Some good news regarding Microsoft licensing in virtual environments - near the end of March, Microsoft announced that customers with active Software Agreements on Windows desktop software can freely access virtualized Windows desktop instances without additional charge. This is an important and welcome departure from the prior model of Virtual Enterprise Centralized Desktop (VECD) which resulted in additional costs to customers contemplating the move to a virtual desktop environment.

The critical point here, of course, is an active Software Assurance agreement. Recent cost cutting measures, coupled with reluctance in moving from the stability of a Windows XP platform to the Vista platform, have resulted in Software Assurance being dropped in some instances.

The name of the game with any software licensing agreement is to get the best deal, but most executives equate this to discount. And, while we love discount, you always have to look at the longer term pitfalls or benefits. Much of the time, a sales rep offering you a discount – say 20% - on a large enterprise agreement negotiation, it sounds great. But, when you look at how software licensing works, the changing dynamics and business goals of a company and the upcoming changes (and, boy, are there a lot of those at companies today), that 20% discount may save you in the short-term, but in the longer term, you’ll end up spending more because you haven’t planned for the long game and there is little or no flexibility in your software license agreement (SLA).

So, what should “getting the best deal” from your software vendor mean? Yes, sometimes it does mean getting the best price. That’s definitely a factor, but you also have to look at:

If you pay attention to all of the above, you will get the best deal – from best pricing to best value.

Get it in writing. Get all assumptions clarified and then confirmed in writing. You don’t want to assume anything and any discussion or email in which you are getting the best leverage should be mentioned in detail within your agreement. We see a lot of our clients - even the largest Oracle enterprise - treat emails and verbal discussions as legally binding agreements, which is untrue in the case of an Oracle software licensing agreement. It is not up to the sales person to remember what he/she promised you or what concessions were discussed and agreed upon. It is up to you to remember and make it legally binding.

Confirm assumptions with examples. For example, your SLA may state that you have worldwide usage rights. You assume that you can use your Oracle product anytime, anywhere. However, that would very likely be an incorrect assumption. You should inquire whether the worldwide usage rights are affected by:

We often drill down to these small, but extremely important, details during the discussions we have with Oracle on behalf of our clients. When you clarify all the assumptions, the last step is to ensure that there is language within your SLA that defines usage more clearly.

Never assume a License Usage Right.  If you think that your Oracle license allows you specific actions or specific functions, you need to check your SLA. For example, if you have eBusiness Suite and you assumed that the collection module was included in the accounts receivable functionality (which is reasonable). The collections module is actually a separate module and a separate cost.

Never assume that the vendor doesn’t know. We have many companies come to us for the first time and they tell us about a yet-to-be disclosed data warehouse launch, a merger or company acquisition, layoffs, or other major corporate changes. Often, the company believes that Oracle doesn’t know about it and they want to know what their SLA options are.  However, don’t be too sure of that. With larger companies, it’s not too hard to find information about the organization including the inner workings and operations.

Employees opting to skip the commute and work from remotely have risen by 39% in the U.S. between 2006 and 2008 and corporations are starting to realize the cost savings. From a technology standpoint, setting up an employees at home (or at a location other than the corporate office) is rather simple - give them a laptop and an IP phone and no one is the wiser about where they are working from - whether wearing business casual at the office or your chenille robe at home. Most companies use some type of hosted server so that clients can access files.

But….what about licensing? When employees choose to use their home computers and access company files and programs, how do you remain compliant with licensing policies? At least with Microsoft, this software vendor offers special Work at Home (WAH) products through Select and Enterprise Agreements that allow customers to use certain volume licensing products on home computers. You must purchase a WAH license to correspond with each onsite license - therefore two licenses for each employee on each product. If you don’t…you’re out of compliance. It wouldn’t surprise me if more than 75% of companies with remote workers have this issue during audits.

The following WAH are available from Microsoft: http://www.microsoft.com/licensing/about-licensing/product-licensing.aspx#tab=2 .

When acquiring these licenses, like anything else - read your terms and conditions. They are very specific as to who, what, where, why, when and how you can use a license!

