The Importance of Effective Subscription Management with Microsoft CSP

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With the introduction of term and policy enforcement changes in the Microsoft CSP (April 2022), we have recently encountered a number of customers who could have benefited from a more proactive license management approach from both their own internal resources and their Microsoft Partner. This lack of proactivity generally results in an increase in software spending and waste, and the risk of license non-compliance.

My colleague Karl O’Doherty and I will summarise what CSP is, the recent CSP framework changes and their consequences, common CSP challenges, and what a good CSP partner looks like. We will also finish on tips for effective management of your Microsoft CSP.

For your convenience, we have uploaded a recording that discusses these areas in more detail.

What is CSP?

Firstly, let’s share a quick recap on what CSP is. CSP stands for Cloud Solution Provider and is a modern-day licensing framework allowing Microsoft Partners to integrate license fulfilment with end-to-end lifecycle managed services; from solutions implementation to support and billing.

The CSP framework, primarily designed for customers to purchase online services, has been available as a procurement platform for several years, however, the recent term enforcement changes impact both customers and Microsoft Partners.

Historically, CSP has always had a high degree of flexibility in terms of how customers could acquire online services and certain Microsoft on-premise software, allowing the customer to effectively ‘pay as you grow’ and/or ‘pay as you slow’ on a monthly basis by default. This is the area where things have changed.

Changes that Impact Customers

By now, Microsoft Partners should all be aware of the customer-affecting changes within CSP, which mainly focused on the area of minimum term agreement enforcement. Microsoft will state that there was always a 12-month minimum term agreement however there was no enforcement policy which meant that customers could effectively reduce their quantity of licenses at any time during that 12-month term, without penalty.

The minimum 12-month term is now enforceable, so if you purchase a license on the 1st of January then you are committing to that license for the rest of the year — the customer has to pay the partner and the partner has to pay Microsoft. There is no flexibility within this policy unless you pay a premium for a monthly committed license term. You could mix and match license types; part annual term and part on a monthly committed term to allow for license flexibility, again at a premium. This fundamental change means that the customer is committed to their Microsoft partner for the term of the licenses (for better or for worse) if they do not pay the premium for monthly licenses. This can have consequences which we will talk more about later in this blog.

Governance

As much as CSP is regarded as a ‘modern’ license framework, the change of term licensing harks back to an annuity structure often associated with on-premise licensing. Furthermore, with the talk of Microsoft introducing a 3-year term, having any license term ‘lock-in’ (even if it's 12 months as these will often ‘roll-over’) reinforces the importance of governance over your software license purchases. Failing to do so will potentially create a variety of risks that many businesses will not be aware of or take account of.

Common Customer CSP Challenges

In our day-to-day engagements with many different types of organisations, we encounter licensing issues common to a number of customers causing varying levels of risk, extra cost and waste, which can all be managed with a good level of governance. These are some of the more common customer-wide challenges:

• The customer is locked into a supplier that may not have the right level of Microsoft software asset management and license expertise and therefore completely misses out on or is late to implement cost and consumption optimisation opportunities.
• Customers will ‘rollover’ on their annualised cost without questioning their usage and consumption, missing out on any cost reduction opportunities.
• Organisations end up buying additional licenses for new starts without considering what licenses have been freed up by leavers. The lack of license management in this scenario creates a great deal of unnecessary spending and waste. Inactive users are not being tracked, harvested and repurposed where possible.
• Poor profiling of requirements where customers buy a particular SKU without knowing the features the product has, whether these features are required or understanding whether an alternative approach can be utilised.
• There is still a misconception with some customers that ‘cloud eliminates the license noncompliance issue’ — this is not necessarily always the case. We have seen multiple situations where businesses have acquired a blend of subscriptions, and sometimes the features between these subscriptions are not always gated, leading to the scenario where a user with a lower subscription level may gain access to features from a more expensive subscription type.

All of this reinforces the importance of an effective CSP partner and the expertise they deliver to their customers.

What does a good partner look like?

• Communication — This is critical to a good relationship between the customer and the CSP partner. A good Account Manager will make sure that their customer is always up to date on product updates and receives frequent reviews and reporting.
• Understanding Customer Objectives — A good CSP partner will understand their customer’s future technology projects, plans, and business objectives. An effective CSP partner will support their customer plan for change and take licensing into account early on in their project planning, to ensure that they get the best possible return on their software investments.
• Account Proactivity — Proactivity from your supplier in terms of account reviews, monitoring consumption and license management is key to avoiding unnecessary spending and rollover of license terms without proper examination of costs.

Tips on Managing Your CSP

To summarise, to effectively manage your CSP, consider the following:

1. Know the date of the anniversary of your agreement for your subscriptions. Know the terms and notice period that needs to be provided to the partner for any changes. If you are not aware of these key dates in your contract lifecycle, you could end up rolling over on spend for another 12 months and continue to use a partner that may not be working best for your business.

2. Benchmark your consumption quarterly and implement any cost-saving opportunities and risk management recommendations. Do not wait until the end of the year — you are only accumulating more waste and potential overspending. This is an iterative process where you are harvesting licenses and eliminating risk on a quarterly basis.

3. Do not assume ‘cloud = license compliance.’ Do not assume cloud removes the need for proactive license management. Involve any internal skilled licensing resource or engage with an external third-party license professional to support you manage your licenses and consumption costs, and overall license compliance. This will help you save time, effort and cost overall.

Our aim for any customer is to reduce cost, waste and risk of license non-compliance, and benefit from improved software ROI. Effective management of your CSP forms a critical part of this.

With a combination of a strong software asset management practice, Microsoft licensing subject-matter expertise and a dedicated operations team, Version 1 looks beyond the CSP channel as simply a means of transacting licenses.

Our Microsoft experts can provide you with the best and recommended advice for the correct positioning of licenses, underpinned by clearly defined and documented processes, to deliver a compliant, cost-optimised and feature-maximised return on your software investment.

If you have any questions on how Version 1 can help, go to our website page, or contact us.

About the author:

William Nelson is a Sales Specialist and works in License Management Practice here at Version 1.