Planning & Negotiating with the Mega Vendors€¦ · Planning & Negotiating with the Mega Vendors Discover a powerful optimisation, methodology that will significantly c. 39% reduce

Cloud Optics Proprietary & Confidential


Planning & Negotiating with the Mega Vendors

Discover a powerful optimisation, methodology that will significantly c. 39% reduce your mega vendor spend.


Introduction to the presenter

▪ Gareth has over 15 years’ industry experience with software licensing.

▪ During his career Gareth has helped clients optimize spend, develop a future strategy and take control over high profile vendor negotiations, including one of the largest Gov contracts.

▪ Successfully managed UK Wide Government EWA Contracts (2009 – 2011)

▪ More recently, Gareth has developed a proven methodology for cost Optimisation which has successfully delivered huge success across EMEA wide clients.

▪ Gareth developed and grew largest LSPs practice for:

1. Microsoft Government / Small and Medium Enterprises (SME) Consulting between 2014 and 2018 across EMEA

2. Cloud Commercial Optimisation in 2016

3. Responsible for the largest LSPs License Consulting UK, Ireland & Nordics between 2016 and 2018

Gareth Redshaw, Director of Public Sector, Microsoft & Cloud Consulting

[email protected]

mailto:[email protected]

Cloud Optics Proprietary & Confidential Cloud Optics Proprietary & Confidential

Agenda - Outline

▪ Introduction

▪ CO Overview

▪ Market Update Microsoft’s Cloud Business Today Factors Impacting Commercial Negotiations

▪ Large Government Department Project, Exec Summary (multi- vendors) Briefing / Objectives Focus On MSFT: Commercial Impact Methodology and key findings/hurdles along the way Output examples

▪ Summary and next steps


CO Overview


The Story So Far…

Intelligent Benchmarking

Audit Defence

Cloud Cost Optimisation

Negotiation Support

Contract Management

Total Savings Delivered

£302m

Savings Delivered39%

Tax Savings Delivered

£37m

Seats Negotiated

1.36m

EMEA, APAC, Americas, Africa

139 Countries

Cloud


What Our Clients Say…

Global Telecoms Company150k Seats

Contract Value $63m

Big 4 Accounting Firm190k Seats

Contract Value $180m

Large Global Bank 300k Seats

Contract Value $90m

“Cloud Optics have led twoconsulting engagements, both veryhigh profile and large dollar value. Toboth engagements Cloud Optics havedelivered significant value. We wouldrecommend Cloud Optics to anycustomer that is looking to obtainboth strategic as well as tacticalguidance in order to optimise theirlicensing agreements…”

“Cloud Optics have led a Global dealwith one of our main Softwarevendors. They provided exceptionalleadership with strategic technicaland financial solutions to maximizeprofits while decreasing operationalexpenses. They have managed togenerate significant savings on taxesand exchange rates. We would highlyrecommend Cloud Optics...”

“Cloud Optics have the ability toquickly assess and understandcomplex situations andrequirements, coupled with theirability to clearly communicate at alllevels, we would highly recommendthem to any company. We stronglybelieve they are a strong asset to anycompany looking for SoftwareLicensing Advisory Services andNegotiation Support…”


