Microsoft Dangles Azure Discounts To Lure Enterprise Cloud Customers

On Nov. 1, Microsoft will roll out an EA that gives customers "discounted Windows Azure prices, regardless of upfront commitment, without overuse penalties and with the flexibility of annual payments," the company said in a Tuesday press release.

In the current model, customers have to commit annually to purchasing a set amount of Azure capacity, and they don't receive credit for unused capacity.

[Related: As Microsoft Marches Into Cloud, Its Already Complex Licensing Gets Even More Baffling ]

The new Azure EA is part of Microsoft's "Server and Cloud Enrollment" (SCE), a new three-year licensing commitment under its Enterprise Agreement, which is slated for availability in the fourth quarter. Under SCE, customers get a 15 percent discount for new license and Software Assurance purchases, among other benefits.

In a press conference in San Francisco Monday, Microsoft Server and Tools chief Satya Nadella described the new EA as a "fantastic" way for enterprises to tap into Azure capacity without having to worry about overage charges.

However, Microsoft isn't sharing specifics about the size of the Azure EA discounts, so the jury is still out as to whether they'll be enough to lure enterprises.

As it stands now, Microsoft's discount tiers for cloud products aren't as good as those for on-premises products, Paul DeGroot, principal analyst at Pica Communications, a Microsoft licensing consultancy in Camano Island, Wash., said in an email.

"While there's a reasonable argument that it costs Microsoft more money to provide a service than giving you rights to install software, buying online services in an EA doesn't give big customers the big discounts that they get from on-premises products, and thus the argument for using the EA as a purchasing vehicle is weak," DeGroot told CRN.

With the new EA, customers get discounts as well as the flexibility to use capacity at their own pace, Matt Scherocman, president of Interlink Cloud Advisors, a Cincinnati-based Microsoft partner, told CRN.

"This will make it much easier for a client to get started in Azure and start to see the value and how it could impact their business," he said in an email.

While the new EA for Azure looks like a step in the right direction, and could get more enterprises using Azure, some partners still aren't sure it'll have the intended effect.

Steve Tutino, president of Ipanema Solutions, an Ann Arbor, Mich.-based Microsoft partner, told CRN he'd like to pay Microsoft directly for Azure capacity, bill his own customers for cloud services, and then get a monthly bill from Microsoft. But right now, Azure doesn't work this way, he said.

"The whole reseller model needs to change, because there can't be a disconnect between how we do business with our clients and how vendors deliver their services to us," Tutino told CRN.

PUBLISHED OCT. 8, 2013