Microsoft end of year review

I recently put Gareth Redshaw – our Director Microsoft & Cloud Consulting and resident Microsoft expert and thought-leader here at Livingstone Group – in the hot seat to get his perspective on the trends and changes in Microsoft software and cloud services from the past year. We also looked at examples of how Livingstone has worked with a wide cross-section of organizations to optimize their Microsoft estates and I got Gareth’s take on some of the things we can expect to see from Microsoft over the coming months.

 

Chris Lewis: What are the main changes and biggest trends you have seen related to Microsoft over the past year?

Gareth Redshaw:  As a result of the pandemic and the increase in remote working, many organizations are now more reliant than ever before on Microsoft’s software and cloud services – especially applications like Teams. Conversely, while usage has increased, headcounts have reduced quite significantly as organizations furloughed staff or had to shut up shop for a period of time. 

While Microsoft afforded its customers some flexibility and sympathy early on in the pandemic when it came to licensing and contracts, as organizations have grown more reliant on what Microsoft has to offer, the vendor’s sales teams in particular have become less sympathetic to headcount reductions which is a big hit for struggling Enterprises. We’ve seen Microsoft change how it negotiates and what it’s offering to organizations quite dramatically.

A few other hot topics from the past year have included the rise of Power Apps and the increase in popularity of FinOps, which has become somewhat of a buzzword recently. Microsoft has also been fighting for global market share in the cloud with Azure, particularly in the US where Azure is often a secondary option. This has filtered over into how Azure is being negotiated. Similarly, Azure spend and forecast management have become more sophisticated with trending data and AI projections helping feed towards a risk averse spend commitment.

 

CL: Has Microsoft changed the way it negotiates contracts?

GR: As a result of the increased reliance on the likes of Teams plus an increased adoption of security capabilities, organizations have found themselves in a weaker negotiating position with Microsoft. The vendor knows it has the majority of the leverage in these discussions, and we’ve even seen it take advantage of this upper hand by introducing new tactics such as unexpectedly delaying negotiations or pausing support at renewal point.

We’ve also seen a trend in ‘Second Generation’ contracts, in which the vendor has been pushing organizations into upgrading to a richer technology stack, rather than simply renewing its previous contracts as is. With everyone’s reliance on software and cloud applications at present, it’s no surprise that this tactic is working.

Siloed negotiations have also started to make an appearance, with Microsoft separating out renewal contracts and negotiations into smaller entities, in order to reduce the revenue under negotiation and therefore impact the client’s ability to attain discounts reflective of the all-up spend. While this might get customers the technology they want, it will come at a price – both now and in the future as control of cost, compliance and consumption will be much harder to come by without one centralized contract.

Microsoft has also become more sophisticated and intelligent in its negotiation approach. It’s no secret that large publishers like Microsoft tend to know customers better than they know themselves – especially when an organization’s Procurement and IT teams have poor internal visibility of current and future roadmaps of its requirements, something Livingstone work with our clients to achieve and is crucial to the success of negotiations.

Microsoft customers need to gain a thorough understanding of their current and future Microsoft standing if they are to gain the upper hand during negotiations, now more than ever.

A final point to note is that the CISO is now playing a much more active role in negotiations because security concerns are around every corner. It’s no surprise that this is the case, and Microsoft and organizations alike are realizing the benefits of having them engaged at this level.


 

CL: What evolutions have you seen to its sales practices?

GR: Multi-level selling – when Microsoft’s sales teams are engaged in discussions with multiple stakeholders at multiple levels of an organization – is becoming increasingly prevalent, and is another example of Microsoft using its leverage in a world where everyone is using its products.

For instance, it’s quite common for a Procurement team to receive a quote for specific areas such as Azure and consider the quote to be unsolicited and not required only for us to uncover during our process similar findings representative of the Microsoft quote.

Microsoft and reseller sales teams are also pushing to sell Microsoft ‘E5’ premium product, Power Apps, and of course online subscription-based contracts and products have never been more popular. One caveat to mention here is that, with the proliferation of data that comes as part and parcel of cloud-based subscriptions, sales teams are gaining more and more insight to customer consumption data – they can see what you’re using and leverage this information to adjust their sales approach accordingly.

With Azure, Microsoft is competing with AWS on a global scale. It’s important to note however, that the relevance and competitiveness of Azure is vastly different between each global buying region.

 

CL: What else has been happening on the cloud/Azure side?

GR: For starters, cloud management tools in general are really starting to converge in terms of optimization capabilities and, for the most part, there are two types of tooling available on the market now – breadth ones that can cover a lot of capabilities, but not necessarily any of them in depth, and depth ones that are designed to support one specific area such as optimization or process and/or policy management.

