As Microsoft Marches Into Cloud, Its Already Complex Licensing Gets Even More Baffling

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Earlier this month, when Microsoft executive Therese Connor told a gathering of partners that Microsoft's software licensing was "dizzying," she was talking about the explosion of product numbers, or SKUs, that arrived with Office 365.

As Microsoft pushes hard into cloud services and subscription revenue, it's aware that some customers are not ready yet. By adding a wide range of new licensing options that cover both cloud and on-premise software, Microsoft believes it's letting everyone move to the cloud at their own speed.

This seems like a logical approach, but licensing experts say Microsoft's licensing, which was already difficult for customers to navigate, has grown much more complex.


[Related: Microsoft To Partners: Our Licensing Is 'Dizzying,' But Don't Let Your Customers Defect To Google Apps]

Before Microsoft launched Office 365 in June 2011, its Enterprise Agreement (EA), a volume licensing plan for large customers, included six products: Office, Windows client, Client Access License (CAL) Suites, Desktop Platform bundles, and subscriptions for desktop optimization and desktop virtualization.

After Microsoft launched Office 365, its SKU list saw a significant expansion.

Microsoft added new SKUs for the various Office 365 plans, as well as Windows Intune; Bridge CALs, a new type of license designed to help customers adopt cloud services; and the Companion Subscription License (CSL), an add-on that covers access to corporate desktops on up to four mobile devices.

So, how many new enterprise SKUs are there?

Before Office 365, Microsoft had 46 enterprise SKUs. After Office 365, this figure ballooned to 177, of which Office 365 and related cloud products such as Windows Intune account for 125, according to Paul DeGroot, principal analyst at Pica Communications, a Microsoft licensing consultancy in Camano Island, Wash.

Some Microsoft customers whose Enterprise Agreements are now coming up for renewal haven't yet seen the new SKUs. DeGroot predicts that some will be baffled by the expanded range of offerings.

"It's very hard work just figuring out what to buy, in what quantities," DeGroot said. "It was hard enough to figure this out before. Now?"

Tim Hegedus, senior analyst at Miro Consulting, a Woodbridge, N.J.-based firm that helps customers with Microsoft licensing, says confusion can occur when customers see the big list of SKU numbers Microsoft presents during the inception or renewal of an Enterprise Agreement.

Hegedus told CRN he has seen cases in which customers, confused by the multitude of options, have mistakenly bought more than one license for a single software product.

"The frustration for the customer lies in seeing multiple lines for the same number of licenses and not understanding how these line items interact or whether these license quantities are accurate," Hegedus said in an email.

NEXT: Microsoft Warns Partners About Google Apps Menace

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