Microsoft Azure Consumption Commitment “MACC” Insights

Since 2015, Microsoft have actively taken steps to modernise the way in which they fulfil software and online services. A contractual arrangement known as the Microsoft Azure Consumption Commitment (MACC) amendment is one such change that many organisations will need to plan for and effectively manage.

As its name suggests, MACC provides organisations with access to a variety of concessions by making a financial commitment to Microsoft. It also gives Microsoft a platform to provide flexibility during Azure negotiations while providing customers with access to incentives like:

· Azure Commitment Discount (current list price discount for specific products).

· Service Level Discount (targeted discount on services Microsoft typically seek to grow market share).

· Other incentives like Azure credits or Microsoft funded consulting services to drive adoption.

Available in Enterprise Agreement and MCA (Enterprise Motion), this amendment is directly negotiated by Microsoft sales teams and their end customers. Organisations need to approach the MACC amendment just like any other multi-year licensing program. Before signing a MACC Amendment it’s important that your organisation assembles the right blend of skillsets to forecast Azure requirements and effectively negotiate with Microsoft. Having inhouse or external licensing experts work in tandem with IT, finance and procurement is therefore essential.

Leverage

When planning for the use of a MACC amendment it’s important that organisations understand what leverage they can use to influence the outcome of contract negotiations with Microsoft, for example:

• Is there a multi-cloud strategy resulting in cloud vendor competition?
• Will there be a loss of benefits when moving between legacy agreements to MCA leading to poor customer satisfaction?
• Remember, the longer the term the greater the commitment to Microsoft.
• Impact of other Microsoft agreements possibly being negotiated in silos.

Beware of the fiscal cliff

MACC enables the dynamic procurement of Azure without having to make a large upfront payment. Each month Microsoft will calculate qualifying spend and subtract this from your organisation’s overall commitment — examples of spend counts toward a commitment includes:

• Azure Service Consumption
• RI Purchases & Payments
• Eligible Azure Marketplace Purchases
• Azure Prepayments

Spend is based on what customers pay after discounts and it’s also worth noting free Azure credits don’t apply towards commitments!

MACC is a contractual commitment meaning it’s a legally binding obligation, where organisations must spend a predefined amount of money during the term of an agreement. This is an important point that should not be glossed over and consequently requires careful planning, because:

• Over committing and underutilising Azure may result in a shortfall payment at the end of the term. Microsoft do allow you up to 12 months to use up any unused commitment which provides a degree of flexibility. However many organisations may fail to track and forecast the risk of a shortfall payment which may impact on cashflow at the end of the agreement.
• Under committing and over utilising Azure may result in the loss of more competitive pricing during the term of an agreement. Under cooking a commitment or where there is unforeseen growth can result in a loss of buyer power. Unless a proviso is made during contract negotiations to allow for competitive pricing structures in the future where there is an increase in Azure consumption.

Conclusions

Starting early is key to fully understanding the art of the possible and to develop a robust negotiation strategy which in turn will enable organisations to verify, with a high degree of accuracy, what level of commitment should be made to Microsoft. Below are some of the key steps organisations should consider doing before entering into negotiations or signing a MACC Amendment:

• Verify your organisation’s current Azure consumption position.
• Make sure you are maximising Azure cost optimisation techniques.
• Rout out and eliminate Azure related waste.
• Identify possible license compliance issues.
• Take the time to independently forecast future Azure demand while leveraging current state insights.

Trying to accurately understand your cloud licensing posture can be complicated. Version 1 has considerable experience in helping organisations assess their license position and effectively license Microsoft technology in the cloud. So, whether you are trying to right-size your current estate or planning for future requirements, contact us for advice and guidance.

About the Author

Karl is a Principal Licensing Consultant at Version 1, providing Microsoft license expertise to organisations globally and ensuring customers get the best value from their Microsoft assets. If you would like more information about Azure cost optimisation, get in touch with the independent licensing experts at Version 1 today.