In July 2016, Microsoft officially announced a new licensing package called ‘Secure Productive Enterprise‘ (SPE) as a new strategic licensing initiative to drive adoption of Microsoft Cloud Services.
SPE represents a bold strategic play by Microsoft to present an increase in committed cloud spend to investors. The new licensing vehicles, incentivise business customers to both upgrade and commit to keystone solutions like Windows and Office, secured by cloud supported security and ongoing feature updates; tightly packaged with Office365 productivity services and cloud based identity management.
The Secure Productive Enterprise is also a play to usurp competitors, leveraging market predominance in certain keystone solutions, like Windows, Office, AD, and Exchange; to annex market share across security, identity and telecommunications sectors, and Microsoft are betting big that a tightly integrated keystone solutions and services portfolio, with strong feature dependencies across the wider solutions and services stack, will allow Microsoft to move into and secure new markets.
Microsoft are changing how they work with their global partner ecosystem. The global rebates and incentives programmes, are strongly focused on adoption of cloud services, with limited incentive for advice on licensing. The communication strategy is one of ‘simplification’ with a single user-based subscription model. Microsoft are hoping to focus communication on how cloud can enable business objectives and promote productivity, and talk less about licensing and pricing.
The third pillar of this multi faceted strategy is contract simplification. The traditional vehicle for business customers was to buy an Enterprise Agreement (EA) for committed spend Select Plus for transactional software. However, with the organic sprawl of strategic initiatives across client computing, core infrastructure and databases, and cloud IaaS and PaaS, customers were soon finding themselves signatories to a plethora of contractual documents. The MPSA (Microsoft Products and Services Agreement) represents the contractual ‘simplification’ plan to provide a single contractual vehicle for procurement of Microsoft solutions and services. The committed spend packages of the Enterprise Agreement, are consolidated as ‘Enterprise Advantage on MPSA’ under a single MPSA contract umbrella, enabled by a digital pricing and ordering platform, to accelerate the closure process and deal cadence.
The fourth pillar, is about accelerating commitment to cloud services, while customers continue to leverage existing software investments. The Secure Productive Enterprise enables customers to sign up to cloud services, but maintain access to on-premise applications services (like Exchange, SharePoint or Skype for Business), or enable the business to access a cloud supported Office (Office365 ProPlus) but continue to run a traditional install (Office Pro Plus MSI), without paying concurrently for on premise software and cloud. This is a compelling message, and supports the Microsoft mantra of ‘simplification’. The drawback, however, is that Microsoft haven’t completely trusted their customers to adopt cloud under this model. The on premise software rights are limited by conservative restrictive software use terms and loss of perpetual rights, with caveats as to eligibility. Investors may seen a keen uptake in cloud committed spend, but the actual adoption may be deferred. The advantage to Microsoft is they have secured committed annuity with customers unlikely to renew into more costly on premise annuity models.
The fifth and final pillar is about cost reduction and cloud ecosystem enablement. Microsoft have announced that ‘EA on MPSA‘ will be an indirect contract sold via a channel model. This enables two key programme initiatives, firstly, strategic cloud licensing packages can be sold as scale, and supported by an ecosystem of service providers with complimentary digital platforms, solutions, and managed services. Secondly, Microsoft are starting to drive a global cost reduction programmes by passing on the cost of transaction and cloud support services to the channel.
A Course for Success
Microsoft is charting a course, and starting to turn the ship. The decision to move from a direct, to an indirect model will bring the strategy ‘full circle’, driving channel partners to reduce margins, supplemented by complimentary services. Simply directing customers towards ‘strategic cloud’ initiatives like Secure Productive Enterprise (SPE) and Azure, will maintain revenue streams based on rebates and incentives in the short term, but success for partners and customers will be dependent on their investment in digital platforms to enable and manage the cloud, technology and advisory services to enable return on investment and cost reduction, and also access to capital to support an indirect resell model.
The Microsoft partners that thrive would have seen the course and not only reacted, but accelerated ahead of the competition, balancing Microsoft’s ‘modern licensing’ strategy with the needs and interests of their customers.
The success for Microsoft will be dependent on implementation, Secure Productivity Enterprise could hyper-scale and be incredibly successful, but could still be held back by conservative licensing restrictions.
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