Office 365, cloud becomes key to Microsoft licensing strategy

Microsoft's desire to turn subscription revenue may enable enterprises to garner leverage for other products they use when negotiation time comes around.

ORLANDO — Office 365 is becoming such an important part of Microsoft's enterprise licensing strategy — along with other cloud services — that customers should consider holding those products hostage to get better deals.

That's a key takeaway from a session on Microsoft negotiating tips from Gartner analysts. At the Gartner Symposium ITxpo, the research firm held multiple negotiation workshops that were generally closed to the press.

But broadly speaking the moves to getting better deals boils down to the following: Find products that are most strategic to the vendor and then be prepared to hold them hostage when you negotiate a broader pact. 

In the Microsoft case, the tips are noteworthy given that the company is moving to a cloud-based model and CEO Satya Nadella said in his keynote talk that  licensing needs to be simplified . And the cloud is the best way to simplify pricing.

msft licensing

Meanwhile, Microsoft is restructuring licensing programs, changing rights, focusing on the cloud, increasing audits and exploring more core vs. processor price plans.

Gartner argued that Microsoft's licensing strategy revolves around moving to subscriptions, generating more revenue, focusing on cloud first development and moving to the cutting edge with choice and a dose of lock-in.

Some of these moves have resulted in price increases. Gartner noted that SharePoint 2013 prices went up 38 percent last year and Lync Standard Server prices jumped 400 percent for all functions. The fourth quarter price for Windows Server 2012 R2 went up 22 percent.

To combat those increases, Gartner noted that enterprises should be prepared to either buy into subscription services or walk away. Walking away would mean you'd probably have to entertain the idea of Google Apps as leverage.