Five Ways to Maximise Value & Mitigate Risk in Microsoft Contract Negotiations: A Finance Perspective
Microsoft contract negotiations can be complex and challenging, requiring organisations to consider various factors that impact their technical, legal, operational, and commercial decision-making capabilities.
With this in mind, this post will highlight five ways to maximise value and mitigate your risk in contract negotiations with Microsoft. These include the importance of establishing a strong blend of skillsets within the negotiation team, understanding the financial implications of cloud consumption, fostering communication between finance and technical stakeholders, and leveraging data-driven insights for successful Microsoft contract negotiations.
- Strengthening Decision-Making Capabilities
Before entering contract negotiations with Microsoft and their reseller channel, it is crucial that you assess the skillsets available within your teams. Many organisations make the mistake of relying solely on technical stakeholders to manage contract renewals, disregarding the expertise of others. By involving stakeholders from legal, operational, and commercial departments, you can strengthen your decision-making capabilities and avoid becoming overly reliant on Microsoft’s account team and resellers for assistance. This approach enables activities such as bill of materials development and forecasting new requirements to be managed more effectively.
2. Understanding the Financial Implications of Cloud Consumption
As organisations migrate on-premises workloads and adopt new cloud services, cloud bills often grow larger. However, excessive cloud expenditure and ambitious commitments can lead to unforeseen budget overages and financial waste. Finance managers need to recognise the shift from a capital expenditure (capex) model to an operating expenses (opex) model, which introduces highly variable and less predictable spending. Developing a foundation knowledge of Microsoft cloud cost saving fundamentals empowers finance teams to identify budget risks in advance, accurately forecast spending patterns, controls cost without sacrificing quality of service, and allocates cost across the organisation more efficiently. Collaborating with knowledgeable Fin-Ops professionals with Microsoft licensing expertise can simplify this complex process and provide clear explanations in a language finance teams understand.
3. Creating Connections and Common Language
Historically, communication between finance and technical stakeholders was limited to funding new Microsoft software, hardware, and support costs. With the advent of Microsoft cloud services, the distribution of buying power throughout the organisation becomes more evident during contract negotiations. This presents an opportunity for finance managers to foster a common language that enables non-technical staff to understand Microsoft cloud spending. Establishing a common language facilitates new thinking within the negotiation team, potentially leading to more favourable commercial terms. Additionally, a common language is crucial for ongoing cost management of Microsoft online services.
4. Timely and Data-Driven Negotiations
To avoid being pressured into unfavourable deals, Microsoft contract negotiations should be based on data-driven insights and executed in a timely manner. Finance teams should initiate discussions with technical stakeholders around seven to eight months before the contract renewal date to formulate a timeline of key activities. This approach enables finance and procurement teams to understand the availability and impact of cost-saving measures and the accuracy of forecasted requirements. These insights allow finance teams to analyse their impact on the broader business, influencing the concessions sought from Microsoft and their resellers during negotiations.
5. Verifying Expected Financial Benefits
Finance teams working in tandem with skilled Microsoft licensing professionals and technical stakeholders play a vital role in assessing whether existing Microsoft contracts have delivered expected financial benefits. By illustrating spending patterns and the financial impact of agreements, finance teams can provide fact-based insights during contract negotiations. This proactive approach prevents poorly constructed agreements from being rolled over, ensuring that you derive maximum value from your Microsoft contracts.
In Conclusion
Successful Microsoft contract negotiations require that you adopt a holistic approach that incorporates a blend of skillsets, considers the financial implications of cloud consumption, fosters communication between finance and technical stakeholders, and relies on data-driven insights.
By empowering finance teams to actively participate in the negotiation process, you can optimise your Microsoft contracts, achieve cost savings, and enhance the overall value obtained from Microsoft’s products and services.
The concepts discussed in this blog apply across a broad range of Microsoft agreement types including:
· Enterprise Agreement ‘EA’
· Enterprise Subscription Agreement ‘ESA’
· Server and Cloud Enrolment ‘SCE’
· Microsoft Azure Consumption Commitment ‘MACC’
· Open Value
· Microsoft Client Agreement ‘MCA’
· Microsoft Products and Services Agreement ‘MPSA’
Version 1’s License consultants have considerable experience in helping organisations navigate Microsoft contract renewal negotiations, optimise your Microsoft software cost base, reduce the risk of license exposure, and advise and guide on the best licensing models based on your business’s technology goals and ambitions.
If you require further information or are looking for advice and guidance around your Microsoft contract negotiation strategy, then go to our website or contact us directly.
About the Author:
Karl is a Principal Licensing Consultant at Version 1, providing Microsoft license expertise to organisations globally and ensuring customers get the best value from their Microsoft assets.
