Microsoft Cutting Azure Pricing For Enterprises, But Some Say Overall Costs Could Rise

Microsoft, in a bid to get more enterprises using its Windows Azure public cloud and away from the low-cost wiles of Amazon Web Services, is rolling out new Azure volume licensing discounts for enterprises next month.

Microsoft's Azure pricing under its Enterprise Agreement will be "significantly lower than AWS' prices on commodity services like compute, storage and bandwidth," a spokesperson told CRN earlier this week.

When Microsoft said in April that Azure had hit the $1 billion mark in sales, it also vowed to match Amazon's frequent AWS price cuts. Now, Microsoft is backing that up with action and showing its resolve not to allow Amazon to run away with the public cloud infrastructure as-a-service market.

[Related: Microsoft Stakes Its Claim As Top Dog In Enterprise Cloud Market ]

But while Microsoft partners welcome the Azure price cuts, their enthusiasm is tempered by a new EA licensing program, called the Server and Cloud Enrollment. The SCE will launch on Nov. 10 and could amount to a significant price hike for customers, according to licensing experts.

SCE is replacing two existing Enterprise Agreement programs, the Enrollment for Application Platform (EAP) and Enrollment for Core Infrastructure (ECI), which are being retired.

With less than a month to go before SCE goes into effect, enterprises that are eligible to renew their EAP and ECI agreements are rushing to do so, one source familiar with the matter told CRN.

"Many clients are renewing the old agreements right now, which gives them three more years" at the EAP and ECI terms, said the source, who requested anonymity because he's not authorized to speak on company matters.

SCE includes core infrastructure, application platform and developer platform components. Customers that choose any of these three will get Azure at the best prices "based on their infrastructure spend," a spokesperson for Microsoft, Redmond, Wash., said in an email earlier this week.

EA customers will also be getting better terms with Azure than they've had in the past.

In the old EA model for Azure, customers commit to buying a certain amount of capacity up front in order to get volume discounts. This was tricky, sources told CRN, because if customers didn't consume all of the capacity within the year, they wouldn't get discounts for the unused portion.

If they went over their commitment, Microsoft would bill them at the full, non-discounted rate, which in some cases amounted to a hefty overage charge.

NEXT: The Impact of Licensing Changes

With SCE, Microsoft is letting EA customers consume Azure capacity on more of a pay-as-you-go basis, which means they'll get the discounted rate even if they go beyond their commitment.

The new Windows Azure terms are sure to entice some enterprises. But, SCE will reduce the discounts that customers have been getting under EAP and ECI.

Jeff Muscarella, partner at NPI, an Atlanta-based firm that helps companies manage software licensing, told CRN earlier this week that some enterprises could end up paying 40 percent more under the SCE.

A Microsoft spokesperson told CRN Friday that SCE can represent a price increase "for some customers."

"Customers should talk to their account representatives or resellers to best understand what SCE means in their specific situation. There are options for customers outside of SCE as well," said the spokesperson.

Some Microsoft partners say they understand the reasoning behind the SCE. Right now, many Microsoft customers have three EA agreements with Microsoft: One for servers (ECI) one for SQL Server and other products (EAP) and their traditional desktop agreement, one partner told CRN.

Under this arrangement, Microsoft has to spend time dealing with three different agreement renewals, so it makes sense for the company to want to simplify things, the partner said.

However, whenever Microsoft alters its licensing, it has a ripple effect throughout its huge channel, and partners are left to explain what the changes mean. At the end of the day, that's time that could be better spent, the partner told CRN.

"The frustrating part for me is that Microsoft continues to change entire licensing programs like this. So, a new CIO coming in the door and looking at a renewing agreement has to understand the old agreement, the new agreement and the transition options from one to the other," said the source.

PUBLISHED OCT. 11, 2013