9 min to readPublisher Advisory Services

Always on Microsoft contract renewal readiness

Jim Nagurney
Jim NagurneyPrincipal Consultant, Microsoft Advisory Services
Publisher advisory

What triggers a contract negotiation with Microsoft?

There are many reasons why companies enter negotiations with Microsoft and other software vendors. One of the main ones is to renegotiate licence contracts which have either come to an end or need scaling up or down. Sometimes, negotiations are aligned with Microsoft’s year-end, however, they can also take place at other times in the year. All large investments whether they relate to migrating to new projects, stepping up with bundling or planning for an upcoming contracting require the focus of your company’s procurement and ITAM departments. The preparations ahead of signing off a new contract are far from being a walk in the park.

In our experience, almost no contract renewal is simply signed at the expiry date, as there are significant decisions to be made which include those related to budget and spending. Taking the time and investing the right resources to manage this process will support your business needs in the long run by ensuring you have optimised contracts and have avoided taking on unnecessary expenses. 

Perhaps perceived as the least cool kid on the block, software audits are also triggering companies to look at and understand their IT and software estates. This is the basis of ITAM and it can help businesses understand what they are missing and what they need for operations in addition to supporting regulatory compliance.

What should you keep in mind when negotiating?

There’s no secret that when it comes to negotiations – of any kind – everyone has their own agenda. This is no different when it comes to Microsoft and almost all other software vendors and developers. It’s important to remember that a supplier’s agenda might not fully align with your own. If you have a large investment planned, you will want to obtain the right products at the best prices and avoid signing contracts and signing up for agreements where you are unnecessarily locked in for years to come. This is why negotiation and working with specialists in this field is so important.

This is not because Microsoft or any other software vendor want to trick or deceive you. All company’s reputations live or die through their honesty and integrity. It’s simply that not everyone involved in sales has the same degree of expertise in licensing – a notoriously complex area – and although they have your best interests at heart, they may not be aware of everything they can provide to help with what you need as cost effectively as possible.

What you can do in this situation is bring in an expert – usually an independent advisor who does this kind of job day in, day out – to support you. Even if you have a great relationship with your Microsoft representative, you will very quickly learn the value an independent advisor who understands licensing can generate for your business.

Having the right partner on your side is great, but it’s not enough. You also need to start your own internal preparations as early as possible. Don’t wait until there are only 3 months left to evaluate your contracts, in many cases, this will not be enough time to ensure you will obtain the best possible value for money. Ideally – and depending on your business size – you need to begin looking at your contracts 6-12 months before they expire. 

Providing yourself with ample time to complete your initial preparations will pay off in the long run. A common misunderstanding when it comes to renewals is that you receive a proposal from Microsoft (or other vendor), and this marks the point at which negotiations commence. If you choose to go down that route, you’ll soon find out that this is just the tip of the iceberg and without the initial preparation groundwork having been completed, you are in a far weaker position at the negotiating table than you could be.

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How can you prepare for negotiations? 

Many people who are entering software contract renewals for the first time, might not know where to start and from the outside, this can look daunting. The process begins with building a good understanding of your current licensing position as the basis for re-licensing and future purchases. This might sound obvious but not all companies take this bottom-upwards approach.

You might be positively surprised by the findings. Maybe everything is already aligned with your needs and you have the right software and systems in place and the correct number of licences to help with operational performance and compliance. On the other hand, you may shine a light into dark, previously unseen areas where improvements can be identified, investments planned, and savings achieved.

This knowledge forms the basis for creating a technology roadmap for your company that is in step with technological developments and new releases, against the backdrop of macroeconomic changes which can have a bearing on pricing and a software vendor’s commercial strategy.

In a rapidly evolving technology market, it’s important to at least have general plans for the direction in which your company is heading to maintain your competitive edge. Are there benefits from moving to SaaS and the cloud? Are you upgrading or moving your own physical or virtual server or datacentre infrastructure? These plans are enabled by internal planning conversations with all stakeholders in addition to involving third-party software and service experts like SoftwareOne.

It’s also imperative that your roadmap includes practical steps for helping you achieve your goals and underpin success. For example, it’s one thing to say that you want to deploy Microsoft Defender, deprecate Proofpoint or deploy Intune but it’s another to understand how you will get there.

Purchasing and SKUs

A Stock-Keeping Unit (SKU) is an identification code for a product (or service) that captures all the important aspects of the product and differentiates it from others that the vendor may supply.

