Provide for yourself, Microsoft license expert says

To renew or not. That's a decision many Microsoft customers will have to make this year about their Software Assurance licensing agreements with Microsoft. While the process of licensing Microsoft products can be a confusing maze of support and upgrade choices, there is another option that some enterprises may not have considered: becoming their own service provider.

Steve Dunton, chief technology officer of ActiveAeon, a subsidiary of Sunderland, England-based Techtonik Ltd., says that large companies can save themselves a sizable amount of money by creating a separate business unit that does nothing but provide Microsoft technology to its parent organization.

In an interview, Dunton, a Microsoft Certified Systems Engineer, talked about looming Software Assurance deadlines and about Microsoft's Service Provider Licensing Agreement (SPLA) program, and he explained who can benefit most from being their own service provider.

What's involved in running that software?
It's a simple install with an agent deployed on each server in [a customer's] environment. It's something they install natively and use to generate their reports [to Microsoft].

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How does a company become its own service provider?
The [Microsoft] service provider licensing [program] requires you to become a hosting company, effectively. There are a couple of enterprises we've dealt with that have become their own hosting company to provide IT services to themselves. How else can customers get product discounts from Microsoft?
There are some enterprise customers who have adopted the service provider licensing model by providing sort of an IT shell within their organization, or actually renting applications and 'providing' them back to themselves. They are on a true pay-as-you-go model. So what's the first step?
They literally have to form the business and then apply to Microsoft to do so. Who would be a good candidate for this? It doesn't sound like something a small or medium-sized business (SMB) could afford.
No. That's not an SMB-type job. Companies with multiple divisions are really beautifully set up to do it. If they're multi-division, and over, say, 5,000 seats, I think they can generate some decent savings from doing it. What kind of savings are we talking about?
In all honesty, it depends on how [a company] is structured. We have one customer at the moment who believes that their savings are going to be in the region of $100,000 a year. How does ActiveAeon help companies become their own service provider?
The reporting requirements [to Microsoft] are quite complex. We equate it to filling in a tax return. What we do -- for lack of a better term -- we're the H&R Block of the service provider industry in that we can [tell you], 'Here's the lowest amount of money you can pay Microsoft on this program.' What's your cost to broker such a deal?
Our solution costs $15 per CPU a month. Our average contract is about $1,000 a month. With Longhorn so far off, will there be any value in renewing SA?
This is what you have to question, because many enterprises don't have to actually follow Microsoft's [product schedule] and install it on the day it's released. So, if they do their typical wait for six to nine months to adopt it after the launch date, they could end up finding that they've signed up for a three-year [Software Assurance] renewal, and [Microsoft's] not going to have anything new out. What would you tell a company that's entering a product licensing negotiation with Microsoft?
Get some real good advice [from a license management consultant] and tie that together with a technology plan, so that you know whether taking Software Assurance is going to meet your technical requirements for that period of time. In that case, Software Assurance wouldn't be a good deal then, would it?
No, not necessarily. What's the alternative?
There are a couple of enterprises we've dealt with that have become their own hosting company to provide IT services to themselves.
Steve Dunton, ActiveAeon CTO,
The other products they could sign up for [under] Software Assurance: the Office suite and some of the other servers. You may use Software Assurance to update your mail system and so on. The London borough of Newham recently got some discounts on desktop system upgrades from Microsoft after they signaled that they might defect to Linux. Is this an unusual tactic by a Microsoft customer?
I don't believe it's that unusual. But I think it depends on the size of your environment. I think Microsoft will try and stop some of the people that they're scared of [losing], but I don't think they'll do it on every occasion. It could be a risky bluff.

The thing is, if they attempt it -- and there are some people that have attempted that move to Linux and failed quite nastily -- [then] having to go to Microsoft cap in hand and trying to get a good deal doesn't necessarily put you in the strongest position.

Steve Dunton, ActiveAeon CTO
Steve Dunton, ActiveAeon CTO
Many Microsoft Software Assurance agreements are up this year. What's likely to happen?
A lot of them are up around June. And, yeah, I think there's a lot of panic going on as to whether everyone's going to renew or not. What will be some of the key issues as companies decide whether to renew?
They've got to decide, in essence, whether they think they're getting a good deal from Microsoft on the renewal, and whether the length of [the] term they are going to sign up for is actually going to give them some new products in that [period].

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