We have all been hearing about the Microsoft Cloud and Services Provider (CSP) model for more than a year now. While there is no doubt it is a huge change in Microsoft’s strategy, here are 3 questions you need to ask yourself to understand if it is a good fit for your organization.
Question 1: Why a New Model?
To answer that question, we need to go back 15 years ago to the days of Steve Balmer. The new CEO had been tasked to secure Microsoft’s core products (Windows and Office) and grow the enterprise level products (Windows server, SQL, SharePoint, SCCM). To boost adoption, Microsoft came up with the Enterprise agreement to bundle technology and provide free training and services for implementation and change management. That strategy was brilliant and led most companies to spin VMs, test and deploy all sorts of new tools without worrying about compliance. Companies were getting high value add and partners were thriving with projects and funding from Microsoft. The 3-year lock-in agreement and discounted prices made the program both attractive and viable for the following decade.
Fast forward to the cloud era and SaaS applications and you now have a problem. Systems are moving fast, thousands of industry specific cloud based companies are delivering on-point solutions to thousands of niche needs; shadow IT starts sprawling and operation is now asking their IT team to deliver specific solutions. IT teams can only move as fast as their 3-year commitment allows and CFOs are looking into amortization of their Microsoft Stack on a 36-month span.
That is when the disconnect happened. The market required a more flexible way to purchase Microsoft solutions.
Here are the 2 major pillars that make the CSP model interesting:
1) CSP is a partner led program: Unlike the Enterprise agreement, the partners are required to deliver value when they sell you CSP licensing. That means they use Microsoft’s platforms and add a component that makes their offer unique and delivers a high value proposition. Good examples are O365 turnkey solutions, VOIP as a service on Skype for business, third party applications running on Azure, Backup as a service on Azure, SharePoint online as a managed service.
All the CSP based solutions are maintained by the partner so there is no finger pointing in case of an incident. The partner must fix it. If they can’t, they need to leverage Microsoft directly to find a solution.
2) CSP is a pay as you go model: Companies used to take months to evaluate a project and invest in a new tool because they would need to live with it for 3 to 5 years. With the CSP model they now pick and choose a solution, implement it and train their employees. When the organization decides the solution no longer fits their need, they change it.
Before the CSP model, a company had to decide what level of licensing they would need to go with, Standard, Pro, Business Premium?, Enterprise, E3, E5, … and be stuck with it. This often led companies to decide on the highest level of functionalities, just in case they would need it in the future. With the CSP model however, you may decide to buy E5 and realize you only need E3 or even Business Premium. A good example is the companies that purchased E3 for their users because they needed Access Database. 3 months ago Microsoft announced Access was now part of Business Premium. With the CSP model and a good partner, that company would start saving 10 dollars per user a month overnight. Under an Open agreement, they would need to wait until the end of the 12-month engagement.
Finally, the CSP model is a ‘per user cost’ model. Seasonality is no longer an issue; you pay for what you use when you use it. Selling a branch of you company? Stop paying for the tools. Hiring massively to launch a new product line? Scale up with linear predictive costs. Want to test a functionality? Start with a team and expand to the company later.
Question 2: Are you ready for it?
CSP is not for everyone however. Realistically CSP is appealing but you will find that the pricing of the licensing and the uplift from the partners might be too high. The CSP offering is, by definition, a subscription and therefore based on a OPEX model. How your finance team looks at the numbers is key. Do they amortize software over 3 years, 5 years, more? A sound ROI analysis will help with the decision.
Your teams are also a major factor to take into consideration when choosing the model. As a decision maker, you can move fast, but how about the operatives? Do you have a good change management structure? Does your organization have a culture that embraces change? Is your IT team highly skilled and can deliver outstanding services on your legacy systems? Did you ever take a cloud readiness assessment?
From a technical perspective, what is your short/mid/long-term strategies for moving to the cloud, how do you move your licensing from on premise, to hybrid, to full blown cloud. CSP will not always be the best choice.
Last but not least, are you a Microsoft shop? If you are, you may very well be at an advantage with a full-blown Enterprise Agreement and a direct relationship with Microsoft.
Question 3: What are the alternatives?
OPEN agreements, MPSA, and Enterprise Agreements are still very relevant in many situations.
You can also consider mixing different plans. Realistically with the current licensing programs from Microsoft, companies will either be under an EA only or have a mix of different agreements.
The only alternative that should not be considered is status quo. Challenge your partners and your teams and look at different scenarios. Decide what is most important: cost reduction? Flexibility? Ability to scale?
Licensing is a fascinating and daunting topic. You want to make the best decision you can to lower the costs and improve your flexibility. You also need to ensure compliance with the End User Licensing Agreement from the different editors you leverage.
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About the author:
JB has been working in IT for 10 years for Dell and several systems integrator specialized in IBM, Oracle, Microsoft, Veeam, VMWare and others. Cloud consulting and Software asset management have been his focus for the past 3 years. JB moved from Paris to Dallas in 2014. In his free time, he likes to sail and rock climb outdoors. He also enjoys the Dallas restaurant scene; best place to eat in the world … after Paris.