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How the other guys do it

18 Jun

So you want to get in the hosting business.  You start looking around the web and notice that other service providers seem to charge less than what you can charge your customers.  You notice other’s advertising solutions that seem to conflict with the licensing rights.  You are at a loss.  You ask yourself, “how do they do it?”  You ask your reseller who seems just as confused.  So what do you do?  How do THEY do it?

Since this blog is about licensing, I’ll educate you on how other’s save costs based off licensing alone.  I’ll break this down into three parts – Exchange, Mobility, and VDI.  Those are probably the big 3 and more often than not, can make you scratch your head.   I will also add one more, and that’s your reseller.

Exchange Licensing

Exchange is your best friend and enemy. I say that only because it is so important and one of the reasons organization’s move towards the cloud.  They don’t want to babysit an Exchange server anymore, but it’s a must have.  Licensing aside, to deploy Exchange you must have redundancy (God forbid it goes down) you must have infrastructure (they have to receive email as fast as their eyes can focus) and finally administration (dedicate an employee(s) to make sure the former happens).  That’s pricey.  Now the licensing.

Exchange is licensed by user, which means all users who have access to the software needs a license.  To deploy Exchange, you also need Windows.  Windows is licensed by processor.  So let’s say you have 10 users and you provide those users access to your Exchange server. Exchange cost’s $5 per user (hypothetical).  Windows costs $20 for Standard edition or $100 for Datacenter edition.  Because Windows is licensed only by processor (not user) the more users, the less expensive Windows licenses become. See below. (example purposes only)

Hoster with 10 Exchange users on a two processor box

Exchange: $5 per user

Windows: 2*20= 40.  But if we do a per user cost it would equate to $40 divided by 10 ($4 per user for Windows).

The entire Exchange solution is $9 per user.  ($5 for Exchange + $4 for Windows)

Hoster with 1,000 Exchange users on a two processor box with multiple VM’s

Exchange: $5 per user

Windows: $100 per processor or $200 (using Datacenter, 2 processor box – multiple VM’s).  So $200 divided by 1000 users equals $.20 per user.

The entire Exchange solution is $5.20 per user.

So what do you do?  You either fight the good fight – offer something the bigger guys cannot offer – customer service, deployment services, kiss your server good night, etc. or if you can’t beat them…join them.  A lot of big providers offer partnerships in which they will provide the Windows server (think Amazon/Azure) but you provide the Exchange license via your own SPLA.  This is called Datacenter Outsourcing.  Perfectly legal, and part of your signed SPLA agreement.

Mobility

If you really want to get into Exchange hosting – this is the best way to do it.  (in my opinion).  You should offer license mobility.  For a complete definition of license mobility, check out my previous blog post here.  In short, this allows your customer who purchased Exchange with Software Assurance to transfer that license into your datacenter.  All you need to do is dedicate a VM for that customer but install it on shared hardware.  One caveat – you must report Windows via SPLA.  Windows is relatively inexpensive so it could be a win-win.  Just make sure you sign the mobility addendum to legally offer this solution and check with your reseller for eligibility

I also think you should consider SAL for SA.  This allows you (the service provider) to host the solution in a shared environment (VM and Hardware) using the Exchange license your customer purchased with SA.  You still report Windows and SAL for SA SKU via SPLA.  (way cheap by the way).  Difference between SAL for SA and License Mobility is under license mobility they are transferring the license to your datacenter.  Under SAL for SA, nothing is transferred, the original licenses can still be deployed on premise and in your cloud!  Great hybrid situation or ability to provide disaster recovery.  Reach out to me at blaforge@splalciensing.com to learn more

VDI

“I see they advertise VDI!!!”  You look online and see other providers offering VDI as a service.  Well, they are either out of compliant (more probable) or they are using Windows Server and RDS to emulate a desktop via SPLA.  Last option is to have the end customer bring their desktop OS licenses to a datacenter provider.  This is not likely since desktop OS does NOT have mobility rights.  This means the service provider would need to dedicate (server and vm) to one customer.  This is the least likely scenario, since dedicating an environment just for a desktop license makes little sense.

Moral of the story with VDI- there is NO way a service provider can offer a desktop license in a shared environment.
Conclusion

Do you ever wonder why you report licenses to your current reseller?  Is it just out of convenience or do they provide you strategic value?  My advice -don’t work with a reseller out of convenience.    Do they have their own cloud services that directly competes with you?  Hmmm…

Reach out to me at blaforge@splalicensing.com or linkedin.  Would love to review your options or simply offer a second opinion.

Thanks

SPLA Man

 

 

 

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2 responses to “How the other guys do it

  1. rjmaynard

    June 19, 2014 at 6:22 am

    Great article. Have you figured out why Microsoft have made VDI impossible for hosters?

     
    • splaman

      June 19, 2014 at 9:22 am

      Thank you for reading.

      I do not have an definitive answer to the VDI dilemma. I think the bigger issue for hosters is not VDI but Office. If they open the door for VDI than Azure could do it as well. Since Office 365 allows the installation on 5 devices, I think they should enable hosters the same benefit., Secondly, they should have Office mobility rights since RDS now has mobility rights. And Last (I promise) Office should have self hosted rights since a lot of developers have applications that report back thru Excel or some other Office application. Just saying. Stay tuned my friend.

       

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