Tier 1 Vendor Focus: Single Point & Managed offeringsO

ur

Focu

s

o o o o o o o

Full Licensing Estate Analysis

Future Requirement & Optimised Current State

Negotiation & Benchmarking Support

Licensing, Product & Contract optimisation

Independent of software sales or rebates

Best in class savings Proven and unique methodology

▪ Cloud services legal impact & locking

▪ Deep Server estate analysis

▪ Global Benchmark contract database

▪ Contract & Global pricing optimisation

▪ Future needs & SA dependency assessment

▪ Deep contract analysis and review

▪ Review agreement license rights

▪ Advice on infrastructure & cloud optimisation

▪ Alignment of Licensing to current strategy

▪ Subject matter negotiation advice

▪ True user profile to license alignment

▪ Review user usage & behaviour changes

▪ Future requirement & growth assessment

▪ Product & usage dependencies

▪ Optimisation based re-configurations

▪ Target the high value portfolio analysis

▪ ILMT configuration optimisation

▪ Yearly spend trend analysis

▪ PVU and sub-capacity assessment

▪ Contract and negotiation optimisation

▪ Define & manage renewal process

▪ Analysis of current entitlement and contracts

▪ Usage entitlement v’s demand

▪ Global pricing and contract optimisation

▪ Negotiation advise and support

▪ IaaS/PaaS rightsizing

▪ O-365 forensic profiling

▪ Trend analysis adjustment

▪ Modernisation and waste management

▪ Regional price benefits

▪ Utilisation vs Entitlement

Cloud


Vendor Update: ▪ Microsoft Market Position ▪ Go-To-Market Trends


Microsoft’s Cloud Growth


Microsoft has seen Tremendous Growth in Cloud Revenue

▪ Aggressive growth - 60% YoY (‘17-18)*

▪ MSFT – 15.5% (was 12.7%)

▪ AWS – 47.8% (was 49.4%)

▪ Utilize dominant markets (e.g. O365) to gain share for growth in cloud markets

▪ Higher IaaS revenue past 12 months ($5B versus $3B)

▪ IaaS % of total cloud revenue:▪ 25% MSFT ▪ 60% of AWS

▪ Azure growth 68.0% & Dynamics 48% -Q4, FY19

▪ Focus on premium cloud growth (Dynamics365 / Azure) by multi-year prepaid commitments driving adoption and revenue growth - $10M+ over three years

▪ Incentivizing growth through ECIF funding & AHUB

▪ Up by 21.0% vs 2018 (continuous growth)

▪ Still lower than on-premise

▪ Discounting subject to smaller bandwidth by factoring in COGS (43.0% for cloud versus 15.0% on-premise)

▪ Still customers do not “fully” consume cloud services so actual COGS should be lower

▪ Second generation cloud customers

▪ Clients no longer only contracting cloud, but are also now consuming

▪ Focus on public sector as cloud consumption is belowexpectations set three years ago

Market Share - IaaS Growth Clients Profitability

Sources: Gartner July 2019, ZDNet, Aug 2019, MSFT Earning reports (Q4, FY`19 & Q1, FY’20)


“Not Contracting Cloud is not an Option” according to Microsoft

Strategic growth areas for Microsoft▪ Azure▪ Dynamics365 (incl. PowerApps)▪ Cloud E5 Suites (e.g. EM&SS E5)▪ Cloud Telecom offering

Clients who are already consuming cloud have less leverage than new cloud customers unless willing to adopt additional cloud services (e.g. Office365 E5, Azure) in order to maintain at least current discount levels

Public Sector Focus on growth / Market share▪ Azure growth measured against existing run rate▪ Office365 growth through premium services▪ Overall revenue commitment versus reduced

flexibility

Microsoft is more confident in negotiations –letting negotiations slip to the last minute by making clients worried about “day one” after contract expiration (e.g. service interruption)

For on-premise customers or customers who have licensed cloud but not deployed … … costs will increase.

DTA pricing favours Cloud only and on premise can expect a sizeable cost increase (vs CTA)

Licensing strategy support / aligns with “pushing” clients into cloud i.e. bespoke use rights (e.g. Ext. Security Updates for SQL Server 2008)


Microsoft’s Typical Sales Tactics

1. Side tracking client’s requirements

2. Only offer based on:

▪ Ambitious Azure prepaid commitment

▪ Dynamics365 prepaid commitment (1,000+ Seats)

▪ Richest cloud bundles (E5)

3. Stalling

4. Limiting contractual concessions on “OST” (*)

5. Discount reduction ambition if no growth

6. Limiting flexibility during term of agreement

7. Commit to deploy in return for lower pricing

8. Multi-level selling (e.g. EBC)

(*) Online Services Terms


Commercial Optimisation Journey - Using A Recent Government Project As Example

14Department for xxxxxxxxxx

Technology

Asset Management

£

1 Establish Control Point 2 Optimised BOM 3 Negotiated BAFO

Cu

rrent

Baselin

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Incre

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and

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isco

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Microsoft Methodology: Optimisation Journey

