Dynamics 365 – Paper is Rock and Scissors

It should be news to no one that Microsoft’s Business Solutions are exploding with new capabilities by the minute. An enormous amount of money and effort is being brought to bear to push the envelope, raise the bar, and then raise it again. The advancements have been nothing short of incredible, but one thing has not kept up with the pace…


One thing that Microsoft has always been, is trusting. Even in the on-premise days, which for many are still today, but that’s another story, customers would sign a Volume Licensing Agreement. In that agreement the customer would obtain the right to install 500 licenses of Office, for example. This is what we call a “Paper License”. In fact, with that Volume Licensing key, they could install a thousand copies, but the deal was that they would not. It was a trust thing, call it the “Honor System”. This “Honor System” concept has no doubt cost Microsoft billions of dollars over the decades in uncollected revenue. Even though it eventually spawned the “Software Asset Management” process, the “Honor System” is hard-wired in to the corporate culture.

Honor Among Thieves

The problem with Honor, is that not everyone is honorable. This Honor System approach of course permeated the Business Solution side of the house as well. No doubt, Microsoft has been taken advantage of there also.

The Licensing Layer

As the engineering and development team is firing off new capabilities like a Gatling gun, the licensing team is charged with figuring out how much to charge for these things. Part of figuring out what something should cost, is figuring out what it is worth to users. Sometimes you come to the realization that not enough users will agree to your idea of value, so an accommodation is made for a lower price version. But in order to get that lower price, we’ll exclude a few things. This would not be an issue if those things were actually excluded from the product for that license. But that would require the development team to stop all that “envelope pushing and bar raising” for a while, and either build a specific version, or somehow lock down the current one to comply with this lower price option. So instead, Microsoft will draft a document (paper license) outlining what you can, and can’t, do with this particular license, and rely on the historical Honor System. But we have already determined that not everyone is honorable.

Two Types of Thieves

I would assume that there are plenty of organizations that are knowingly and intentionally exploiting the honor system. They agreed to the restrictions on, for example Team Member, with their fingers crossed behind their back. I have no sympathy for them. But more often than not, the actual users of the products are not the people who bought them. Indeed there is a document somewhere, oh here it is, The Dynamics 365 Licensing Guide. It is pretty clear right there in Appendix A of this 52 page document what a Team Member can do. So who read this? Do the users have it? Most likely not.

Lookie What I Can Do

You are a user in your organization. You have been issued a Team member license. Maybe I.T. explained a few things about what you can’t do, and you’re like blah, blah, thanks. You go back to your desk and start to use the product. Wait a minute… I thought I.T. said I could not create an Opportunity… but I certainly can. “Hey Dana, check this out, I can create an Opportunity“. Dana: “I thought I.T. said we couldn’t?“. “I.T. is a bunch of morons, they don’t even know how the product works! Make sure we tell everybody.” “Will do!” And just like that, this organization is in severe breach of the terms of their licensing.

Who is Responsible?

It’s kinda Contracts 101. When you go buy a new car, and sign the loan document, who is responsible for payment, and maintaining insurance? You are. Granted, you signed a 3′ long document that you could touch, feel and leave with a copy of. In the online world, these documents usually sit behind a hyperlink under a “Agree to Terms” checkbox. Regardless, the customer is ultimately responsible for making sure their users are not using things, in a way they are not supposed to, even if there is nothing more than an online document somewhere preventing it. The lack of technical “locks” places a huge burden on the customer. Microsoft understands this, and efforts are underway to provide these locks for the first time. Customers should breathe a sigh of relief. But will that be smooth?

Another Snake in the Woodpile

Most Partners are up-to-speed, and take great lengths to ensure that their customers understand the limits. But a few are actually co-conspirators. Some partners would be happy to engage with a customer who plans to explicitly violate the terms of the agreement. “I won’t tell, if you don’t tell”. Even worse, I have heard of some partners who knowingly sold customers restricted licenses, without letting the customer in on the rules. I have no sympathy for either of these partners either, although I do feel for the unknowing customers. Today, with CSP, the partner is selling the license to the customer, there isn’t even a checkbox, the customer is oblivious. Who is responsible there? I would have to assume that the customer would get a pass there on past use, but now that they know…

A Rude Awakening

Let’s assume that Microsoft was going to spend the technical bandwidth to build locks, on everything. For those in compliance, it means nothing. But for the knowing and unknowing thieves, it shall be significantly disruptive. “Hey Dana, I can’t create an Opportunity… must be a bug, are you able to?” “Nope” “Well, we’re all creating Opportunities, what do we do?” Here’s what you do. You either stop creating opportunities, because you can’t anymore, or you upgrade your licenses so you can. “How much more is the license I need to create opportunities?”  Minimum of 8X. “WTF?” Seeing as Dynamics 365 is already significantly cheaper than Salesforce.com, you should not have expected that your cost would be an eighth of that!

A Soft Hammer

Microsoft is not an evil empire. They have known for decades that paper is not enough. They share some responsibility here. It’s like I lent you my car to go to the store, I guess it’s partly my fault for not specifying that I meant a store in my state. So I expect that when the time comes, everyone will have been given way more time than necessary to get into compliance. Although I, for one, will not bat an eye, if they decided to smash the intentional thieves and co-conspirator partners right out of the gate.

Users Down, Revenue Up

Imagine if Microsoft could snap their fingers and instantly have everyone in the world paying for what they are using. There is probably a higher ROI on that, than anything else they could do. But clearly, some users will ultimately be lost. The thieves will cancel immediately, and even some of the unknowing will have to cancel, when they can’t pony up the 8X. The few Partners who built a business around this scheme will fold up their tents. Knowing Microsoft, they will provide an easier path for the unknowing customers to get into compliance than having their cost octupled immediately. But most will stay with the platform that they have now adopted. For some of their users, compliance will not be an issue, for others they will upgrade to the proper license. At the end of the day, I expect Microsoft’s revenue to be up as a result. Which is one more reason they should take care of this sooner rather than later.

My advice to customers, review the licensing agreement, then review your use of the product, if those two things are out of sync, fix it now, while you have the time to do it in an orderly fashion. So when the time comes, your business will not be disrupted, in fact, you will not feel a thing. If you are not sure, contact us we’ll help you sort it out.

Add your thoughts below, just don’t pimp your stuff on my blog 🙂


  1. Rocky Pavicevic

    It also doesn’t help that pricing and licensing are open to accidental missteps. Let’s take the example of the transition licensing from CRM Online to Dynamics 365. Just recently I found out that the transition pricing to D365 licenses was/is only valid for the initial term of the subscription, 1 year. All along I heard, read and understood that transition pricing was locked for a term of up to 3 years, from the initial transition pricing release in Nov 2016. What is right? Am I the only one to have gotten this wrong? Probably not. Bottom line, even when customers/partners want to/ aim to “do the right thing”, there are, not so infrequently, gaps in communication from MS, leaving too much up for individual interpretation.

    • Steve Mordue MVP

      Fraught with Gotchas

  2. Beth Burrell

    Sorry but I tend to think most people are trying to be honest but the licensing is so darn confusing it makes your head spin. You can call Microsoft licensing 10 times and get 10 different answers. 52 page licensing agreement really? Then adding all different pricing fro different companies, it is clear as MUD!
    There are some small companies that will try to use TEAM licenses for everyone but they will find away around all road blocks.
    If Microsoft can’t answer the licensing clearly then something is very very wrong

    • Steve Mordue MVP

      Why sorry? I don’t think I said most people are crooks


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