With today’s IT focus on cloud services, SaaS, and subscription-based software, you might think perpetual licenses are a thing of the past. But, believe it or not, in 2016 it’s still possible to purchase Microsoft perpetual licenses on new software. And if you’re an enterprise-level organization, it’s highly likely that a large percentage (probably more than half) of your current software licenses are perpetual. But how do you get the most out of Microsoft perpetual licenses? Keep reading!
What are the Different Types of MS Licenses?
First, let’s be clear about the different kinds of MS licenses:
Perpetual licensing – 20 years ago, this was the only way to buy business software. A perpetual license is just that: you own the license to use the software as long as you want. Simple.
Perpetual + Software Assurance – As part of its Enterprise Agreement model, Microsoft introduced Software Assurance (SA) to provide ongoing support, maintenance, and extended usage rights for enterprise clients. SA typically lasts for 3 years after the initial purchase of a perpetual license, and can be renewed for 3-year periods to extend the life of your perpetual licenses.
Subscription – More and more, Microsoft is pushing the subscription model. The upfront cost of a subscription purchase is almost always lower than that of a perpetual license agreement. In addition, a subscription allows your organization to purchase software from its operating (versus capital) budget. However, you’re really only “renting” the software, as opposed to buying a license to use it.
Enterprise Advantage – On July 1 of this year, Microsoft announced a new licensing program called Enterprise Advantage, which the company said would bring traditional Enterprise Agreement benefits to the Microsoft Products and Services Agreement. Enterprise Advantage allows participants to mix perpetual and subscription software with cloud services like Office 365, Azure, and CRM Online, organization-wide.
If all this looks like software licensing is getting evermore complex, it is. Enterprise Advantage will debut in 2017, and Microsoft will be phasing out licensing agreements such as Perpetual Desktop Enrollment and Subscription Desktop Enrollment next year. What should you do next?
Maximizing Value from Microsoft Perpetual Licenses
If you are currently using Microsoft perpetual licenses, getting the most from your existing licenses means asking (and answering) the following questions:
- How old is your software? Depending on the age of your software, it might make more sense to renew your SA on, say, MS Office 2013, than it would to begin a new subscription on MS Office 365. In many cases, after about 3 years a subscription model begins to cost more per unit of software than a comparable product purchased via a perpetual license. If you’ve already sunk cost into the software, and it’s likely to be serviceable for the next few years, it might be better to stay put.
- Do you really need all that support? It’s very common for large organizations to overspend on support and maintenance for software that in most cases works just fine. Do you really need another 3-year SA, which could cost anywhere from 25% to 29% of the original price of the license? It’s possible the version you’re using is good enough to stand alone.
- Have you looked at depreciation? Perpetual licenses purchased with capital budget dollars may provide your organization with a sizable deferred tax benefit (you can write off the depreciation as an offset to taxable income). It’s worth looking into, because you don’t get any tax benefits from subscription-based software.
These are complex questions with no easy answers—that’s why most organizations spend more than they need to on software. But there’s also good news: the more significant your Microsoft budget, the more potential savings you can achieve.
With a background including deep IT operations and vendor experience, Earth & Sky, INC understands how to help you spend less on the software you need to competitively run your business. Call us today at 858-442-9591 or request a free consultation, so you can spend more time and resources on IT innovation, and less on software maintenance.