One particular area to check very closely in your Microsoft volume licensing negotiations

Author: Steven Zolman

Microsoft has a very sophisticated set of tools and processes to set, manage, deliver, and customize their volume licensing prices. Each month, Microsoft generates and disseminates an updated master price list via a secure portal. This list includes every possible permutation of product, license versus software assurance, new versus renewal, 1, 2, or 3 years remaining, enterprise edition, standard edition, level A, B, C, D, Enterprise Agreement (EA), Select Agreement, Open licensing, and on and on and on… literally, tens of thousands of unique line items are updated monthly.

Then, Microsoft and their LARs (Large Account Resellers) and distributors download excerpts and extracts to supply to customers, or to load into their own catalog systems.

Finally, sales and licensing teams generate unique customer-specific pricing for particular deals. For Enterprise Agreements, price quotes are generated by licensing specialists. For Enterprise Agreements, a quote goes through several stages of draft, from a simple rough estimate, to a more sophisticated multi-tab Excel workbook showing different options and their costs over time, to, eventually as the deal reaches closure, a “Customer Price Sheet” or CPS.

The CPS is typically delivered to the end customer as a final closing document in the EA sale. Most often it’s in Adobe .pdf format (to lock down any accidental changes, since Excel doesn’t seem to be capable of doing that reliably).

Now, given that Microsoft is a HUGE technology, software and services and consulting firm, whose key area of focus in the enterprise is the “Information Worker”, it would be reasonable to expect they have this chain of events down cold and tight. After all, it’s the very definition of the kind of business process they sell solutions for.

But of course, it’s not quite that clean.

Humans are involved, so, errors creep in. People get in a hurry, make mistakes, overlook small details that have large impacts.

But, surely, these are rare events, right? Actually… no.

Three cases in point, all of them happened to clients of NET(net), all of them within the past few months:

1) We helped a client negotiate a very nice customized EA. Closed everything out. Everyone’s happy (ok, maybe not Microsoft). Time goes by, client wants to install some software.. as a good customer they check their licensing rules, to discover that Microsoft had fat-fingered a SKU on the final CPS, and the client did not in fact own what they thought they owned. No worries, MSFT messed up, they’ll make it right, right? Uhhh no. Several painful months of back and forth later, MSFT forced the client to cancel and re-bill the EA. Yes, you read that correctly. Cancel the deal, re-write it. And the client ended up having to pay for the MSFT error. Dollar value, not huge, maybe $70k of product. Annoyance, labor, time away from other important projects for the already stressed IT staff: priceless.

2) Another client, faced with one of Microsoft’s famous April 30 deadlines (don’t you love artificial supplier deadlines?), was presented with two deal options, let’s call them A and B. Deal A was slightly more attractive, by a factor of roughly $200k on a $2 million deal. Client was all set to sign, I was performing some rapid analysis on the offer and discovered… MSFT had selected the wrong cells in Excel, erroneously lowering the cost of the deal by…. $440k. So, do you think they quietly owned up to the mistake? No. Did they eat the difference? Uhhh no. What MSFT actually did was abruptly withdraw the deal via a short and curtly worded email to the CIO, with no explanation forthcoming. Leaving the client hanging, with no deal in hand, and April 30 ticking by. At least this one has a happy ending, we ended up creating a better deal for the client. But nobody at MSFT ever owned up to the simple math error.

3) Yesterday. Microsoft presents the client with a series of cost models over 3 years, comparing various licensing options. Since I’ve built and beaten up literally hundreds of these price models, and since I had already independently built one for this client, it was immediately obvious to me that the MSFT model was based on totally incorrect assumptions about the client’s current state and future needs. Let that sink in for a moment; we are late in the sales cycle, getting to final numbers, and the MSFT sales team doesn’t even understand (or forgot) the basic information about their customer’s current situation and desired go-forward products. Impact: about $127k a year or $381k total – in context of a total deal size of just under $1 million. yep, a 38% “oopsie”. Oh but wait, it gets better. I pointed this out to the MSFT account manager, who argued with me for 15 minutes till I walked him through each step by step detail of his team’s error.

So, the lesson: do not assume that Microsoft’s or your LARs price quotes are correct in any way. Check each line item for absolute accuracy, and be sure you understand not only the item, price, and quantity, but the “why” of that particular item price and quantity (why didn’t they quote any of the other 8,000 SKU’s for Office?).

Or, go the simple route, hire NET(net). I love my work, and I love finding Microsoft mistakes.

Scott Braden

NET(net)’s Website/Blogs/Articles and other content is subject to NET(net)’s legal terms offered for general information purposes only, and while NET(net) may offer views and opinions regarding the subject matter, such views and opinions are not intended to malign or disparage any other company or other individual or group.

 

Scott Braden

NET(net), Inc

SVP, Value Creation

616.546.3100 Main

616-928-2685 Direct

sbraden@netnetweb.com

www.netnetweb.com

 

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