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Fork In The Road for SMBs

by Stephen White  |  February 12, 2016  |  Comments Off on Fork In The Road for SMBs

If you are reading this post, you may have also seen our update last week referencing recent licensing changes from Microsoft in context of a desired business transformation and cloud first model.

The sales, marketing and commercial approach any vendor takes when converting business orientation will not be isolated to product licensing and pricing but is of course intertwined with structures, partner models, incentives, resourcing mechanics and associated KPI management

Part of the approach taken by publishers and vendors converting from a product oriented model to a services or cloud model, will be structural changes that enable investment in people and resources to drive the revised or newly desired outcome. What’s required for vendors to succeed in this business transformation model is covered by a number of publications aimed at a sales leadership audience and their executives.

But what types of change might be made to the organizational approach and what impacts might this bring upon the client? Fundamentally changes made by a publisher to enable transformation will be a factor of their unique maintenance and subscription base and structure – what Adobe must do has differed to SAP and Oracle for instance.

fork-in-the-roadMicrosoft’s announced change to limit Enterprise Agreement (EA) access to organizations of over 500 users or devices, increased from 250 as of July 1st 2016 is one example of structural and programmatic re-orientation. In this case the change made reflects a publisher with the double edge sword of a significant book of contractual business, the execution of which is arguably draining too much internal resource from value selling. By removing costs associated with managing a sizable segment of the EA client base, with associated customized amendments and negotiation, Microsoft will be able to re-point the associated resource or investment toward driving more desirable cloud services outcomes.

The primary impact of such a change is logically on SMBs of sub 500 users (with public sector and some geographies exempt currently) but will also impact organizations looking to leverage some of the more positive structural characteristics of an EA. Thereby some larger operations may also see an impact where seeking the ideal contractual structure to adopt new online services requirements even where their total user count is well above 500 seats.

In 2015 Gartner published guidance pointing to the route through which an organization could start with a smaller requirement of online services in an EA, without needing to make an enterprise wide commitment conventionally required when licensing on premises via the EA. For example a 1200 user business looking to commence adoption of Office 365 for one of it’s divisions representing 300 users in September 2016, then migrating other divisions to the platform over two years will have to start a commitment at 500 users rather than 300, thus adding 66% to it’s initial subscription costs.

From personal experience I recall a median EA size below the new minimum threshold, and recently confirmed this still applies in certain markets. The number of organizations impacted by increasing the entry level may initially be limited to clients with new requirements, not already using an EA, then gradually increase to include those already using the model. Cutting the workload of EA management significantly in the next three to six years should enable field sales and other resources to focus on what is core to the task of driving cloud services success.

So how can clients react or understand the impact on their options? We’ve published fresh guidance on EA considerations alongside other models being positioned by Microsoft and it’s channel to fill the void. Be clear that your organization’s own scenario and requirements for elasticity and price protection will likely differ to most others, so be prepared to complete your own assessment promptly, avoiding a rushed last minute decision, and protecting longer term interests.

Category: asset-management  it-cost-optimization  licensing  

Tags: cloud  enterprise-agreement  licensing  microsoft  strategy  

Stephen White
Research Director
2 years at Gartner
14 years IT Industry

Stephen White is a Research Director in Gartner's IT Asset Management, Vendor Management and Procurement team, focusing on strategic licensing and negotiation strategies, asset management, and reseller engagement. Mr. White leverages his experience in software sales and consulting to assist IT leaders through his coverage of best practices in license life cycle strategy and trends, license metric and pricing practices, contract negotiations, optimizing terms and conditions, sourcing, and relationship management. Read Full Bio




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