Microsoft’s Enterprise Cloud Suite (ECS) – Look Before you Leap

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Microsoft Pushing Organizations to the Enterprise Cloud Suite (ECS) – What You Need to Know

If you have a relationship with Microsoft, it is likely that your sales representative has been pushing to get on your calendar to discuss the benefits of Microsoft’s Enterprise Cloud Suite (“ECS”) and why your upcoming renewal is the perfect time to sign up and adopt.  Of course, if you are like most of our clients, this push started last year and has picked up in frequency as Microsoft’s June 30th year-end fast approaches.  In fact, many organizations receive renewal proposals that include an additional “highly recommended” alternative option that centers around ECS and its adoption even after the sales representative was told there was no interest at this time.  As you may expect, the ECS option includes appealing one-time additional discounting beyond the volume discount to further entice the organization to reconsider.  Along with the additional discounting, most organizations are provided a presentation that addresses how a move to Microsoft’s cloud ECS solution will save them millions of dollars over the next few years when compared to alternative hosting and collaboration solutions.  Like most things in life, if it seems too good to be true, it is often best to take a closer look at the details and read the fine print before making any decision and/or commitment.

Why is Microsoft pushing ECS so hard?  Here are some of the key motivators behind Microsoft’s calculated approach to achieving increased adoption.

  1. Products within ECS bundle align with Microsoft’s strategic direction and corporate vision

The Enterprise Cloud Suite is comprised of the following:

  • Office 365 (version E3)
  • Windows Enterprise (now on a per user basis with no limit on devices)
  • Enterprise Mobility Suite (“EMS”)

Each of these solutions represent key areas of focus for Microsoft.  Microsoft has communicated to the market the importance of being successful in each in order to be successful as a corporation moving forward.  Satya Nadella, since taking office as Microsoft CEO, has stated on numerous occasions that Microsoft’s innovation agenda and overall pursuit is to bring end users, developers and IT professionals together with platforms and applications in the mobile-first, cloud-first world.   Along with cloud and mobile, Microsoft continues to focus on increasing adoption of Windows 10 given the ambitious billion-device goal it set for itself.  In addition, if Microsoft truly wants to have a mobile operating system for the mobile-first world, it needs to ramp up adoption of Windows 10.   By creating a bundle of products that address both mobile and cloud the way that ECS does, Microsoft has created a solution that if adopted by an organization allows Microsoft to achieve success in all areas of its strategic focus at once.

  1. You don’t own the Cloud, you Rent it

Microsoft realizes that the more cloud solutions an organization adopts the more “sticky” their products become, and the revenue that comes with it.  By pushing a solution that is essentially a group of cloud products, Microsoft is able to move an organization further away from their old on premise model and on to a subscription based cloud model.  Subsequently, this will be a movement that removes ownership rights (i.e. if you are not happy you can take your ball and go home) and replaces them with renter’s rights (i.e. you don’t own but rather have the right to use as long you meet all of your obligations along the way).  When it comes time to renew years down the road, you will have very little leverage and will have little choice but to renew.  What other choice would you have?  Stop using the solutions you just ramped your entire organization up on?  Walk away from the same solutions that are now tied to employee productivity and data protection?  Walking away is not likely, and Microsoft knows this.

  1. With a bundle, the need for one drives adoption of all

Through a product licensing change, Microsoft has found yet another way to promote the adoption of their mobile and cloud solutions.  By creating a bundle and attaching an enticing upfront discount that makes buying each part separately no longer the most cost effective option (now or later), Microsoft has found a way to promote adoption of 3 key cloud solutions all at once even if the organization is not fully sold on adopting all of the parts at the very same point in time.  The bundle prevents competitors from grabbing market share both upfront and downstream.  This is no different than the approach Verizon takes with their cable, phone and internet package.  Since ECS includes Office 365 and EMS, Microsoft is pushing even more solutions into the organization as each includes multiple key products as well.  Office 365 E3 includes Office 365 ProPlus, Exchange Online, Sharepoint Online, Lync Online, and Yammer Enterprise.  EMS includes System Center CM, Windows Server CAL, Azure Rights Management, Windows Intune and Azure AD premium.  The prime target for the ECS bundle is the organization that adopted Office 365 at the last renewal but hasn’t shown much interest in EMS to date and/or is thinking of moving away from Windows (or has no immediate need to roll out Windows 10).  By including EMS as part of a bundle rather than continuing to push it on its own, Microsoft is able to lower the barrier to adoption by making EMS a part of a heavily discounted bundle that includes Office 365.  If the organization adopts now there will be demonstrated immediate and long term cost/expense benefits.  In addition to the benefit of adoption, the bundle has also significantly reduced the sales cycle.  With regard to Windows, the fear of having an organization not renew Windows goes away with Windows moving to a per user subscription based product under the ECS bundle.

Given these motivators, it is not surprising that Microsoft is pushing ECS in such an aggressive manner.  If and when Microsoft submits a proposal that includes an “ECS Option” for your consideration, we would recommend ensuring Microsoft provides you down-stream price assurances (i.e. what is the per user/unit price going to look like when it comes time to renew).  In fact, we would even recommend obtaining Microsoft’s commitment that the one-time, “special” discounted per user price be locked for the initial term as well.  We have actually seen Microsoft submit proposals where the per user/unit price actually went up in year 2 and year 3 of the initial 3-year term.  We would also recommend challenging Microsoft to further explain what commitment they would be willing to make if the savings expected to be achieved through adoption are not achieved.  This is always a difficult conversation and one that most likely will not result in a warranty.  Even so, it is a conversation that usually flushes out the marketing material and drives more productive discussions around value that can be called upon at a later date should things not exactly go as Microsoft said they would.

It is important to point out that we have heard from many organizations that Microsoft’s ECS bundle does come with benefits worth exploring and considering.  Most specifically, organizations often mention the enhanced ability to protect data and manage environments that now include growing mobile device usage.  There is also the ability to drive productivity through collaboration across various devices with various applications which is often cited as well when speaking of Office 365 specifically.  Given this, we would certainly never tell our clients to stop considering ECS.  What we would tell them is to ensure they not only move through any necessary demos and proof of concept work but also (in parallel) ensure Microsoft provides the necessary level of transparency and protections to earn your business and willingness to adopt.

If you would like to further discuss how UpperEdge has helped organizations properly prepare and effectively negotiate with Microsoft, please feel free to reach out to me at amansfield@upperedge.com

Adam Mansfield

Trusted advisor to Fortune 500 executives. Expert in negotiating and drafting best-in-class agreements: - Software (ERP, CRM, WMS, HCM, SCM; PLM); - IT services (Implementation, AMS, Hosting); - Cloud computing (SaaS, IaaS, PaaS); and - Outsourcing - Data Center Deep experience in: - Vendor evaluation and selection methodologies; - Sourcing strategies; - Procurement processes and procedures; - Vendor management; - Contract negotiation; - RFP creation and proposal review; - Pricing analysis and modeling; - Mitigating risk and cost exposure; - Benchmarking; and - Intellectual property, business and contract law

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