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Enterprise Cloud Acceleration: Transformational License Agreements

In our introductory post, we addressed Enterprise License Agreements (ELAs) generically and reviewed some of the benefits to both customers and manufacturers. In this follow-up, I will address some of the specific nuances of the structure of a Dell EMC ELA.

Legacy EMC began marketing ELA agreements to their customers more aggressively in the past 3 years, and their program has now carried over post acquisition by Dell. EMC has two types of agreements that they offer, a holistic Transformational License Agreement (TLA), and an ELA specific to their Backup and Recovery Suite of products (BRS ELA). For the purpose of this post, we will focus on the TLA.

Transformational License Agreements

The Dell EMC TLA offering has several unique features, some of which are an outgrowth of the nature of their hardware-driven business, and some as a result of their extended family of offerings.

A Dell EMC TLA has 6 variables that we will cover in this blog:

  • Type
  • Transfer of existing licenses (Transmutation)
  • New licenses (Growth)
  • Term of contract
  • Prepaid support included
  • Transformation credits

License Type

Dell EMC TLAs can be either Term or Simple agreements. In a Term agreement, the grant of licenses (right to use) expires at the agreement. There is an option to convert those licenses to perpetual licensing, for a fee. Licenses that are converted will become either frame-based licensing or perpetual licensing in the case of non-frame based titles, such as the DPS Suite. This license type is the least expensive, and if strict accounting is the way you roll, then the license portion of this type of TLA will be amortized (Operational Expense).

In a Simple agreement, at the end of the licensing period, the frame based titles fall to the frames that they are residing on at the end of the term and the non-frame based licenses become perpetual at the end of the term. This license type is the most expensive and if strict accounting is the way you roll, then the license portion of this type of TLA will be capitalized (Capital Expense).

Selecting between Term and Simple is largely dependent on the type of licenses you are looking to do a TLA on, the term of the TLA, and the certainty (or uncertainty) of your future data center plans. AHEAD can help navigate these choices, and build out forecasting models to support your decision process.

Transmutation

The next aspect of a Dell EMC TLA is related to existing software transmuted into the new agreement. This is also referred to as the Install Base (IB). This is extremely relevant to customers who will be pursuing their first TLA. Existing frame based licenses, or non-frame based perpetual licenses, that the customer chooses to put into the TLA will be transmuted from their existing licensing to the new TLA agreement.  

As part of the TLA contract, the old license grants are terminated, along with the maintenance agreements they were being supported under. Dell EMC will provide a check back to the purchaser of the current maintenance balance.  If you purchased support directly from Dell EMC, the check or credit will come directly back to the customer from Dell EMC.

If your existing licenses were purchased from a reseller such as AHEAD, the check will come from the reseller and can be netted from your new TLA purchase price. The support credit reconciliation process requires due diligence to audit the license credit reports generated by Dell EMC, something AHEAD has become very proficient at.

New Licenses and Growth

The granting of new licenses requires forecasting of expected growth in the customer environment for new storage capacity that will be acquired during the life of the agreement. The art of creating these forecasts, including assumptions and the study of historical growth, can take several iterations to ensure all parties are protected.

Not to worry if historical growth in one area doesn’t meet expectations, Dell EMC also includes a “substitution table” in each TLA. This table allows a customer to exchange different software titles at specified rates during the agreement. For example, if a customer purchases 100 TB of Symmetrix VMAX growth but that license growth does not meet expectations, the customer can deploy that growth into the Unity growth instead. This provides investment protection for the customer.

Terms of the Contract

TLA terms can be structured three, four, or five years, depending on the customer’s long-term data center needs, and the types of hardware purchase they may be making. For instance:

    • If you are an all Unity shop, then a 3-years TLA or a 3 year DPS ELA would likely be the right vehicle.
  • If you are a Vblock customer with 4 years hardware support, then a 5 year TLA would typically be recommended.

Prepaid Support Included

Support will typically be pre-paid for the term of the TLA. This is something new with TLA 2.0. Without getting into a long discussion, prepayment of all years on a TLA was always available on simple TLA’s, but not on term TLAs. Dell going private has made the prepayment of the support years equal to the TLA years possible. Since the beginning of Term TLAs, customers have been requesting this.

Transformational Credits

The last portion of the TLA is the Transformational Credits (TCredits), and this is another clever approach introduced by Dell EMC. The goal of the TCredits is to establish a pool of dollars that can be used to purchase new software and technologies.

The pool of Transformational Credits is akin to a gift card, which can be redeemed during the agreement for multiple and different items in the extended Dell EMC family, including:

  •      Dell EMC Software Titles
  •      Professional Services
  •      VMware Licensing 
  •      Virtustream 

EMC is working hard to include the list of available TCredit uses to extend to products you might not expect, such as Security or Big Data products.

Leveraging these TCredits to your advantage is a primary driver for customers considering these agreements, as they can provide some additional volume discount opportunities.

Bottom Line

In summary, there are a number of advantages to the Dell EMC TLA structure, including: 

    • Average 20% discount as opposed to traditional licensing purchases
    • Can change accounting of licenses to an Operating Expense
    • Allows movement of license titles
  • Financeable at a below market rate

Bottom line, if you are committed to Dell EMC spend, you need to be looking at a Dell EMC TLA sooner rather than later. Given the number of TLAs that we have been involved in and the maturity of our ELA/TLA practice, AHEAD can help you size, structure and, ultimately procure the right agreement for your business needs.   

I hope this post has helped you understand the Dell EMC TLA offering, and allowed you to start to think about how this may, or may not, fit your organization. If you would like to discuss further, please contact either myself at john.cole@thinkahead.com or Tom Maheras at tom.maheras@thinkahead.com.