With this is mind, when it comes to Azure, organizations need to decide how they want to manage Azure – do they want a specialist approach just for Azure, or are they looking for wider processes and policies that have wider-reaching cloud coverage? With our Cloud Investment Management Service (CIMS) for Azure, we work with organizations to not only negotiate their Azure contracts, but also implement tailored optimization rather than double digit potential savings that are not attainable and ensure our clients get the most out of their Azure purchases on an ongoing and long-term basis.

FinOps crops up again in relation to Azure too, particularly when it comes to Azure forecasting, risk management and negotiations. Looking at Azure from a FinOps perspective can be hugely beneficial for organizations, helping to get a better understanding and handle on their cloud costs and contracts. Supporting forecasting from a risk/commitment management perspective is also something Livingstone Group can help support.

 

CL: Can you give some examples of where you’ve worked with organizations to help them with their Microsoft estate over the past year?

GR: We recently helped a global retailer negotiate a new contract whilst managing a sizeable headcount reduction as it had had to shut many of its stores due to COVID. We started by really understanding and reviewing their requirements and needs. This involved completing a full Microsoft estate analysis and reviewing its user personas – a key practice for us when we want to establish an accurate, lean and future-proofed picture of an organization’s usage and requirements. Subsequently, we produced an optimized Bill of Materials for them that they could then present to Microsoft during negotiations. Thanks to our team’s expertise and having a true understanding of the client’s needs, we were able to achieve the retailer’s desired outcomes with a multi-million-dollar cost-saving impact.

We also worked with a global advertising firm with its Azure contract negotiations. Similar to the retailer, we conducted a thorough investigation into the client’s requirements. We considered risk and consumption, and looked at the organization’s projected Azure spend to see if it aligned with the investment profile it needed in actuality. This is standard operating procedure for us, helping organizations to get a handle on their software and cloud estates – and by enabling them to see the whole picture clearly, we give them the power and the leverage they need during negotiations to obtain an optimal deal.

There was also a global organization with >80,000 users that we helped through their contract negotiation process. The challenge with these negotiations, was that the products were siloed and negotiated separately, including Azure. But because the client had gone through our CIMS process, it already had a clear picture of its Microsoft and Azure current and future requirements, and was able to make a bigger commitment to Azure – an outcome that was beneficial to the vendor and the organization’s operations.

You can see plenty more of our client success stories online.

 

CL: What trends do you expect to see in the next year?

GR: Firstly, Power Apps products – including PowerBI, PowerApps, PowerAutomate – will certainly be a key influence in the next year as Microsoft puts more and more emphasis on this technology. So, organizations shouldn’t be surprised if these crop up on a more regular basis during negotiations.

Microsoft will continue to drive Azure on a more global scale and really compete against competitors, especially AWS, to be front of the pack.

Microsoft is also becoming a front-runner for security, compliance and telephony – key elements that are critical products for Microsoft contract negotiations.

Finally, Microsoft has just announced price increases for all the majority of its EUC user licensing with some components taking a ~20% increase. Notably, M365 E5 premium components are exempt from the cost increases. This change alone makes M365 E5 as a packaged offering much more price compelling even without the need for the full suite. Closing the price gap certainly makes it easier for then sales teams to build a sales business case.

 

If you would like any information about how Livingstone Group can help with your Microsoft needs, please see our dedicated Microsoft page and please get in touch with one of our Microsoft experts.

 

About the Authors

Chris Lewis, Head of Marketing

I am currently the Head of Marketing at Livingstone Group. Over 25 years’ experience in technology marketing roles spanning global markets. I have built and led several high performing multi award winning Marketing teams, successfully defining and delivering corporate communications, branding and marketing strategy. Previous employers have included Dimension Data, Infor, SCC & Marconi Communications.

Gareth Redshaw, Director for SME, Cloud & Strategic Partners at Livingstone Group

Gareth joined our team through the acquisition of Cloud Optics, who are now a company in the Livingstone Group. With over 15 years’ experience in software licencing Gareth has helped clients optimise spend, develop their future strategy and taken control of high-profile vendor negotiations; this includes one of the largest UK Government contracts.

Having successfully managed UK wide government EWA contracts from 2009-2011, more recently Gareth developed a proven methodology for cost optimisation.  He has implemented this across EMEA wide clients and delivered substantial savings. Gareth developed and grew the largest LSP’s practice for Microsoft government SME consulting and Cloud Commercial Optimisation.  In addition to this he was responsible for this same LSP’s Licence Consulting UK, Ireland & Nordics.

 

 

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