Summary for the Service Provider IT Professionals / Procurement Officers who are desperately late for a meeting and spilling coffee as they run down the hall… There are some pricing changes for Windows Server in SPLA that take effect January 1st.  This does not affect the pricing in the other volume licensing programs.  If you don’t know what SPLA is, stop reading and pick up the pace.  If SPLA is important to you, here’s the info:

SKU

% Change

Windows Server 2008 R2 Web

- 21%

Windows Server 2008 R2 Standard

- 21%

Windows Server 2008 R2 Enterprise

- 21%

Windows Server 2008 R2 Datacenter

+30%

 

The rest of the story…

The three most important assets in a software company are people, intellectual property and price integrity.  The third one might stand out as an odd item on the list but it is far more critical than most people would think.  Far too many software companies take what I call a “cash-ectomy” approach to selling. Loosely defined, a “cash-ectomy” is the removal of as much cash as possible from a customer regardless of the volume of the sale.  That approach rarely works for very long as customers compare notes and quickly realize that the price they paid was far more correlated to their budget than it was to their volume. 

Microsoft takes a different approach. Our prices reflect what we charge.  We don’t uplift by 50% so those brave enough to ask feel like they are getting a “deal”.   Going a step further, we attempt to normalize the Microsoft server product portfolio prices between channels to help reduce conflict and drive consistency. On January 1st, 2011, changes in SPLA pricing will take effect which to better align SPLA prices with subscription prices.  For the most part, SPLA prices drop 21%.  The one exception is Windows Server 2008 R2 Datacenter which has unlimited virtualization rights.  That product increases by 30% over the current price, this only applies to the SPLA program, not other volume licensing agreements.

Why is the price of Windows Server 2008 DataCenter (WS DC) for SPLA providers going up?  Truth be told, it’s going down.  That’s not PR spin or some hocus-pocus math factoring Moore’s Law.  The current price for SPLA on WS DC is a limited promotional price.  The original announced price was almost double.  MSFT deferred the implementation of the full price in 2009 and again in 2010.  As we have moved closer to January 1, 2011, feedback on the implementation of the full price was as consistent as it was intense.  That feedback compelled us to look at the non-promotional WS DC price again. 

After a lot of math, a lot of feedback, and more math, we made a decision to lower the January 1st price on DC. Specifically, instead of retiring the promotional price and doubling the price, we have landed on a much more modest increase of 30% which we think will be welcome news to our service provider partners when considering the original plan.

Here are some plain-English answers to some likely questions…

Q1 – “The new DC price point makes sense for newer hardware where I can achieve greater VM density.  What about my older hardware?”

The decrease in Windows Server EE should be a welcome surprise for older hardware.  For hardware that only practically supports 4 or less instances, EE may be a more economical option.

Q2 – “Why raise the DC price at all?”

As mentioned above, the current price is a promotional price (note that the price of DC in the current model is less than EE).  The January 1st change is 34% less than what was planned.  More importantly, since the DC sku was launched, server capacity in terms of cores has doubled, significantly increasing the performance value.

Q3 – “Is the new price a promotional price?”

No.  

Q4 – “What will this translate to in terms of the price I pay my Service Provider?”

 Since the introduction of this sku, cores per proc have doubled spreading the cost over twice the capacity.  That said, each service provider sets their own price based on their goals for revenue and share.