Be Current or Not Current on the Microsoft Annual Enhancement Plan

Since Microsoft announced the new Business Ready Enhancement Plan Renewal Policy, talks about whether the customer should stay current has increased significantly.

At 16% of your total software list price, it’s potentially a sizable recurring investment for companies using the software. Not just specifically to Microsoft, almost all ERP, CRM, business software out there requires users to pay an annual enhancement of some sort.

Other than the obvious questions of “what do I get for staying current?”, the benefits are numerous and I encourage you to get with your partner to learn what these benefits are. But the primary reason with the new policy is that you need to be current in order to purchase additional granules and users.

This may sound very scary at first, but hopefully this blog post will put in perspective on what this means should you decide to stay current or not.

1. How many years of Enhancement will I pay to pay for the software again?
Assuming your system list price is $100.00. At 16%, you’d be paying $16.00 per year. So $100.00 / $16.00 = 6.25 years. You would need to be current on the Microsoft Enhancement Plan for 6.25 to pay for the software again.

In another words, the bet you placed by staying current on the enhancement plan is that Microsoft will release new versions of NAV that you will upgrade to (full or executable only) during 6.25 years. In addition, with the new enhancement plan policy, you’re also betting that you’re business will grow and change, therefore, requiring additional modules and user licenses in the 6.25 year time span. So if you’ve purchased additional modules, upgraded, etc during the 6.25 year time frame, you’ve won.

2. How many years can I not pay the enhancement plan for the cost to accumulate to pay for the software again?
Again, assuming your system list price is $100.00. Assuming that you decided to skip the enhancement after the first year, the penalty you’ll pay is around 20% (you may have to check the exact percentage in your area). So $100.00 / $20.00 = 5 years. You can skip the enhancement for 5 years and pay for the software again in 5 years.

In another words, the bet you placed by NOT staying current on the enhancement plan is that Microsoft will not release anything of interest worthy of upgrading your system in the next 5 years. You do not expect your business to see growth or changes to purchase additional modules or user licenses. If you have not purchased any modules or done any upgrade to newer version in the 5 years since you skipped the enhancement, you’ve won.

Conclusion:
In a down economy, it may pay not to be current if you do not expect the cycle of your business to turn up again within the next 5 year period. Then again, it’s pretty tough to gage what will happen in the next 5 years.

Whether or not to stay current really depends on the business and the people that runs the business. For the enhancement plan, I always view this as an insurance and the same type of mentality as an insurance. Most of the time you pay for the insurance premiums complaining about it’s hefty price, but when problems occur, you’re glad you paid the premium. In Navision’s case, the time is 6.25 years.

Comment List
  • Its good to see the numbers in perspective, though its still important to remember that each country and region has different numbers, I think some countries are not yet at 16% but are slowly getting there. And in some cases there is the 20% (or some amount) of penalty PLUS you have to pay the 16%. Sometimes the penalty is waived, so each case should do the same math that you did.

    I like the way you analyze it as a Win/Lose. It makes the numbers easier to interpret. And then compare it to insurance.

    In terms of the new policy, I think the big question now is what do you get if Microsoft now will no longer support mixed environments. 100% of all my clients are on mixed mode (i.e. Objects and executables are different versions), and to be honest I can't even remember the last time I saw a supported system under these rules. (Most of my clients run 5.00sp1 Exe)

    So for the typical client that maybe plans to upgrade the Executables once a year or so, and objects maybe every three years, it means they will only really be supported for a very small percentage of their time. So what are they getting out of the support plan?

    I am just playing devils advocate here, but this is a major issue that maybe Microsoft just didn't think about.

  • I do think the new architecture in NAV2009 RTC will make it a whole lot easier to upgrade. But you're correct in that not supporting mixed mode will be a huge problem.

    Microsoft is always changing what they're providing in the Enhancement program. One of our clients is current because he believes that it's necessary for the software company to keep developing new technologies.

    Imagine if no one had to pay for enhancement for any software. The price of the software will probably be insanely high and no one would purchase any software.

    If software companies do not receive constant cashflow, what would be the incentive for software companies to keep investing in their products?

    Personally, I believe it's fair for the enhancement fee. By staying current, you get the latest in Microsoft Dynamics technology. Microsoft does need to keep working on the ease of upgrading so there's more incentive to stay current.

  • I agree that an enhancement plan o some kind is fair.

    The thing that has always concerned me is how Microsoft sell the Navision plan. In a word "appallingly". I understand the origin of this, since PC&C (except in the US for a brief period) never charged any form of recurring fee for Navision, and Microsoft had a hard time introducing it. But now its introduced and we all know its there, why cant they just be up front and honest.

    Just lets call it a fee to keep using supported software. In fact why not just drop the initial cost of the software, give it away, and then just charge subscription based. Use the example of a 6 year = 16% support, so in 6 years you pay $200 for $100 of base software, / 6 = 33% so basically what would have cost $100 up front, now costs $33 per year.

    Imagine you get a new employee, you simply work out their Navision cost as an annual figure, no need for a user and then maintenance etc.

    Anyway, this is a great blog topic, something that customers don't understand well enough, but need to.

  • I think it's tough to ask Microsoft to give the software away for free. :)

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