If you have an employer-supplied notebook computer, there’s probably an asset tag on the back that your organization uses to track and manage that device during its useful service life.
That asset tag likely places the cost of the device at less than $1,000. Meanwhile, the various Microsoft programs running on the same notebook, such as Office, Visio and Project, as well as client access licenses such as Windows Server, Exchange Server, SharePoint Server, SQL Server and Systems Center Server, go largely un-inventoried.
The cost of just a few of these Microsoft licenses can well exceed the value of the notebook or server device itself. However, because they’re not physical “things,” software licenses often don’t get the same level of asset management scrutiny and discipline applied to hardware.
Most mainstream business software is licensed via volume agreements, and Microsoft uses several programs to address small, medium and enterprise class customers. When installed on either PC or server hardware, the software is activated by an installation key. Prior to the volume licensing approach, these installation keys were typically unique and acted similarly to the asset tag affixed to a notebook.
Software acquired via volume licensing, meanwhile, offers the ability to reuse a common installation key repeatedly, thus making it difficult for that identifier to serve as an asset tag. The convenience of a common installation key leads many customers to over-deploy many Microsoft products; without, moreover, any automation in place to track installations and required order placement obligations.
While this dynamic is positioned under the auspices of convenience and simplicity, the dark side is that Microsoft has, like many other software publishers, dramatically stepped up its auditing and compliance efforts. In fact, many sellers are assigned revenue targets specifically tied to extracting remediation dollars from high-volume customers.
The compliance dance begins with a seemingly benign notice from Microsoft to customers who haven’t kept pace with growth expectations. From there the pressure builds to submit to a Software Asset Management (SAM) engagement, which is a degree less onerous than full-scale, official audit. Ultimately, Microsoft insists on a comprehensive network scan, using either a sanctioned tool licensed by the customer or one that Microsoft brings to the engagement. In most cases, this network scan reveals installations of products far beyond what the customer has paid licenses for, and starts a difficult negotiation cycle with Microsoft focused on collecting remediation revenue.
Once Microsoft learns that no formal license management solution is in place, the burden shifts to the customer to prove why those licenses are not in service or used for production purposes. This process can take weeks or months, consuming valuable people cycles. Ultimately, Microsoft collects significant remediation revenue, even if the negotiated amount might be less than what the original scan indicated was owed.
More importantly, the process gives Microsoft the knowledge that the customer has no license management solution. The result: as when a taxpayer is audited by the IRS, you are placed on an ominous “watch list.”
The customer can turn this entire scenario on its head by demonstrating complete oversight of its license entitlements and deployments. Many commercial solutions available today are optimized for Microsoft Software License Management. By providing a robust inventory of volume licensing agreements, deployment landscape and purchase history, along with automated workflows and better controls, these solutions ensure that few to no installations take place in a vacuum. Moreover, improved oversight reveals countless instances where deployed products are no longer assigned to a device or user and can be returned to available inventory for reallocation to either another device or another user (repurpose vs. repurchase).
An effective licensing management solution can show Microsoft that they have no leverage to arbitrarily squeeze revenue from a customer for mismanaged product deployments. Once Microsoft becomes aware that a customer has the power of a licensing management platform in place, the leverage for future negotiations fundamentally shifts back to the customer.
About the authorAfter a 20 year career with Microsoft, Louis has compiled a track record of Enterprise client success underpinned by customer focus, strategic thinking, organizational agility, problem-solving acumen and impactful knowledge transfer which has established his reputation as a Microsoft licensing expert.
About the author
Louis Pellegrino
Louis joined the ISG team in early 2014 after nearly 20 years with Microsoft Corporation. Louis has compiled a track record of Enterprise client success underpinned by customer focus, strategic thinking, organizational agility, problem-solving acumen and impactful knowledge transfer which has established his reputation as a Microsoft licensing expert.
During his time with Microsoft, Louis worked in both the Consulting Service Group as a Practice Manager and in the Worldwide Licensing and Pricing Group as a Director responsible for designing and negotiating Global Volume Licensing relationships. As a highly effective and influential communicator/negotiator, Louis has delivered consistent business results across both revenue and quality of service performance targets.
