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New Microsoft license agreement could drive up costs

Thor Olavsrud | Nov. 15, 2013
Microsoft's new Server and Cloud Enrollment (SCE) licensing program, which replaces the ECI and EAP programs, could increase enterprise customers' costs by as much as 40 percent

4 Things Enterprises Should Know About SCE

But NPI says there are four things enterprises with existing ECI or EAP investments should know about SCE:

  • In most cases, the SCE discounts are lower. Under EAP, customers received a 40 percent discount off L+SA. Under ECI, the discount was 20 percent. Under SCE, the discount drops to 15 percent.

For SA renewals, SCE offers a five percent discount. This is actually a welcome change for EAP customers who received no discount for SA. But it's a drastic decrease for ECI customers who previously received a 20 percent discount for SA renewals.

  • Minimum commitments are higher. Under ECI, enterprises had a minimum commitment of 25 licenses. The SCE program, on the other hand, requires all Windows Servers in the customer's environment be covered.

Customers can no longer pick and choose which servers to add to the agreement. "The minimum commitments are higher, which is probably the one people aren't going to catch onto, at least initially, Muscarella says. "It used to be you didn't have to license all your Windows Servers. Now they require you to license your entire footprint. It could be quite a bit more. If you're in an environment where you were only licensing a small number of your Windows Servers, this could be a big issue for you."

  • The negative cost impacts of SCE are in addition to Microsoft's recent price increases. NPI says customers may feel that SCE is adding insult to injury based on price hikes to a number of offerings: Pricing for Windows Server 2012 R2 Datacenter Edition is up 28 percent; SQL Server Client Access License (CAL) pricing is up about 25 percent; SharePoint Server costs have increased by 38 percent.
  • The costs built into SCE mean Azure isn't as cheap as it appears. "Don't be fooled by the lure of Azure," NPI says. Under SCE, you'll get access to Azure at the best available pricing and management of Windows Azure will be included for certain Core Infrastructure (CIS) commitments. Instead of paying directly for Azure, NPI says, customers will instead by paying indirectly through the lower discounts offered by SCE.

"By all accounts, Microsoft appears to be just shy of giving Azure away to customers," NPI says. "It's a familiar tactic from Microsoft's go-to-market playbook. Give the product away (or charge very little), embed it into the enterprise, capture market share and raise prices. The rise of SharePoint can be attributed to this strategy."

"Depending on your mix of Microsoft products, the impact of SCE replacing EAP and ECI could increase your costs 20 percent to 40 percent," Muscarella says. "Until you go through and look at your existing environment and counts, it's hard to understand how these price increases could impact you."

 

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