News

Report: Microsoft Raising EA Licensing Renewal Costs Over 40 Percent (UPDATED)

• By Kurt Mackie
• August 31, 2012

A consulting company has calculated that Microsoft is increasing the licensing costs for Enterprise Agreement (EA) renewals by about 43 percent.

Software Licensing Advisors laid out the math in its "formula of the month" discussions, written by senior consultant Paul DeGroot. DeGroot is a prominent expert on Microsoft's software licensing, with his own Pica Communications consultancy.

The August post (PDF) by Software Licensing Advisors shows how to separate the actual cost of the licensing from the combined figure on Microsoft's contract renewal forms. Microsoft doesn't break down that combined figure, but it includes Software Assurance costs along with licensing costs.

In a September post (PDF), Software Licensing Advisors relates how Windows licensing costs actually increase with Enterprise Agreements after three years. By performing the calculations, the Sacramento-based consulting firm found 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 with 250 or more PCs to license. Select Plus is also for organizations with more than 250 PCs and offers a more simplified version of licensing compared with the original Select licensing for enterprise customers, which Microsoft stopped selling in July of 2011. But the point of Software Licensing Advisors' calculations is that most customers may just assume that their renewals are based on the original EA price.

For instance, while an EA for Windows may have started out with a price of $125.31, it jumps to $179.31 at renewal time, 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.

UPDATE, 8/31: Andrew Wolfe, a senior product manager on Microsoft's Enterprise Agreement team, offered the following response on Friday 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 is a new company that started 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, that will help organizations better assess their application use and avoid costs associated with "over-licensing" software.