The COVID-19 pandemic has had a significant impact on cloud and software licensing strategies for most companies. The need for increased flexibility & scalability has accelerated cloud migration timelines. Staff reductions, ability to scale both up and down and the need to cut costs have also had companies re-evaluating the best licensing strategy to implement moving forward. Microsoft made some significant licensing changes in October of 2019 that are imperative for existing and aspiring Amazon Web Services (AWS) and Google Cloud Platform (GCP) customers to understand as they head into their upcoming Microsoft Licensing Agreement renewals. While you can read about the complete details of the licensing change here, the gist of the changes are that you will no longer be able to use Microsoft Volume Licensing for certain products if the licenses were purchased after October 1, 2019 or the version that you are deploying was released after October 1, 2019. With these licensing changes in mind, here are some tips and potential traps that you should look out for as your are considering your Microsoft renewal options:
- The Server Cloud Enrollment Subscription “trap” – I recently encountered a situation in which a customer, that was known to have a large Windows Server environment in AWS, was coming up for their Enterprise Agreement (EA) renewal. This customer had a traditional EA and was bringing their volume licenses (BYOL) into AWS. All of their existing volume licenses were purchased prior to October 1, 2019 so they were still eligible to be used in AWS. Under the premises of “increased flexibility,” it was recommended to the customer that they move their Windows and SQL Servers from their Enterprise Agreement to a Server Cloud Enrollment (SCE) Subscription. That way, rather than being locked in for three years, they would now have the flexibility to true up or down each year. What was not properly explained, was how this is considered purchasing a new license, and since it was done after October 1, 2019, the customer would no longer be able to use those licenses in their existing AWS environment. Adding more complexity to the situation, when you enter into an SCE, you are making an enterprise wide commitment that all Windows and SQL Servers must be licensed through the SCE. So while the customer technically still owns the perpetual use rights for the Windows Server licensing they owned through the EA, they are not allowed to use them while the SCE is active. In this situation, Microsoft offered to waive the new license cost for the SCE and honor the same EA discount on their Software Assurance that the customer was receiving previously. Unfortunately, the customer did not consult with an unbiased expert prior to making this decision. Now they are stuck, having re-bought licenses that they already owned, which they can no longer use in their AWS environment (because they were purchased after October 1, 2019) which hosts the majority of their server environment. The customer is now left with these two options:
- Keep their server infrastructure in AWS as is and re-purchase their Windows Server licensing for a third time through AWS License Included. They would then need to double pay for their licensing for the next year, and then true down their SCE licensing to zero on their first anniversary date…..or
- Migrate all of their AWS workloads to Azure so they are able to use their SCE licensing
If you are using, or plan to use a Public Cloud other than Azure, it is highly recommended that you speak to an independent licensing expert so you are not making a licensing change that could have an immediate impact on compliance and will force you into making changes to your infrastructure that you do not want to make.
- Server “License Included” gives you the most flexibility and peace of mind – On the surface, Enterprise Agreement discounts can look very appealing compared to pay for what you use, “License Included” options. We find that most customers are not using 20-30% of the EA licensing that they are paying Software Assurance on. So when looking at it holistically, those discounts evaporate pretty quickly. The reason customers move their server infrastructure to the cloud is to pay only for what you use and for the flexibility, scalability and innovation that it allows. So why would you want to keep the same old school mentality when it comes to server licensing and bring your license compliance baggage with you? When you add additional optimization exercises such as core reduction, downgrading SQL Editions and reduction of hours, paying for licensing by the hour can become a lot more attractive, especially when you consider the license compliance and audit risk that your are removing.
- Microsoft 365: consider subscriptions and profiling – As mentioned earlier, Enterprise Agreement discounts can look very attractive. Microsoft “loves” three year annuity contracts as it leads to predictable revenue. The problems with the three year commitment of a traditional EA are: 1) you can only true up and never true down, and 2) you must true up at the high watermark each year. With many companies around the world facing workforce reductions, it is not too hard to figure out why this is not a great option in these current times. Microsoft does offer Microsoft 365 through EA Subscriptions (you can true up or true down once a year) and CSP licensing (you can true up or down monthly) that will give you greater flexibility. However, it’s important to look at these options in addition to how they can be leveraged with your server licensing strategy. Another cost savings strategy is profiling your users. Most volume licensing agreement will have all users at the same level for simplicity. Oftentimes, not all users have the same needs as others. Taking the time to understand usage needs can lead to significant cost savings.
If you are in need of third-party, unbiased licensing advice, please reach out to EVOLVE Cloud Services and we would be happy to assist: info@evolvecloudservices.com or 480-770-6352