Microsoft's Office 365 Add-ons muddy licensing and make customers pay twice

Perhaps useful for dipping toes in subscription waters, say experts, but it means customers pay twice for Office

Microsoft has kicked off licensing add-ons that let enterprises add Office 365 subscriptions atop existing volume license agreements, touting the new options as a more flexible, simpler way for businesses to move to a rent-not-buy model.

Flexible: Maybe. Simpler? Hardly. Independent analysts scoffed at any notion of Microsoft's licensing becoming easier to understand, with one saying that the Redmond, Wash. company's practices have become so Byzantine it's "getting ridiculous."

"Microsoft claims it's 'simple,' but I doubt that word is abused anywhere more than in Microsoft licensing," said Paul DeGroot, a licensing consultant whose Pica Communications specializes in Microsoft licensing, in an email reply to questions.

Others were just as skeptical of pairing "simple" in the same sentences as "Microsoft licensing."

"Microsoft says that with so many licensing choices comes more complexity," said Michael Silver, an analyst at Gartner who also fields clients' questions about Microsoft's policies. "That might be true, but the complexity is getting ridiculous."

The analysts were talking about Office 365 Add-ons, an off-shoot of a promotion Microsoft ended June 30 that let enterprise customers add Office 365 to their existing Enterprise Agreement (EA) at a sharp discount.

According to Microsoft marketing materials, the new licensing add-ons, which launched Aug. 1, "Give you a simple, low-cost way to add Office 365 services at any time, while maintaining your current Enterprise Agreement and Software Assurance benefits."

Enterprise Agreement is the name of Microsoft's volume licensing program for its largest customers, companies and organizations that license Windows or Office, and the accompanying CALs -- for "client-access licenses" -- for more than 250 PCs. An Office EA requires that all users or all PCs be covered by the agreement; each user or PC is allowed to run the suite though a "perpetual" license that, once paid for, can be used as long as the company wants to stick with that edition.

Complicating matters is that EAs automatically come with Software Assurance, an annuity-like program that lets a customer upgrade to future editions during the EA's three-year lifetime.

But Microsoft is aggressively pushing the software-as-a-subscription concept, to even out revenue, replace Software Assurance and make good on its promise to become a "devices-and-services" company. Office 365 is a subscription that, for an annual fee, lets each user run Office on up to five desktop and notebook devices, and up to five mobile devices. But if a business stops paying the subscription fee, its employees cannot use Office; it never owns the license, only rents it.

Some enterprises have jumped on Office 365 wholeheartedly, but most have either stuck with their existing EAs and the perpetual licenses acquired through those agreements, or have adopted a hybrid approach, where some users rely on Office perpetual licenses and on-premise servers -- ones running Exchange for email, for instance, and Windows Server for file storage -- while others are tied to Office 365.

Office 365, while giving employees locally-installed copies of Office, offers cloud-based and off-premise email, storage and other services.

Add-ons let companies dip a toe into Office 365, said Blake Gollnick, director of Microsoft licensing at SHI, a New Jersey-based reseller.

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