Every purchase involves SKUs. These are typically an 8-digit number that denotes the specific offering Microsoft, or another vendor makes available for sale, each resulting in a specific set of entitlements that grant an end user-specific rights to use an application with associated costs. Many projects involve multiple SKUs and as a result, a Bill of Materials is essential for effective planning and organisation.

There are many ways to buy the products you need and as a result, there are a wide number of SKUs. Take Microsoft Intune for instance. There are SKU variations based on whether you need to deploy the applications for use by a frontline worker or for an M365 Enterprise implementation. Do you buy it on its own? Do you buy the licence on a per-user or per-device basis?

These are just several examples of the complexity of purchasing the SKUs you need, and many businesses navigate these by turning to experts in the sometimes bewildering world of understanding and buying the software your company needs while mitigating risks and avoiding unnecessary costs. A methodology for comparing different types of SKUs and sometimes subtle variations is essential for effective planning and again, this is where experts like SoftwareOne can help.

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Initiating negotiations

Now that you’ve made all the preparations, you are most likely ready to sit at the negotiation table, so another thing to keep in mind is the engagement with the software vendor. Typically, there are a few rounds of conversations where you discuss the pricing and everything that should be included in the contract.

As long as you do your part and understand your position, the chances are that you will get a deal that will support your business. And this is where an independent advisor like SoftwareOne steps in. Our Microsoft advisory team has the technical and licensing expertise, but more importantly, it has the process that will help you stay on track and ensure that you know exactly what you’re signing up for.

How can you make sure that you’re always prepared? 

Understanding the first two points covered above – your current and future licensing position – will ensure you have a good starting point whenever you need to negotiate with a software vendor. Back when everyone was using perpetual licenses, companies had an asset that they owned and only needed to consider the software assurance to ensure they were compliant.

Nowadays companies need to do much more due diligence in order to stay compliant, and they need to do it every year. But compliance isn’t the only issue. There are also conversations to be had around cost savings and these are a high priority for nearly every company. Today there are opportunities to save money with every contract renewal. Failing to go through the preparation process means you will most likely overspend on your upcoming contract renewal.

Through our MAS Managed services, we support our customers on an ongoing basis. To get a good insight into the client’s current situation, we complete a software licence reconciliation once a year. This way, we know exactly what our customers are using and what they need, long before it’s time to begin negotiations.

Looking at your future needs should also be an ongoing activity, as your goals and priorities change throughout the year(s).

Working with Microsoft’s sales team 

You made all the preparations, you have a negotiation strategy in place, now it’s time to start talking to the Microsoft sales team. And it is going to be you sitting at the negotiation table, as Microsoft – like many software vendors - doesn’t allow any third-party consultants to get involved. But this shouldn’t scare you, as long as you’ve done the work and have an advisor on your side to help prepare your strategy. 

When working with companies that need to renew a contract with Microsoft, we support them from the first stages of preparations up until the negotiation moment. We are involved in creating the software licensing overview and Bill of Materials, as well as guiding them through their engagement with the vendor. 

Negotiating with a software vendor can feel like a lonely and exhausting process, so having someone to support you throughout the whole project can make a huge difference. Just hearing how the negotiations between Microsoft and other companies are going can feel reassuring. Understanding the types of concessions your peers make provides you with insight that can make a difference in your own negotiations. SoftwareOne offers this kind of support, on top of the knowledge and expertise needed for a Microsoft contract renewal. 

How is SoftwareOne’s approach to Microsoft negotiations different? 

SoftwareOne helps the client get in the driver’s seat by bringing clarity and control, as well as advising on the right way to navigate the negotiation and on the best way to engage with Microsoft. Our team has decades of experience working with Microsoft and completes dozens of successful negotiations every year. 

We step into the supporter role by providing the tools, insights and data analytics that will make the engagement between the client and Microsoft a fruitful one.

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Take your contract renewal and negotiations to the next level

Do have an upcoming contract renewal? SoftwareOne’s Microsoft Advisory Services team can support you along the journey – from preparations to negotiations.

Take your contract renewal and negotiations to the next level

Do have an upcoming contract renewal? SoftwareOne’s Microsoft Advisory Services team can support you along the journey – from preparations to negotiations.


Jim Nagurney

Jim Nagurney
Principal Consultant, Microsoft Advisory Services