One of the major benefits customers have seen from Microsoft’s Software Assurance (SA) is the ability to migrate from a lower to higher edition software without incurring full licensing costs for both editions by using what is called a Step-up license.  In order to qualify for a step-up license you must be enrolled, with SA, in any of the following volume licensing programs: Open License Value, Select License, Select Plus, or Enterprise Agreement. There are also a few other stipulations (Gotta love those stipulations). On a renewal of your software licensing contract and with Open License Value, Select License, and Select Plus you will need to have three years remaining on your “SA Step-up” license for the higher level edition. On an Enterprise Agreement renewal, you must add an SA Step-up license for the higher level edition at signing.

When you have an existing agreement for any of the volume licensing programs you must have one, two or three years remaining on an SA Step-up license for the higher level edition.

Make sense? Yes, we know it’s confusing, but it can be really beneficial when you need to migrate. The Step-up License price is the difference between the License and Software Assurance (L&SA) price of the higher level and lower level editions of the software.

Microsoft has removed its grace periods on Software Assurance (SA) renewals for the following products on new contracts:

This is for new contracts, so if you have SA built into your current contract, you will still have your 30-day grace period until the end of your contract.

One of the most complicated aspects of negotiating a software licensing contract is when an organization has no precedent to follow. Perhaps they are purchasing volume licensing for the first time, or working with a new vendor, but when there is nothing to go by, the process is all that more complicated. To add to this, vendors have non-disclosure agreements, preventing customers from discussing pricing with others. Therefore, you won’t find out about pricing until you are actually seated at the table with the vendor - on the hot seat. Pricing benchmarks are important to the negotiation process, to make sure you are getting the best deal. In addition to price, if this is a first of any kind, you want to know that you are buying something that will fit your company today and 2 years from now.

Get help.  Consultants negotiate contracts every day, they know what the vendor has to offer, what the discounts should be, how to work a contract to accommodate your company’s growth … I can keep going here! It’s not shameful to ask for help - it will save you money in the long run.

With October a day or two away, and the launch of Windows 7 nears, Microsoft’s licensing hasn’t gotten any clearer. Two analysts at Directions on Microsoft, an analyst firm that reports on the company, has released a report that breaks down five reasons why Microsoft licensing is supposedly difficult:

1.    Many products and markets.

Microsoft offers a broader set of products than any other software vendor, sells in virtually every country, and deals with customers of all sizes. A one-size-fits-all product packaging, licensing, and pricing approach couldn’t possibly work; complexity is simply unavoidable.

2.    Decentralized decision making.

Although Microsoft has a central licensing division that, among other things, designs and administers licensing programs such as Open and Select, numerous Microsoft product groups decide independently what types of licenses are required for a product and how they are priced. Each product group cares most about responding to its competitors, maximizing its revenues, and addressing specific customer requests. Consistency, simplicity, and ease of compliance often take a back seat.

3.    New technologies.

Developments such as the Internet, multicore processors, virtualization, mobile devices, and cloud computing have all forced Microsoft to adjust licensing rules. Each adjustment triggers many transition complications for existing customers and may introduce obscure new rules or exceptions designed to generate new revenue from emerging trends.

4.    Limited enforcement and compliance tools.

Most Microsoft products do not include features to help medium and large organizations match product use to license purchases or comply with license usage rules. Customers are responsible for building the complex infrastructure and processes necessary to police themselves. Weak enforcement tools can lead customers to buy more licenses than they need or sign up for “all-you-can-eat” license programs, such as Enterprise Agreements.

5.    Lack of incentive.

Microsoft executives don’t see current licensing policies as a problem-customers are still buying-and the executives are reluctant to tinker with such a complex system. Any major restructuring of licensing policies could raise a tsunami of transition issues with great risk of costly, unanticipated, or unintended consequences for both customers and Microsoft. Furthermore, Microsoft would likely face at least a short-term hit to revenues to mitigate transition costs for customers.

The analysts make some good points, but they all seem like reasonable changes that Microsoft should move on - and sooner rather than later. New technology shouldn’t be an excuse for a technology company not to change, especially considering that they are partly responsible for this new technology!