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8 sure-fire ways to screw up a cloud contract

Robert L. Mitchell | Nov. 20, 2013
Read these tips before you sign anything

Microsoft licenses may not be the most expensive thing in the IT budget, so some large businesses may not give them as much scrutiny as they deserve. "Even if it's only 1% of the IT budget, that could be $1 million," DeGroot says. "Isn't it worth taking a closer look to save $1 million?"

7. Keep your on-premises systems running in parallel with the new cloud service
One of the biggest benefits of moving to the cloud comes from the reduction in on-premises management costs. For example, if you move to Office 365 you no longer need an Exchange administrator. But many organizations are slow to shut down the on-premises systems, or choose to migrate only a small subset of users, such as those in a remote office, to the cloud.

That's usually a mistake, says DeGroot. "I see a lot of companies with small amounts of Office 365, but it doesn't work in a small way."

Setting up just 25 people with Office 365 and then configuring those users to use Exchange email is quite a bit of work. And if you use SharePoint and Office 365, will you synch the Office 365 version of SharePoint with the on-premises SharePoint server? "That is not a trivial project," he says. If you choose to do the syncing, at that point you're duplicating costs and then some. "You're paying a premium to Microsoft to manage the servers and you haven't reduced your on-premises management costs at all."

If you're planning a transition to the cloud, scrutinize the licensing for the on-premises servers you'll be phasing out while negotiating on the cloud service. Do you really need Software Assurance for your on-premises software, which gives you access to the next upgrade, if you'll be off the platform within three years? Cancelling can save a lot of money, DeGroot says.

One client on its way to the cloud, a business with 10,000 employees, saved over $1 million by cancelling its Software Assurance contract.

Another client went even further. A global investment firm with 200 offices decided to run Office 365 in its smaller offices, and then refused to continue to pay Microsoft for maintenance on the on-premises servers that were supporting those users. "They said, 'We're not going to pay for the perpetual licenses and pay maintenance on those products when we're moving the whole thing to the cloud.'" If you're going big on cloud, cutting back on on-premises support makes good business sense.

8. Don't negotiate a volume pricing agreement that accommodates the best- and worst-case changes in your seat count
You may have 50 users on that CRM platform today, but what happens if you grow -- or suffer substantial layoffs? How much does each incremental user add -- or subtract -- from what you'll pay?


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