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Sales: Software Assurance Sales -- Obstacles Dead Ahead

Partners who sell Microsoft Software Assurance (SA) may hit some big hurdles this year, according to a recent survey by Cambridge, Mass.-based Forrester Research Inc.

The survey results, released in July, indicate that many SA customers are considering not renewing their SA contracts. In fact, only 11 percent of the customers Forrester polled definitely planned to renew.

SA is a maintenance program that, for a yearly subscription fee, provides 24-hour phone support, training, home-use rights and other benefits. But the primary reason most businesses opt for SA is to get new and upgraded products.

For channel partners, Forrester's findings could translate into a lot more work. "I think the failures of SA from the channel perspective mean sales cycles will take longer and be more challenging, and customer expectations for discounts are likely to be higher," says report author and Forrester Vice President Julie Giera.

This is an important year for the SA program, with many agreements up for renewal. In fact, 86 percent of the 63 customers Forrester interviewed have SA licenses that expire in 2007. Of those, 26 percent said they won't renew. That's more than double the number of those who liked the agreement enough to ante up again. Another 31 percent indicated that they were "not sure" or "still deciding," 18 percent planned to renew "only for some products," and 13 percent said they'll "probably" renew.

The Forrester report's conclusion isn't good news for Microsoft or its partners: "The economics behind buying or renewing SA aren't nearly as compelling for many companies as appeared to be the case a few years ago, when the program was first introduced. Long upgrade cycles, lack of a detailed product road map for new products, introduction of Enterprise CALs [client access licenses], and costs of SA are prompting many more organizations than before to reconsider their licensing strategies."

Forrester's report encourages customers to fight back against SA terms and to hold out for discounts.

Microsoft, which has worked closely with Forrester on licensing-related studies and tools, disputes Forrester's conclusion that customers feel that they're not getting their money's worth from SA.

Stacie Sloane, director of marketing and communications for worldwide licensing and pricing, calls Forrester's results misleading because they were based on too small a sample. The report "only looks at a subset of our customers and isn't consistent with the feedback we've received," she says. "In fact, Microsoft's renewal rates are on target and in line with our expectations.

An estimated 75 percent of existing EA customers are renewing their Enterprise Agreements, which demonstrates that customers find value in all the benefits this type of agreement offers."

If that's true, Giera wonders, why is Microsoft so eager to cut deals on SA? "Discounts have gotten deeper, concessions have gotten better and customers have been able to get a much better deal. That says to me that Microsoft understands that this audience is at risk," Giera says.

Besides pushing Microsoft for better deals, how should partners respond? Giera recommends viewing SA not just as a product, but as a platform for upselling and solution-selling their own wares.

For instance, if a customer is doing an Exchange migration, a partner could point out SA's training and work-at-home benefits, then offer to handle the rollout and implementation. Says Giera: "There's huge money to be made there."

About the Author

Keith Ward is the editor in chief of Virtualization & Cloud Review. Follow him on Twitter @VirtReviewKeith.

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