisors also plans to announce a new tool, designed in conjunction with SoftWatch, to help organizations better assess their application use and avoid costs associated with "over-licensing" software.