Microsoft's Enterprise Agreement (EA) is a cornerstone licensing contract for large organizations, typically spanning three-year terms. As renewal approaches, CIOs and procurement leaders must navigate complex decisions to balance cost, compliance, and strategic needs. This guide provides a structured approach, with real-world insights and expert recommendations. For a general overview, see our Microsoft EA negotiation overview.
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Renewal Strategies: Best Practices
| # | Strategy | Details |
|---|---|---|
| 1 | Start Planning Early | Begin 8–12 months before expiry. Rushing leads to poor outcomes. Early planning enables needs assessment, coverage continuity, and negotiation leverage. See the 12-month renewal preparation checklist. |
| 2 | Inventory & Usage Review | Conduct a thorough internal audit of deployments vs. licenses. This "effective license position" analysis spotlights unused licenses, under-utilized services, and over/under-licensing. |
| 3 | Needs Assessment | Forecast needs for the next 3-year term — planned growth/reductions, cloud migration plans, new products. If a business unit plans to shift away, don't renew those components. |
| 4 | Stakeholder Alignment | Involve IT, procurement, finance, and business unit leaders early. A unified internal stance prevents last-minute disagreements and strengthens your negotiating position. |
| 5 | License Optimization (True-Down) | Clean up license counts before renewing. Remove or reassign unused licenses to avoid carrying "shelfware" into the next term. One company discovered 20% unused licenses and avoided renewing them. |
| 6 | Engage Microsoft/LSP Early | Open dialogue 6–12 months before renewal. Request initial quotes. This signals Microsoft to start working on your deal and securing discount approvals. |
| 7 | Set Objectives & Benchmarks | Define clear targets (e.g., "reduce total EA cost by 10%," "cap M365 at $X per user"). Research industry benchmarks to inform expectations. See how to benchmark EA pricing. |
| 8 | Structured Renewal Process | Follow phases: environment assessment → demand planning → optimization → pre-negotiation strategy → negotiations → contract execution. |
EA Pricing Models: Volume Tiers & Recent Changes
Microsoft EAs use a tiered volume pricing model — more licenses committed means lower price per unit. Understanding these tiers is crucial for budgeting and negotiations.
| EA Level | User/Device Count | Discount Characteristics |
|---|---|---|
| Level A | 500 – 2,399 | Entry tier. Programmatic discounts have been eliminated in recent years — must negotiate any discount. Microsoft is phasing out Level A EAs in favor of MCA. |
| Level B | 2,400 – 5,999 | Moderate volume discounts. Likely to become the new minimum EA threshold. |
| Level C | 6,000 – 14,999 | Significant volume discounts. Strong negotiation leverage on pricing. |
| Level D | 15,000+ | Deepest built-in discounts (up to ~45% off list). Greatest flexibility for custom terms and enterprise-wide deals. |
Price lock during term: Pricing is locked for 3 years (even if Microsoft raises global prices). At renewal, this protection ends — pricing resets to current list unless renegotiated. Enterprise-wide requirement: EAs typically require licensing all "qualified" users for certain products (Windows, Office) to receive platform pricing. Read about Microsoft EA price changes in 2025.
- Level A discounts eliminated: Smallest EA tier now pays closer to retail rates — must negotiate all discounts
- Minimum EA size increasing: Microsoft phasing out Level A EAs, steering sub-2,400-seat organizations to MCA/CSP
- Cloud service pricing evolving: Azure monetary commitments and M365 bundle incentives are key negotiation areas
- Periodic price increases: Microsoft raises prices between terms — your renewal quote will reflect these unless you push back
Cost Optimization: Reducing EA Costs
🗑️ Eliminate Shelfware
- Identify licenses paid for but not used (Office 365 seats, Visio/Project, migrated workloads)
- True-down at renewal — don't renew unused licenses
- One enterprise found only 600 of 1,000 Visio licenses were active — saved 400 license costs
📐 Right-Size License Mix
- Shift users to lower-cost editions where E3 suffices over E5
- One company downgraded 5,000 users from E5 to E3 = $4M savings over 3 years
- Start lean and add via True-Up if needed — you can't reduce mid-term
☁️ Leverage Azure & Hybrid Benefits
