Executive Focus: Microsoft Licensing Strategies and Tactics

Microsoft’s long-term business objective is to ensure Microsoft’s goals are met, and it is doing this by converting customers to subscription-based licensing, whether on-premises or in Microsoft’s cloud. Microsoft uses various licensing strategies and tactics that lead customers to subscriptions and increase the adoption of Microsoft-hosted services.

Tactic 1: On-Premises Attraction Fading

On-premises software products are becoming less attractive, as hosted services that mimic or replace on-premises software are receiving new features that are not available in on-premises versions.

Price increases and shorter product life cycles. Customers preferring to stay on-premises are faced with rising prices, fewer discounts, and shorter life-cycle durations that result in more frequent upgrades and higher maintenance cost.

Remaining on-premises requires subscriptions. More on-premises software products require Software Assurance (SA), a maintenance and support subscription that provides upgrade and other limited rights. Coupled with shorter product life cycles, the only conclusion is that most on-premises products will require SA within the equivalent of two agreement renewals.