Microsoft adds flexible, cost-effective Office 365 purchase option

Effective yesterday, Aug. 1, Microsoft customers have a simpler way to add Microsoft Office 365 to their Enterprise Agreements (EAs). Known as Office 365 Add-ons, the new Office 365 purchase plan will allow new, existing, or renewal EA customers to procure Office 365 as an “add-on” to their existing on-premises Software Assurance (SA) investment.

Why Microsoft Office 365 Add-ons are a breath of fresh air

When Microsoft introduced Office 365 a couple of years ago, the goal was to move organizations to the cloud and transition their on-premises, perpetual license workloads, such as Microsoft Exchange, SharePoint, Lync, and Office ProPlus, to a hosted subscription-based licensing model. But with thousands of customers already under Enterprise Agreements for these traditional licenses with Software Assurance, the process wasn’t going to be easy.

In order to accommodate organizations that wanted to begin transitioning to Office 365 before the term of their Enterprise Agreement ended, Microsoft offered a purchase option that introduced transitional part numbers (SKUs), Client Access License (CAL) Bridges, and pricing changes that would account for the difference in what customers were paying on-premises versus what they would need to pay in the cloud.

Additionally, Microsoft had to update many of its contractual documents, including Enterprise Agreements, to accommodate terms for online services. The new language used to address minimum purchase order requirements, price level minimums, true-up due dates, and other conditions brought about a whole new set of program terms or changes.

The result: the hybrid licensing model that many customers use today. This licensing approach has its benefits. It allows organizations to transition to cloud services at their own pace, matches online services plans to meet requirements of users within the organization, and amasses no incremental costs in a year for equivalent transitioned users. These benefits make the hybrid licensing model optimal for customers looking for a long-term solution.

However, the new SKUs, licensing options, and product/program terms introduced by the transitional hybrid licensing model add a layer of complexity that can become an unforeseen administrative burden for some organizations.

An easier way to purchase Office 365

Enter Office 365 Add-ons. This new licensing purchase option eliminates Microsoft’s transitional fix by allowing customers to maintain their on-premises annual investment. If they want Office 365, they simply purchase it separately for the desired quantity. Customers will still need to agree to Microsoft’s Online Services terms and conditions, but they can avoid some of the complicated terms that would be applicable in a hybrid licensing scenario.

Previously, if customers wanted to transition to the cloud under the hybrid licensing approach, they would have had to purchase a product and SKU called a Core CAL Bridge. This product SKU represents the workloads of the Core or Enterprise CAL (ECAL) Suite, which are not included in the Office 365 service plan. Windows Server CAL is one example of a workload in the CAL Bridge that is not part of Office 365 and for which a customer would need to maintain a license on-premises. Thus, a customer transitioning to Office 365 under the hybrid licensing model would have to track a new SKU and license.

In contrast, using the Add-on purchasing option, customers maintain their existing Core or ECAL Suite and simply add the Office 365 plan on top. The underlying EA does not change, allowing customers to continue experiencing their existing SA benefits and new version rights.

What Office 365 Add-ons mean for you

The most immediate impact of this new purchasing option is that it minimizes the burden of entry for customers looking to try Office 365. It gives organizations the ability to add Office 365 plans at any time, for any number of users, without the administrative complexity often associated with the transitional hybrid licensing model. In the long run, it will simplify the widespread deployment of Office 365 across an organization’s user population.

Here are the highlights of Office 365 Add-ons:

  • Customers maintain their existing investment in on-premises licensing rights and SA benefits.
  • Office 365 Add-on SKU pricing offers a discount on full Office 365 User Subscription Licenses (USL), based on recognition of underlying on-premises licensing investment in Microsoft Office and Core/ECAL Suite.
  • Add-on SKUs are available to customers that have signed Microsoft’s Online Services terms and conditions.
  • Add-on pricing is based on the month in which the service is used, and can be paid upfront or in arrears at anniversary using the License Reservation process.
  • Office 365 Add-ons offer the ability to purchase any quantity at any time.
  • Customers can purchase Add-on SKUs in a 1:1 ratio to their underlying Core or ECAL licenses.
  • Customers still need to follow on-premises true-up requirements for qualified devices and users for Microsoft Office and Core/ECAL Suite.

For more details on Microsoft’s new Office 365 purchasing option, or to determine the most efficient and cost effective Office 365 purchase option for your company, please contact your SHI Account Team.

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