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Generate all cloud licenses for the entire subscription term

Background

Today, not all cloud licensing subscriptions are generated for the full subscription term.

The logic defined here defines license end date upon creation of a license. The way this logic is written, if a customer purchases a multi-year subscription and is:

  1. On Cloud Licensing AND (QSR OR Ramp): license is issued for the full term purchased for ✅
  2. On Cloud Licensing AND (NOT on QSR and Not on Ramp): license is issued for one year only ❗

The thinking for this was that it provides sales with the opportunity for checking for true-ups prior to the start of a new year.

Problem

With this logic, all Cloud Licensing Multi-Year Subscriptions where the customer is not on QSR will expire after 1 year. This will result in the customer losing access entirely at the start of the second year, unless:

  • Sales creates a new $0 quote for the second year, it is synced to Zuora/CDot, and then the customer receives a new activation code? 🤔 this is the only way to avoid this I can think of.
  • This is definitely not a process sales is familiar with.

Related to this, because of the logic of term start date + 1 year, we are actually creating expired activation codes on year 2. Separate issue for this specifically created here: https://gitlab.com/gitlab-org/customers-gitlab-com/-/issues/4815

What is the Impact?

We expect the majority of customers who are on Cloud Licensing to also have QSR enabled, however, the following categories of customers are currently opted out of QSR by default, but not out of Cloud Licensing:

  1. Channel customers
  2. PubSec customers
  3. PO Required customers
  4. MSA customers
  5. Legacy Ramp customers
  6. Customers on non-standard terms

A quick report of new/renewal quotes sent to Zuora with a Close Date in 2022, Initial Term > 12, TurnOnCloudLicensing__c = Yes and TurnOnSeatReconciliation__c = No:

  • 40 quotes

Looking at this same criteria but New quotes (not yet sent to Zuora), we see:

  • 92 quotes

However, with SCL launch having only happened 2 months ago, we can expect this number to continue to increase at a higher rate as all customers are set to TurnOnCloudLicensing__c = Yes by default.

Reported Examples

  1. https://gitlab.zendesk.com/agent/tickets/331005
  2. https://gitlab.zendesk.com/agent/tickets/336134
  3. https://gitlab.zendesk.com/agent/tickets/340677
  4. https://gitlab.zendesk.com/agent/tickets/343223
  5. A Mid-Market Customer has encountered this after the first year of their 3-Year contract resulted in an "expired" cloud activation. Ticket for reference.

Proposal

Summary: Update license creation logic to generate all cloud licenses for the full term

We can remove the dependency on QSR for generating a full term license. Instead, all cloud licenses could be generated for the full, Multi-Year term.

Pros:

  • Eliminates risk of customer losing instance access/downgrading to free
  • Smoother customer experience, no need to enter a new activation code each year
  • Aligned to communications put out about cloud licensing, that there is no need for additional engagement each year as there is with legacy licenses

Cons:

  • Potential loss of revenue as customer would not have an obligation to pay for true-ups prior to beginning the second/third year of their subscription term

NOTE: given the current process for creating ramp deals as 3 unique subscriptions, we should not remove the dependency here for creating 1-year subscriptions for a ramp deal.

Alternative option, ruled out

Maintain current logic but define sales process for non-QSR customers

Potentially, this is by design and sales leadership would prefer to keep this logic in place. If so, we need to make sure that the process is clearly understood by the sales team if their customer is on CL and not QSR. To be considered: additional enablement, sales alerts for upcoming license expiration.

Pros:

  • Allows for the possibility of reconciling true-ups, increase in revenue

Cons:

  • If sales is not proactive, can result in customer loss of access/downgrade to free

Result

All cloud licenses are to be generated for the full subscription term. Customers will no longer lose access after 1 year on a MY subscription.

Edited by Courtney Meddaugh