- Fully utilize committed Azure credits — don't let pre-paid credits go to waste
- Use Azure Hybrid Benefit (AHB) to apply on-prem licenses to Azure VMs — cuts cloud bills 30–50%
- Right-size VM instances and eliminate idle resources
🔄 Cut Redundant Services
- Eliminate overlapping capabilities (third-party security vs. M365 E5 built-in)
- Retire replaced products (Skype for Business → Teams)
- Review SA benefits — keep only where needed (upgrades, license mobility, hybrid rights)
Negotiation Tactics: Securing Better Terms
| # | Tactic | How It Works |
|---|---|---|
| 1 | Start Early & Leverage Timing | Negotiate 6–12 months ahead. Time final signing for Microsoft's fiscal Q4 (ends June 30) when sales teams are most eager to close deals and offer concessions. |
| 2 | Present a Unified Front | Counter Microsoft's "divide and conquer" approach. Define clear roles internally. All stakeholders must support the negotiation strategy — no one signals willingness to sign "as-is." |
| 3 | Use Data as Leverage | Show detailed usage data proving under-utilization. Decline unnecessary items with evidence. Research prevailing discount levels for benchmarking. |
| 4 | Leverage Microsoft's Priorities | Microsoft wants cloud adoption. Use planned Azure expansion or M365 upgrades as bargaining chips for incentives (credits, discounts). Mention competitive alternatives (AWS, Google) to create pressure. |
| 5 | Bundle & Broaden Scope | Negotiate new products (Dynamics 365, Power BI, Security) as part of the renewal for introductory discounts. Consolidate separate contracts into the EA for improved cross-board pricing. |
| 6 | Negotiate Aggressively | Microsoft's first offer is rarely the best. Push for deeper discount percentages, price caps on True-Ups, favorable payment terms, and flexible True-Up/True-Down provisions. Get Business Desk approval. |
| 7 | Exploit Competitive Leverage | Even as a "Microsoft shop," mention alternatives for specific workloads. Show AWS cost comparisons for Azure. Microsoft sharpens pricing when they believe spend is at risk. |
| 8 | Document Every Concession | Get all verbal agreements in writing (email minimum). Verify final contract reflects negotiated discounts, special conditions, and any amendments. Check every line item before signing. |
Negotiation is about price, terms, and relationships. Articulate a win-win — "We'll commit to adopting X cloud product if you accommodate Y in pricing." Microsoft values long-term partnerships, so a collaborative approach often gets further than pure adversarial stance. At the same time, don't hesitate to say "no" — Microsoft negotiators expect resistance and will rarely walk away from a willing customer. See our EA discount strategies guide.
Compliance Considerations
| Compliance Area | What to Check | Risk if Missed |
|---|---|---|
| Pre-Renewal License Audit | Reconcile deployed software vs. entitlements 3–6 months before renewal. Identify compliance gaps. | Unbudgeted True-Up charges. Microsoft audit findings at worst possible timing. |
| True-Up Accuracy | Verify all annual True-Ups were accurately performed over the past 3 years. Check for missed deployments. | Retroactive charges from Microsoft, potentially at non-discounted rates. |
| Server & Infrastructure | Verify Windows Server, SQL Server correctly licensed for all cores/VMs. Check failover/DR licensing. | Per-core shortfalls can generate massive compliance claims. |
| CALs (Client Access) | Audit Windows Server, SQL, Exchange CALs. Ensure every user/device accessing services has proper CALs. | CAL deficits are one of the most common audit findings. |
| M365 License Assignment | Verify user count matches licenses purchased. Ensure correct plan assignment (E3 vs. E5 features). | Users on wrong plans = compliance violation. Extra unpaid users = shortfall. |
| Software Assurance Impact | If dropping SA, you lose version upgrades, license mobility, Azure Hybrid Benefit, and reassignment rights. | VMs running under AHB suddenly become non-compliant if SA lapses. |
Microsoft has become more aggressive in enforcing compliance, particularly around renewal time. "Informal" audits disguised as SAM (Software Asset Management) engagements are increasingly common. If you decline to renew and remain on legacy products, audit risk increases further. Always assume any significant licensing shortfall will eventually come to light — it's better to discover and resolve it on your terms. See our Microsoft EA renewal case study.
