News

Microsoft Raising License Costs Under Server and Cloud Enrollment

• By Kurt Mackie
• February 06, 2014

Organizations may see higher licensing costs with the launch of Microsoft's new Server and Cloud Enrollment (SCE) agreements, according to licensing expert Paul DeGroot.

DeGroot, founder of Pica Communications and a senior consultant with Software Licensing Advisors, gave a talk on Thursday for Software Licensing Advisors, a licensing consultancy specializing in Microsoft products. The webinar, titled "Microsoft's Server and Cloud Enrollment (SCE): The Good, Bad and Ugly," mostly pinpointed the ugly.

The new SCE agreements came out on Nov. 1, 2013, although Microsoft described the plans back in August. Eventually, SCE will replace Enrollment for Core Infrastructure (ECI) and Enrollment for Application Platform (EAP) agreements. DeGroot explained that all future Enterprise Agreement-style renewals will be SCE plans going forward, and that on Jan. 1, Microsoft changed it such that only SCE is available for renewals.

SCE includes a 15 percent discount for new licenses, and a five percent discount on Software Assurance (SA) renewals. In contrast, the older EAP plans include 40 percent discounts on premium license purchases, a 15 percent discount on other licenses and no discounts on SA, according to DeGroot. ECI was designed to support Windows Server and System Center licensing, and it includes 20 percent discounts on new licenses and SA.

SA is a licensing option that offers upgrade rights to the next Microsoft software release within a contract period. However, SA is estimated to increase prices for organizations by 25 percent to 29 percent over the underlying software licensing price. Under the SCE, organizations appear to be compelled to add SA coverage across their infrastructures. That SA push likely will be a major factor that will increase the costs of Microsoft's licensing for organizations at the time of contract renewal, according to DeGroot.

"I have trouble thinking about having an ECI and signing an SCE and watching my costs go up," DeGroot said, adding that he's seen some customer agreements penciled together and "they just don't work."

The vendor community partnering with Microsoft is required to pitch SCE, DeGroot said, and they are claiming that SCE offers better discounts. He recommended asking them for cost models to show how the numbers work out.

Even a Microsoft partner document suggested that "moving from ECI to SCE probably won't save you any money," DeGroot said. Costs could increase 61 percent with the SCE agreement for a customer that had 70 percent SA coverage on servers and 45 percent SA coverage on System Center suites, he noted, alluding to the partner document.

Previously, organizations that had EAP agreements could have old licenses lying around without SA coverage. As long as those licenses were included in the EAP agreement, it was possible to upgrade those products, DeGroot explained. However, the SCE lacks this capability. Instead, organizations will be faced with either buying a new license or buying a subscription-based service instead; otherwise, those old licenses can't be used. However, paying for subscription licensing can cost 42 percent more than just paying for SA, DeGroot claimed. He acknowledged the confusion such nuances could instill.

"You're probably confused, and, you know, that's part of the [Microsoft] strategy where people say, 'Where's the pen?'"

Another burden for organizations with SCE is that they now have to list the maximum number of products used during a contract period at the annual true-up, which determines their costs. Organizations get a 15 percent discount on the new licenses added but they have to add SA coverage to them. The SCE plans offer a five percent discount on SA, but DeGroot still got "whopping numbers" in his cost estimates because of the expense of adding SA.

DeGroot offered lots more details not captured here. The talk will be offered on demand by Software Licensing Advisors at some point. The Sacramento, Calif.-based consulting firm offers replays of its recorded webinars and other materials at this page (sign-up is required to access the Webinars).

In addition to SCE, Microsoft has some next-generation licensing programs in the works, which are described in this Redmond article.