Phase 1 Report Phase 2 Report

Cloud


Methodology Adopted

16Department for xxxxxxxxxx

Technology

Asset Management

PHASE 1Situational Awareness & Strategy

Validate strategy

• Control Option Approval

Requirement GAP Review

• Product Terms / SA Dependency / Software Products

Final BAFO Review

▪ Executive Review & Impact Assessment

PHASE 2 / 3Commercial & Contractual Solution

BOM Optimisation:

▪ Products licensing metrics

▪ User profiling

▪ Agreements / Frameworks (CTA/DTA

Vendor & Contract Reseller Tender ▪ Agreement /

Framework Review

▪ Concessions

▪ Price Books & Rebates

▪ Market Trends

▪ Future Protection

Cloud & User Profiling

Current Estate Analysis

Deployment Planning

Technology & Strategy Workshops

Entitlement Analysis

Server Install Base

Azure ConsumptionAssessment

Government Microsoft MethodologyC

urr

ent

Stat

eFu

ture

Sta

te

Co

st

Op

tim

isat

ion

BA

U /

P

roje

ct

Han

do

ver


Phase 1: Typical outputs


Phase 2: Typical outputs


Output from Workshops / Strategy Discussions – Azure Forecast

▪ Sample view of UK Government CO Assisted Azure Forecast


Example From Recent Government Project

TODAY

Cu

rren

t C

on

tract

Sp

en

d

(3 Y

ears

)

£ 34.7 M

Op

tim

ised

B

.O.M

.

£ 14.4 M

£ 1 M

Phase 1 : Renewal w/New Demands Phase 2 : Optimised BOM

Price

In

cre

ase

s

Ne

w T

ech

no

log

y

Sh

ort

falls

£1 M

£ 2.5M

£ 6.3M

Gro

wth

REVIEWED &

APPROVED

£ 32.3 M

Targ

et

B.O

.M

£ 5.8 M

Re

du

ce

/ R

em

ove

Un

ne

ed

ed L

ice

nse

’s

Fa

vo

ura

ble

Co

ntr

act

Imp

rove

Lic

en

se

Me

tric

s

Total Savings

£ 48 M

Ren

ew

al C

ost

(Contr

ol P

oin

t)

£62.5 M £107 M £59.9 M £54 M

Total Increases

£ 44.5M

£

Ne

go

tia

ted T

erm

s

Phase 3 : Negotiation Support


Learning Points from this engagement?

Ensure all product owners are engaged in the process

Include “ALL” Cloud spend

Undefined product owners

Time: Plan 6 to 12 months ahead of renewal

Consumption ‘vs’ need not challenged

Develop a realistic Cloud budget

Key

Learnings

Be clear AND be open minded

Product owners require help in defining ‘future’ plan

Challenges Overcome

Remediation’s


Summary and next steps


- Summary –Three Key Take Away’s From Today

1. Mega Vendor cloud business is the driving force during ALL negotiation’s

▪ Vendors may try to isolate offers favouring cloud only spend

2. Leverage & Control multi-stakeholder selling strategy to your advantage

3. Focus is no longer on just selling cloud > cloud consumption is key


Why Cloud Optics ?

ValidationBenchmarking Vendor Offer

IndependentFunded Exclusively By Clients

Methodology Proven Across All Engagements

PersonnelEx-Vendor Negotiation Team

Negotiation Expertise Every Contract Pushed to Maximum Commercial

Impact

Focused Specialism Mega Vendor Only Focus.

2nd Gen Cloud ExpertiseExperienced At Negotiating Contracts With

Limited “Walk-Away” Position

Commercial Focus Pricing and Agreement Optimisation

BOM Optimisation Reduce Contract Cost Pre-Vendor Negotiation

01

02

03

04

0506

07

0809

39%Savings


Questi n’sAny


Cloud Optics – Contact Details

Rachel WhiteheadCommercial Manager

M: +44 7738 [email protected]

Gareth RedshawDir. MSFT & Cloud Optimisation

M: +44 7853 834 [email protected]


http://www.cloud-optics.com/


http://www.cloud-optics.com/

Planning & Negotiating with the Mega Vendors€¦ · Planning & Negotiating with the Mega Vendors Discover a powerful optimisation, methodology that will significantly c. 39% reduce

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