Structure and Strategy of Microsoft’s Online Services WEBINAR Office 365 101 Structure and Strategy of Microsoft’s Online Services March 15, 2017 SPONSORED BY:

Basic Office 365 Concepts License Hosted Services User Licensing Subscriptions Customers access Microsoft Productivity Servers (Exchange, SharePoint, Skype, et al) that are “hosted” in Microsoft data centers Customers assign “User Subscription Licenses” to their users rather than to devices. A user can access the servers from any location and any device. Subscriptions require annual payment. Unlike Software Assurance on perpetual licenses, customers have no perpetual rights

What’s Online The Office 365 family and related products cover many Microsoft-hosted services Exchange Online Hosted email SharePoint Online Document collaboration & interactive applications Skype Online Messaging, voice, Web conferencing Project Online Project Management Visio Online Diagrams Office Online Browser-based Office OneDrive Cloud-based document storage (a la DropBox) Dynamics CRM Online Customer relationship management Azure Active Directory Cloud-based directory services Intune Device management and patching Team Foundation Services Online Developer team collaboration Operations Management & Security Server management Intune Device management and patching Microsoft Teams Online community a la Slack On-premises subscriptions often combined with Office 365 Office ProPlus, Visio, Project

Office 365 Suites Microsoft is extraordinarily good at packaging products and services Even weak products, when bundled, gain competitive advantage. They’re “free” and the competition is not. Office 365 E1 Exchange Online Plan 1 SharePoint Online Plan 1 Skype Online Plan 2 $6.80/month/user Office 365 E3 Exchange Online Plan 2 SharePoint Online Plan 2 Skype Online Plan 2 Office ProPlus On-premises install and full capabilities for lightweight apps on Windows, IOS, Android $17/month/user Office 365 E5 Exchange Online Plan 2 SharePoint Online Plan 2 Skype Online Plan with Enterprise voice and optional PSTN integration Office ProPlus On-premises install and full capabilities for lightweight apps on Windows, IOS, Android $29.76/month/user Kiosk Plans 1 and 2 Exchange Online (OWA) SharePoint Online (limited) $6.80/month/user

Enterprise Mobility + Security Secure Productive Enterprise E3 Secure Productive Enterprise E5 E3: Active Directory in the cloud Intune Mobile App Advanced Threat Analytics Cloud data encryption $9 month/user E5 adds: Identity management and authentication Cloud App (DropBox, et al) Security $15 month/user Office 365 E3 Enterprise Mobility + Security E3 Windows 10 Enterprise E3 $28/month/user Office 365 E5 Enterprise Mobility + Security E5 Windows 10 Enterprise E5 $50/month/user

Managing Office 365 AD Integration Reservations Transitions & Options Office 365 cloud services can be integrated with cloud and on-premises Active Directory to ease on-boarding and off-boarding Products can be ordered and used at any time, but between agreement anniversaries, reservations are used to pro-rate partial-year use Discounts may include partial credit for previous or current Software Assurance on on-premises products: “From SA” recognizes previous SA, Add-ons recognize current SA on a related on-premises product

Applying Office 365 to Your Environment The fit will vary depending on an organization's size and structure Small Large Savings on IT management overhead Few or no economies of scale Simplifies remote access to documents Mergers/acquisitions with disparate technology can be integrated rapidly Ongoing economies from staff and hardware savings More costly in the long run than smart on-premises licensing

Microsoft’s Great Leap Microsoft’s main annuity revenue source, Software Assurance, has a fatal flaw: Customers who stop paying for SA can still use, even upgrade the software. Customers may be at n-1, n-2, even n-3. Modest upgrade discounts are the major benefit, but customers who skip versions double costs. Upgrade feature deltas are declining. What’s the difference between Office 2013 and 2016 again? If Microsoft moves a customer to subscriptions, they will never stop paying

Have a Real Business Case Pay Attention to Quantities Buy only when ready Have a Real Business Case Pay Attention to Quantities Microsoft wants you buy 2,000 seats of Office 365 E3. You get a 25% discount in an agreement renewing July 1. You are unlikely to deploy Office 365 until Jan. 2018. You will spend $34,000 a month on a service you won’t begin to use for 6 months. Your effective price (actual cost per deployed user per deployed month) will be 3x to 10x the list price., Use the MPSA to match deployment and payment. Roughly 5% of our customers have identified a real business case for Office 365. Microsoft arguments like “everybody is going to the cloud,” “we’re cloud first, so on-premises products won’t be upgraded” are great arguments for stopping SA, but not good arguments to abandon on-premises software (often the latest version) for the cloud. Office 365 ProPlus is the product of choice for mobile users who need to access virtual desktop infrastructures and other services from a variety of devices (business PC, home PC, business portable, iPad, phone). Buy it for them. As for the remaining 98% of your employees, conventional device licensing should work just fine.

Negotiations Cautions Customers who go for Office 365 in a big way give up most of their negotiating Promotional discounts usually disappear after (and sometimes even within) the first agreement term. Be prepared for large (>25%) price increases in renewal Negotiating a price cap may help, but be careful that the concession does not contain a licensing “time bomb” such as “the price of Product X will not increase by more than 15% at full renewal of this agreement.” All bonuses and incentives for Microsoft account teams are now based on cloud and subscription purchases and deployment. Your renewal proposal will consist entirely of products that give them credit toward sales goals. It is designed around the account team’s requirements, not yours Microsoft teams may tell you that they will offer no discounts on anything except cloud services, and they no longer propose renewal of on-premises software. Microsoft is stepping up customer audits. The goal of many audits is to find (or make up) substantial non-compliance and then propose an Office SPE E5 contract as a way to avoid paying the fine

Have questions? ) paul.degroot@msftadvisors.com V +1 206-818-7621