Why Would You Lease a New Car and Not Drive It for 12 Months?

Why do companies do this with software?

The concept sounds crazy. Logic says that you lease a car, start to drive it immediately, and continue to drive it for the lease term. Yet with Microsoft software, even cloud-based software like Azure, O365, Dynamics CRM, and Windows 10, companies continue to buy SaaS offerings on their traditional Enterprise Agreements (EAs) and pay for them before they start to use them.

The concept of Software as a Service (SaaS) is that it is more cost effective. You only pay for what you use or consume, and you can add or remove licenses as you need them. However, the Microsoft sales teams and sales approach is still very much stuck in the perpetual software sales model where customers pre-pay for the right to use Microsoft software over a 3 year period.

The Cost of Enterprise Agreements in the SaaS Era

I was speaking to a customer the other day about assisting them with the migration from Exchange in their datacenter to Office 365 (Exchange Online). This customer was only interested in email but the Microsoft Account Manager sold them an E3 license, which was much more expensive per employee, to the tune of $13 per employee per month!

The customer agreed and signed the EA for an E1 license, which costs $4.60 per employee per month. Ouch, that’s an expensive lesson learned.

I was speaking to the customer 18 months after they made the purchase, which means that they had burned $1,296,000 ($18/user/month x 18 months x 4,000 users) and were half way through their EA but they had yet to even use one license.

Part of the benefit of O365 is that it eliminates the need for costly administration of your on-premise Exchange servers. It eliminates the need for patching Exchange as that is all handled by Microsoft as a part of the SaaS model. It reduces — if not eliminates — outages as Microsoft builds high availability into their platform. But this customer was still incurring all of the operational expenses of patching, administration, and potential downtime.

CSP is the Future of Enterprise Licensing

Now that you see and understand the problem, the question becomes, “Is there a solution?”

Microsoft has created a new model through its partner channel called the Cloud Solution Provider (CSP). As a CSP partner, we offer licensing for SaaS offerings as you consume them. In the case of O365, we might provide ten licenses for the first month as we migrate over a group of pilot users. You can then add another 250 licenses in month two. We can continue to add or reduce the licensing as your requirements and users shift. You then only pay for what you consume. This is a Cloud SaaS model and one that CIOs and CFOs should know about.

Can you imagine the embarrassment that the CIO experienced when they reported to the CFO that they had spent $1.3M on software that was not yet implemented or used? Don’t make the same mistake.

Why would you PRE-PAY for a cloud service?

Infront is a CSP – Cloud Solution Tier 1 Partner with Microsoft. Our goal is look out for your organization's best interests when implementing Microsoft solutions.

Forget about perpetual licenses. Your organization can now buy licenses as you need them.  This is the way cloud SaaS offerings were designed.  Infront is able to sell Azure, Windows 10, O365 and more directly to your organization. Let us know what Microsoft software you need and we're ready to help.