Why Microsoft Will Fail!

Okay, did I catch your attention with that title?  Let me set the record straight. No, I don’t think Microsoft will fail anytime soon.  Sometimes, as I’m thinking about the business or deals that I am working on, I often wonder what is going on behind the scenes at Microsoft and why they make certain decisions?  In this post I’m going to try and answer some of the top questions that people ask me around why Microsoft makes some of the decisions that they do.

Why the Push to Office 365?

On the surface the answer to this question seems simple.  Microsoft wants to control your infrastructure; they want to make sure you are hooked… but I really don’t think it was this simple internally at Microsoft.  My guess is, there was a massive amount of real debate about a push to Office 365 (and I’m guessing it was not always a polite conversation).

Office 365 to me, was an answer to a problem Microsoft has had since the invention of Software Assurance, it was a way to force customers to upgrade.  The biggest threat Microsoft has to its traditional recurring (ie. Software Assurance) revenue stream, is clients that do not renew (all or part) of the Enterprise Agreement (EA).

If you really think about it, Exchange as an online service – makes sense.  SharePoint as an online service – only sort of make sense (think of all the customization that may not be easily achieved in a multi-tenant type deployment), Skype in the cloud – not sure it makes sense (ok I will give IM and presence, but Voice?  I’m still not sure VOIP quality comes close to the landline) but Office in the cloud – huh?  Yes they have the Office Apps but are they really much more than a glorified viewer (which were free?).

I think just looking at Office pretty much provides the full picture here.  People were dropping the SA on Office, as they only deploy the product every 6 or so years.  Microsoft realized this and the natural answer – push people to Office365 and make it dependent on a new version of Office.  Now at this point I can see someone in the product team in Seattle going AND OH if we make a new version of Office we can force those updates on people.

Why the Push to Upgrade?


Upgrades have always been the nemesis of Microsoft.  It started with Windows XP (no I don’t want to get into arguments about how bad Vista really was).  No one wanted to move.  Microsoft of course never understood this.  I always love the comments you hear from sales reps, this customer moved in 90 days why can’t you?

Taking the clients view on this, I truly see it.  Honestly, what value can they add into Windows or Office for that matter to provide business value to do the upgrade.  I sometimes wonder how many people would still be running Windows XP if it was still supported, which by the way is the number one reason people upgrade these two products – end of life support!  Not a good reason in my opinion (completely off topic but, if anyone from Rimini or Spinnaker reads this, please, please, PLEASE!! take on Microsoft support).

I think Microsoft’s issue has always been that, they do not see the clients’ world.  Their view is so myopic of their own desires they can’t see it.  The reason people can’t move (beyond finding business value) is the cost to do all the application compatibility is so cost prohibitive.  End of story.  Microsoft’s first attempt at address this – App-V.  Virtualize guys, contain the old apps in an image and your good to go.  When that didn’t work, they came up with plan B. Force it on them with Office 365.

Not a bad plan if you are a shareholder of Microsoft’s.  Get them and keep them forever.  The problem is, I don’t believe this plan will work.  As much as Microsoft technology is important to people, I do think some unforeseen force will catch them (maybe it’s Google or Amazon or someone we haven’t seen yet) The problem for Microsoft and why I think they will fail is…..  They are upsetting all their clients.  Organizations are tired of the Microsoft games (Pushing products that aren’t needed into bundles and increasing prices, not negotiating in good faith, auditing and pushing unfair findings on them, etc).  Eventually when someone catches them, I think the exodus could be fast.  Just ask Novell (remember Netware), IBM (bye, bye Lotus Notes), Corel (WordPerfect) Perhaps someone should ask the crew from Netscape or Blackberry what happens when you take clients and your dominance for granted.

Why is Microsoft Introducing Enterprise Advantage?

On July 1st 2016 Microsoft announced a new licensing program called Enterprise Advantage and Richard Smith who is the General Manager, Microsoft Worldwide Licensing & Pricing had this to say:

In 2017, we will introduce Enterprise Advantage as a new way for commercial customers to buy organization-wide on the Microsoft Products and Services Agreement (MPSA). Enterprise Advantage brings traditional Enterprise Agreement benefits to the MPSA and provides the best value for a three-year, organization-wide and optional platform-wide purchase:

  • Mix perpetual and subscription software with cloud services like Office 365, Azure, and CRM Online, organization-wide
  • Purchase any time, whatever you need, with no additional enrollments
  • Enjoy budget predictability and price protection
  • Buy how you want, taking advantage of your combined purchases across the organization to maximize value

More easily manage your assets, including true-up and true-down of subscriptions and services, to meet ever-changing businessneeds.  https://blogs.technet.microsoft.com/volume-licensing/2016/07/01/introducing-enterprise-advantage-on-mpsa/

Microsoft’s Mark Nowlan added that:

“With MPSA, Microsoft’s goal is to streamline its multiple licensing/purchase agreements down to a single agreement and two options to buy (transactional/buy as you need or organizational-wide), Nowlan said. As part of this consolidation, the Perpetual Desktop Enrollment, Subscription Desktop Enrollment, and Server and Cloud Enrollments will go away.”  http://www.zdnet.com/article/microsoft-to-add-enterprise-advantage-to-mpsa-licensing-in-early-2017/

 But Why is Microsoft Suddenly Making these licensing changes?

  1. Less room for negotiation for smaller organizations in the sub 2,400 users/devices space.

With the new Enterprise Advantage program Microsoft is making licensing much more programmatic for these smaller to mid-sized organizations.  This means there will be less room for negotiation.   Our sense is that with the new agreement the MPSA price is the price and there is little to no room for negotiation.

  1. Reduces negotiation around terms and conditions.

With the elimination of the traditional contract stack and its “simplification” there will be less room to negotiate specific terms and conditions which are important to the client’s business.   With the MPSA program the terms and conditions are basically a take it or leave it proposition.

  1. Reduce Microsoft’s administrative Costs.

There are administrative costs associated with these licensing programs.   Over the last decade Microsoft has become more and more hands on with all their enterprise class agreements and there are costs associated with this.  Organizations with less than 500 users will find themselves pushed to a Cloud Solution Provider (CSP).  The Microsoft Cloud Agreement (MCA) program’s lack of complexity in terms of customization will help Microsoft push the workload to their CPS Partners.  These partners will wind up assuming more and more of the support and administration costs is our guess.

  1. It potentially provides the illusion of choice to clients in the 500 to 2,400 user space.

At first glance it looks like an organization in the 500 to 2,400 user space retains a lot of the options they always have enjoyed with the MSP, EA or CSP.   The problem is that the only space in which there will likely be any customization is in the EA.

We’re not sure this makes Microsoft licensing any less complex.  In fact, it potentially adds to the complexity.  What it does is make it easier for Microsoft to make clients in the 250 to 2400 user space very programmatic and removes any ability to negotiate T&C’s and pricing.  Microsoft will then use the CSP program to drive these clients to the cloud.

If you have questions or concerns about the impact of this change, we encourage you to contact one of our unbiased licensing experts for a free initial consultation.