Microsoft tarts up software licensing to fend off 'a few clicks and a credit card' rivals

'Why do I need to speak to a rocket scientist every time I buy Microsoft?'

Microsoft is trying to make the dark art of software licensing less complicated and more relevant to a cloudier world – but, as always, the devil will be in the detail.

The first signs of a Redmond overhaul came at the end of September when it canned Select Plus Agreement rebates for channel partners in favour of the Next Generation Volume Licensing programme.

The Microsoft Products and Services Agreement (MPSA) is the resulting offspring, which aims over time to consolidate all licenses onto a single master agreement, regardless of business size or type.

This is a long term goal, but as of 1 December all traditional on-premise business software was included in MPSA as were online services. Only enterprise channel partners, Licensing Solutions Partners, can sell these licenses at present.

MPSA is an everlasting agreement under which customers - or incumbent channel partners on behalf of the customer - open a purchasing account by legal entity, department or cost centre so procurement is centralised or decentralised as required.

Previously, each volume licensing agreement - which includes Enterprise, Select Plus, Open and Open Value to name a few - each required separate documentation and signatures even if one channel partner was involved in the sales cycle.

"The idea is that over time all licences will be brought under one roof," said a source close to Microsoft.

The initial target market in the first implementation of MPSA is for businesses with 250 seats and above, but it will expand in scope from next summer to include small businesses. Sources tell us that MPSA "mirrors" the Select Plus volume licensing agreement - though customers are not able to buy online services via a Select Plus licence.

Select Plus agreements allow customers to buy licences in the quantity they need - it can be sold purely as a software license or with Software Assurance rights. Companies must report any rises or falls in user numbers at the end of each month and cough for the difference if required.

Software Assurance gives customers rights to the latest software updates as well as maintenance rights over a three-year period. It will be rolled onto MPSA next August. Also expected in the same month will be the introduction of licences for SMEs and the channel partners that serve them. At present the SMB sector is able to buy Open and Open Value licences via distribution.

One of the biggest complaints from customers regarding Microsoft was the complexity of licensing, with some joking that a degree in the discipline is needed to get close to making sense of it.

"When I speak to customers they always moan that buying software, particularly with Microsoft, is too complex," said one channel partner, "I agree with the sentiments [of MPSA] but the sentiment is easier [to get right] than the execution".

Microsoft has also created a portal for customers to view licenses and services procured, but not what has been deployed, so it only tells half of the story. Deployment and reconciliation services can still be offered by channel partners or software asset management specialists.

In a blog, Richard Smith, GM for worldwide licensing and pricing at Microsoft, wrote that it is "simplifying our volume licensing contract structure to align with customers organisational needs".

He said that with a portfolio mix of cloud, hybrid and on-premise software, customers want more flexibility to license them.

"This results in one signing event, fewer terms and conditions, and greatly reduced number of steps required to complete a volume licensing agreement," he added.

Such is the impenetrability of Microsoft's licensing processes that a whole ecosystem sprung up on the back of it in the 2000s.

Martin Thompson, analyst at the ITAM Review, which manages a community for asset management professionals, voiced some scepticism about MPSA.

"There is little substance to their statement. Flexibility equals more options and choice, so it's a contradiction to suggest both flexibility and simplicity," he told us.

He suspected intense competition in the software and SaaS markets was behind the emergence of MPSA.

"Younger, agile competitors are offering good software with a few clicks and a credit card. Why is it I need to speak to a licensing rocket scientist every time I want to buy software from Microsoft?"

"Simplicity and frictionless commerce shouldn't be underestimated," he added.

Martin Callinan, country manager for IT asset management vendor Express Metrix, agreed the cloud was forcing Microsoft to revisit its licensing conditions.

"Broader trends across the industry towards cloud-based subscription models and per-user licensing models – as opposed to the traditional per-device software licensing model – are creating more demand from end-users for meaningful models that reflect current usage," he said.

The challenge, he added, will be to manage the new licenses alongside legacy agreements and hybrid infrastructures.

The consolidation approach from Microsoft should be "welcomed" said Rory Canavan, director of ITAM Services at 1E, "however, also in need of a refresh is the manner by which Microsoft can accommodate transfers of licences between legal entities which is currently paper based and far too slow".

He said a "real-time metering data" element on the MPSA portal was also needed to help SAM staff "actively manage licence costs". ®

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