When Microsoft launched Dynamics 365, they launched an entirely new licensing model based on Apps and Plans. The community became aware of this deconstruction, before they were made aware of the pricing, which led to some early speculation on how it would roll out… then in November, the associated pricing was revealed.
Simply Described.. in 172 Pages
I keenly remember sitting through a partner Airlift webinar where Microsoft representatives attempted to explain the new “simple” licensing model. Now, four and a half months later, confusion is still the norm, and few inside of Microsoft can even clarify it. While I know there are not, it “feels” like there are hundreds of skus… and there will necessarily be more needed soon. For example, once the SMB Apps launch, there will not only be Skus for those, but I expect there will need to be another raft of “transitional” skus for those as well, more on that in a minute.
“Can you give me a price on Licensing?”
This has become one of the most challenging, yet unavoidable, questions that a “business solutions partner” is asked by a customer today (I don’t know what we are called anymore). Even previously, when we only had a handful of Skus, many partners got the mix wrong for a particular customer’s needs. Fortunately, customers had no hope of figuring it out on their own. So partners routinely sold Professional licenses, where Basic, or even the seldom offered Essentials, would have served the needs.
I don’t think partners did this on purpose, it was just the safest for them. Imagine having to go back to a customer who you sold a ton of essentials licenses to and acknowledge that to accomplish their needs, it looks like they will need to upgrade to Professional for those users. Eek. In my own discussions I would often tell customers to budget for Professional, and if we later find that certain users can get by with Basic or Essentials, to consider it a bonus. With this new plethora of Skus, I estimate that the number of customers who are put on the correct licensing mix for their organization will be very low.
Microsoft has this term they like to apply to the Sku they would like you to sell, it’s the “Hero” sku. Similar to how you might see a lot of pricing for other services today offered as “Good”, “Better”, “Best”, there is usually a “Recommended” banner floating over one of them. It is the “Hero”, and you are a Hero, if you sell the Hero. I am not saying that Microsoft is trying to tilt the board towards their more profitable Skus, rather I think it is an acknowledgement on their part, that you will probably get it wrong, and both of us are safer if you just sell the Hero. But focusing only on the Hero means, that while you can skip a lot of homework, you are probably quoting way more than necessary for licensing, and losing a lot of customers in the process.
Some clarity please!
The Hero offers everything. You can’t go wrong with the Hero. In Dynamics 365, the Hero is the Plan. A user with a Plan license will never run into any roadblocks… there is nothing they can’t do. But to not repeat the mistakes, and lost opportunities of the past, you must understand the App and Team Member Skus. Imagine a scenario where you have an existing Dynamics CRM Online customer. They currently have 20 Professional users, 10 Basic Users and 100 Essentials users (because someone took the time to sell them the right mix of Skus). They will be moving to Dynamics 365, and also adding 10 more sellers, 5 of which also field cases, 15 pure CSRs, and 20 interns. 175 total users. Can you tell me how much this will cost per month? And for how long? BTW, they are also interested in ERP…
The complexity of simplification
On the one hand, it would seem that Microsoft’s rolling up the former Basic and Essentials skus into one new Team Member sku should make our lives easier. On the other hand, figuring out what a Team Member can, and cannot do, is also a challenge, for which Microsoft has generously offer a multi-page document, that makes it even less clear. The only way to know for sure, is to just buy one, and test every scenario the customer is interested in. Otherwise, you take the risk that they end up needing that user to do that one little extra thing, that a Team Member can’t. I am not blaming Microsoft for the fuzziness around this Sku, it is simply impossible to know every customer scenario. You could just sell the Hero… and not win any deals.
The Enterprise Advantage
I suspect this will be different for big enterprise deals than SMB deals. In fact, I would assume that most enterprise deals will be won by the partner who offers the lowest monthly cost, based on the best effort at the matrix. In this new subscription economy, the monthly cost is really the biggest decider for Enterprise, because it never ends. Your deployment and customization costs do end. If you project out the monthly cost for 5 years, as I suspect many enterprise customers will, the differences between a correctly proposed matrix, and a poorly thought out one, will be staggering.
What about SMB?
Based on what we all know about the future of SMB licensing, and nothing that has been shared with me under NDA contradicts any of that, we will have a similar picture as enterprise. We all know there will be SMB Apps, we already have one (Financials), we all know that the apps will be $40 each with a $5 Team Member. One big difference will be the Plan.
Where the Enterprise Plan, with ERP is $210, more than double the single App price, in SMB, it is only an additional $10 to go to the Plan… with ERP. This is a significant factor that requires some real thought. Even the fictional licensing scenario I described above is SMB sized. SMB by definition has a vastly smaller number of users, to potentially be multiplied by a much smaller Plan differential cost ($10).
Most SMB customers are coming in for Sales to start with, and those users will probably want Marketing, so they are looking at the Plan anyway. The difference in cost between a “siloed App” or “everything”, is simply not that much. I can’t think of many SMB customers who would quibble over $10, given their smaller number of users. Granted, the Team Member for $5 is a different story, and they will rightfully want to use that were they can, so we still need to thoroughly understand that Sku.
Also, as I mentioned previously, I expect there will need to be a new slew of Skus once the SMB Apps launch for “transitioning” the remaining CRMOL users, who have not already transitioned to the Promos, as well as from the Promos themselves. While Microsoft will be letting them keep the Promos for 3 years, I expect many of those customers would prefer the new SMB focused Apps and will want to move over right away. I’m sorry, when I started this paragraph, I expected it to end in a better place.
I guess to sum this all up into one sentence : You should be doing your homework on the Team Member Sku. I apologize for making you read all of this to get here, but I did not know this is where I would end up either. In the future, maybe you should just skip to the end of my posts.