License Management - Health Care Case Study
Our baseline license management partner Emerset provides a case study on Microsoft in the Health Care Industry.
Client Profile: A leading, national HMO.
Business Sector: Healthcare (HMO – Health Maintenance Organisation)
Annual Revenue: $4 billion +
Desktops & Laptops: 16,000
Servers: 1,800 +
Patients: 4 million
Sites: 14 hospitals, 1,300 clinics, 400 pharmacies, 37 children's clinics, 39 women's healthcare clinics
Engagement Description: Microsoft Enterprise Agreement Subscription Renewal Consulting Services: Clear Licensing® Gap Analysis, Clear Licensing® Financial Analysis & Clear Licensing® Negotiation Management
Since 2002, the client was party to an Enterprise Agreement Subscription (EAS), which initially began with only the basic platform products (Office, Windows O/S upgrade, and Core CAL, previously known as BackOffice CAL). Additional products were then introduced to the organization, changing the scope and significance of the EAS. When the agreement required renewal in 2008, the client decided to evaluate the options presented by Microsoft, in both financial and technological terms.
The plan included the implementation and upgrade of the following software within three years:
- Office 2007
- Windows Vista
- Core CAL
- Exchange 2007
- Windows 2007
- SharePoint (MOSS) 2007
- Dynamic CRM – Call centre
- Forefront for Exchange
- SQL upgrade to 2008
- Windows Terminal Server 2007
"Working with Emerset during the pre-negotiation stages really helped us to understand our current situation and the various options that were available. Being guided through the entire ClearLicensing protocol saved us time and money and kept the entire team focused on the outcome of the negotiations. Emerset's ability to understand our business and examine what our situation will be six years in the future made it easy to take tough decisions and justify them both to Microsoft and to our own managers."
“The entire process was smoothly executed in a professional manner and resulted in real savings (in the seven-figure range) for the organization.”
Prior to negotiations with Microsoft, the client approached Emerset to conduct a complete analysis of the current and future use of Microsoft products by the organisation. The analysis was based on our proprietary ClearLicensing® methodology for examining software licensing agreements, and was geared towards achieving the following objectives, as determined by the client:
- Gap analysis, comparing the current use of the software with the terms & conditions of the agreement.
- Financial and business analysis of exiting (rather than renewing) the agreement by activating the "buy out" option (pre-defined terms of payment for transferring the licenses from subscription to proprietary) and re-entering into a new Enterprise Agreement in 3, 4, or 5 years.
- Financial analysis of renewing the agreement for two three-year periods (initial 3 years + an additional 3 year agreement) and comparing this to the "buy out" and new EA options.
- Product licensing analysis.
- Creating a benchmark by comparing similar agreements from companies of a comparable size in the same business sector.
- Negotiation readiness and management: preparation of the negotiation process, including a carefully selected strategy, tactics, objectives, briefing of the client's negotiation team, and ongoing analysis and preparation of the negotiations.
- Crosscheck of final agreement.
- Post-agreement check.
- Software assurance benefits.
- Gap analysis: this stage comprised the gathering of product installation information using the Microsoft SMS server and a manual data-cleansing process. The information was then compared to the current licenses in the agreement, and the outcome of this process was used as a basis to calculate the exposure the client had to Microsoft and the additional costs expected if the client decided to exit or renew the agreement. This intern al information was very valuable to the client as it provided a comprehensive view of the current situation.
- Financial and business analysis of exiting (rather than renewing) the agreement by activating the "buy out" option in the agreement and re-entering into a new Enterprise Agreement in 3, 4, or 5 years: This stage of the process was conducted by utilising the results of the gap analysis together with a series of interviews with the client’s key decision makers. These interviews provided an understanding of the future direction and technological requirements of the company. All the accumulated information was entered into the ClearLicensing® financial model. The outcome was used as the benchmark for exiting or renewing the agreement, and formed a critical part of the client's best available alternative options.
- Financial analysis of renewing the agreement for two three-year periods and comparison to the "buy out" and new EA options: All data collected was analysed using the ClearLicensing® financial model and the results were compared to the exiting and renewal options. This helped to create a better understanding of the expected costs of a renewal agreement, and to decide whether negotiations would be worthwhile. Emerset concluded that renewing the agreement was financially beneficial and also met the organisation's needs. This process also helped to determine a realistic price target for the next agreement.
- Negotiation readiness and management: This stage was critical to the success of the negotiations. A comprehensive document was prepared by Emerset in order to summarise the current install base, planned project, results of the gap analysis, financial analysis, and the outlined strategy and tactics. In addition, the team members were briefed and allocated roles in the negotiation process, resulting in a well-prepared team of professionals. The ongoing management of the process involved crosschecks of the proposals based on the following metrics:
- Price levels – checked that price levels were in accordance with the size of the organisation and official price lists.
- Pricing compared to official price lists.
- Discounting policies.
- True-up pricing – future pricing for adding additional products and
- Quantities throughout the agreement:
- Buy out pricing.
- Payment structure.
- Special terms & conditions – validation of the true value of special terms & conditions and monetisation of the benefits.
- Product licensing analysis: Various aspects of product licensing were examined and compared:
- Core user CAL vs. device CAL licensing.
- SQL per-processor licensing vs. CAL server licensing.
- Virtual server licensing (planned consolidation aspects).
- Enterprise CAL – Validation of the financial benefits of the Enterprise CAL compared to purchasing individual components.
- Creating a benchmark by comparing to similar agreements from companies of a comparable size and in the same business sector: A special benchmark was used in order to quantify the entire cost/value of the agreement by comparing it to similar agreements in the healthcare industry. This allowed us to verify that the overall terms & conditions of the agreement were in line with Microsoft's business practices.
- Crosscheck of final agreement: The final agreement was compared with a predefined check list created by Emerset in order to validate all proposed terms & conditions before the final signing.
- Post-agreement check: As an integral part of Emerset's ClearLicensing® methodology, an additional check was conducted 10 days after the agreement to confirm that all licensing details had been updated correctly on Microsoft's Volume Licensing Site (MVLS), including the Software Assurance Benefits.
- Software Assurance Benefits: All Software Assurance Benefits were validated in accordance with ClearLicensing® protocol and monetised in order to quantify their real value for the client. The following benefits were included:
- Entitlement for Current version and Planned Wave 14 planned in Q1 2010 and Windows 7.
- DRP Licenses.
- Extended Hotfix support.
- Training vouchers.
- 24x7 problem resolution support.
- Premier and MCS agreements.
- General terms & conditions of the agreement: Emerset worked with the legal team in order to gain a comprehensive understanding of all aspects of the agreement, including certain risks and exposures that needed to be addressed.
As a healthcare company, the client has specific requirements that were given special consideration. These include:
- Different types of users with specific needs, such as HQ workers, nursing staff working in 3 shifts, doctors working at multiple locations including private clinics, and client service personnel working shifts.
- Use of terminal server and thin client technology.
- Introduction of Dynamic CRM into the organisation.
- Fluctuating staff numbers due to the current economic situation.