Learn how to negotiate your way to Azure cost savings

Discover how to counter Microsoft's sales playbook. ClearEdge Partners licensing specialist Steve Paradis explains how to navigate your next negotiation and get the best price for Azure.

One of the most effective ways to cut your Microsoft Azure costs is to negotiate a good enterprise deal in the first place. Optimize your usage as effectively as you want, but some frugality here and there won't result in considerable savings if you're paying full price.

With that said, negotiating with a company like Microsoft isn't easy. Its reps have a set -- and successful -- sales playbook, called the T-36 Playbook. Your objective is to move these Microsoft reps off the T-36 Playbook so you can negotiate a deal that fits your needs and demands, according to Steve Paradis, principal licensing specialist at ClearEdge Partners, a business consulting service. 

Here is the advice Paradis shared in an interview with SearchCloudComputing and in two ClearEdge webinars on Microsoft's pricing strategy -- "Microsoft: All in on Cloud" and "Counteracting the Microsoft Playbook." Use these tips to earn Azure cost savings in your next negotiation.

How the Microsoft sales playbook works

Before you sit at the table with Microsoft to negotiate your next deal, you need to understand how its sales reps are compensated and how the T-36 Playbook works.

Microsoft has shifted its compensation model to sell cloud, and sales reps are no longer incentivized for "as is" renewals. Instead, they're compensated for their clients' cloud purchases and consumption, as well as net new products, according to ClearEdge. That can come in the form of Microsoft SaaS or IaaS offerings. Organizations procure these services as part of the Micrososft Enterprise Agreement (AE) or Cloud Solution Provider (CSP) programs, and pay for them on annual or monthly cycles, respectively.

This means your sales rep will look for ways to add more products to your Microsoft plan and drive more cloud use. And since they're so heavily incentivized to push you in that direction, this is also where you'll find the most room to negotiate bigger discounts, according to ClearEdge.

Microsoft's sales playbook calls for a series of customer engagements -- including sales check-ins and audits -- initiated by the sales rep over the span of your agreement. It's essentially meant to lock customers into multimillion-dollar agreements by giving Microsoft the upperhand with insights into how your company works and what it might need.

"From the time you sign your agreement till the moment you sign your next one, [Microsoft] is doing things and providing themselves leverage along the way to make it either harder for you to negotiate or more challenging for you to find areas of leverage," Paradis said.

Microsoft Azure pricing best practices

With these updated sales tactics in mind, let's go over some best practices to counter Microsoft's playbook and get the most Azure cost savings.

To negotiate the best package with Microsoft, begin preparation early, set up clear communication, project your usage and, ultimately, develop other cloud options.

Create a deal timeline

Organizations have the best chance to land Azure discounts if they negotiate prices in parallel with the AE subscription renewal or agreement process, according to ClearEdge. But this takes preparation and due diligence.

Start evaluating your current Microsoft agreement and potential cloud options a year to 18 months prior to renewal, according to ClearEdge. This gives you more time to understand your own usage and vet competitive products.

"If you start early, it sets the table for everything else. You're able to create options. You're able to leverage an optimized environment. You're able to look at what your actual usage is," Paradis said. "Because if you come to the table late, Microsoft's already got their deals done and heels dug in." Give yourself enough time to prepare and put together a realistic alternative. For Azure users, that will likely be AWS, Paradis noted.

Understand your cloud roadmap

Before you build your next cloud agreement, you need to understand your cloud usage.

"[Microsoft] may come to the table offering you all kinds of incentives, deployment services dollars, migration services dollars," Paradis said. "That is, again, specifically tied to their compensation, because part of their compensation is derived from you consuming more cloud."

Start by building a "demand profile," which is all about trimming your server, cloud and user costs in your own environment, according to ClearEdge. This could be consolidating servers onto physical machines and refining your organization's Microsoft user profiles -- i.e., what Microsoft tools and technologies your teams actually use and need.

This evaluation will ultimately determine what kind of deal you need and can negotiate toward, and whether your projected spending is sufficient to qualify for discounts. Recently, Microsoft has prioritized larger commitments. ClearEdge has found if you commit less than $1 million per year, you should expect to pay standard pay-as-you-go rates.

Get everybody on the same page

Identify and align stakeholders in sourcing, IT and finance, Paradis said. Microsoft may have a technical resource in your building or have day-to-day contact with people in your organization in these areas, especially the IT team. If Microsoft has direct contact with your IT team and figures out your projected cloud usage and roadmap, it can use that information as leverage in negotiation, Paradis said. Everyone in your organization must be on the same page and communicate appropriately.

You should also identify an executive sponsor who can push the negotiation through when it reaches the final, executive-to-executive stage. ClearEdge has found that organizations get the best deals when negotiations reach this level, as executives can offer larger discounts than sales reps and regional sales directors.

Your challenge is to communicate a compelling story or roadmap that illustrates why your organization should receive a discount -- a story the sales rep can then use to convince Microsoft's internal business desk to sign off on the deal, said Paradis. And while Microsoft is very much focused on its business, it tends to respond well to a valid business use case.

About ClearEdge Partners

Founded by senior sales executives from large IT suppliers and informed by current market analytics, ClearEdge enables CIOs and their teams to make more competitive IT investments. By combining rigorous inspection and IT financial expertise, they identify risk and opportunity, align internal teams and maintain leverage throughout the lifecycle of supplier relationships. As a result, their clients maximize the value of their investments by unlocking millions of dollars from legacy spending and redirecting funds toward IT modernization, digital and cloud transformation with confidence and speed.

Next Steps

Azure cost management tools to control cloud spend

Dig Deeper on Cloud provider platforms and tools

Data Center