Key Contract Terms & Pitfalls
| Contract Element | What to Know | Pitfall to Avoid |
|---|---|---|
| Term & Renewal Mechanics | EA doesn't auto-roll. Renewal is a new EA — all terms are renegotiable. Confirm intent 30 days before expiry. | Assuming the old pricing continues. Without renegotiation, prices reset to current (usually higher) rates. |
| Price Protection | Previous discount doesn't carry forward by default. Negotiate price caps and rate locks for the new term. | Microsoft reducing long-standing discounts at renewal if not challenged. |
| EA vs. EAS | Enterprise Subscription Agreement (EAS) = pure subscription, no perpetual rights, but flexibility to reduce counts annually. | Choosing EAS when you need long-term ownership, or EA when you want flexibility. |
| CSP Alternative | Cloud Solution Provider offers month-to-month flexibility for certain segments. No upfront volume discounts though. | Moving too many licenses to CSP, reducing EA volume tier and losing bulk discounts. |
| True-Up/True-Down | Can only add licenses mid-term (True-Up). Reductions happen at renewal only. Final Year 3 True-Up happens before renewal. | Overcommitting upfront when you can't reduce. Negotiate True-Down flexibility for large customers. |
| Special Terms & Amendments | Custom terms from previous EA don't automatically carry forward — you must renegotiate or explicitly re-include them. | Losing entitlements you rely on (virtualization exceptions, pricing protections, custom usage rights). |
Action Checklist
✅ 5 Actions for Your EA Renewal
- Audit & Baseline (12 months out): Inventory all Microsoft licenses and usage. Identify shelfware, over-provisioned editions, and compliance gaps. Map current state against entitlements. Build your "effective license position."
- Optimize & Right-Size (9 months out): Eliminate unused licenses. Downgrade over-specified editions (E5 → E3 where appropriate). Review Azure committed spend vs. consumption. Evaluate SA benefits vs. cost. Model CSP vs. EA for specific segments.
- Build Negotiation Strategy (6 months out): Set clear cost-reduction targets. Research benchmark pricing. Identify competitive alternatives for leverage. Align all stakeholders on goals and walk-away positions. Engage Microsoft/LSP with initial proposals.
- Execute Negotiations (3–6 months out): Counteroffer aggressively. Use timing (Microsoft fiscal Q4 = June). Push for discount percentages, price caps, Azure credits, and flexible terms. Bundle new products for introductory pricing. Get all concessions in writing.
- Finalize & Communicate (signing): Verify every line item on the final contract against negotiated terms. Ensure special amendments are included. Update internal tracking systems. Inform IT teams about license changes. Schedule the next internal review cycle.
Frequently Asked Questions
Start 8–12 months before expiry. This gives time for thorough usage analysis, stakeholder alignment, optimization, and multiple rounds of negotiation with Microsoft. Rushing in the final weeks means you lose leverage and may accept unfavorable terms. Microsoft itself recommends initiating about a year in advance.
During your EA term, prices were locked. At renewal, that protection ends. If Microsoft raised list prices during your term (which they often do), your renewal quote reflects the higher rates. Additionally, prior special discounts don't carry forward automatically — you must renegotiate them. This is why cost optimization and aggressive negotiation are essential at every renewal.
It depends on your size and needs. CSP offers month-to-month flexibility but typically lacks EA-level volume discounts and price protections. Microsoft is steering sub-2,400-seat organizations toward MCA. For large enterprises, EA usually remains the most cost-effective option, but evaluating CSP for specific segments (seasonal workers, small subsidiaries) can be strategic. Use CSP quotes as negotiation leverage even if you ultimately stay on EA.
By default, no — you can only add licenses mid-term (True-Up) and reduce at renewal. However, large customers have occasionally negotiated mid-term reduction provisions or the ability to convert on-premises licenses to cloud subscriptions without penalty. An Enterprise Subscription Agreement (EAS) allows annual True-Down, but you forgo perpetual license ownership. Negotiate flexibility upfront if you expect fluctuations.
If you don't renew: for perpetual licenses, you retain rights to the versions you had but lose Software Assurance (meaning no upgrades, no license mobility, no Azure Hybrid Benefit). Subscription services (M365, Azure) would shut off. You may also face increased audit risk as a lapsed customer. Before deciding not to renew, map out which rights you depend on and ensure your IT environment remains compliant without SA.
Optimize Your Microsoft Enterprise Agreement
Redress Compliance provides independent Microsoft advisory — helping enterprises optimize EA costs, negotiate better pricing, right-size licenses, and manage compliance risks across M365, Azure, and on-premises estates.
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📖 Related Reading
- EA Renewal Playbook: Preparing 12 Months Ahead
- EA Renewal Playbook: Negotiating Pricing & Discounts
- EA Renewal Playbook: Leveraging Competitive Pressure
- Tactics for the Final EA Negotiation Sprint
- Microsoft EA Pricing Changes 2025
- Surviving Microsoft EA Renewals in 2025–2026
- Maximizing Cost Savings in Your EA Renewal
- Microsoft License Optimization & EA Right-Sizing
- Negotiating EA Renewals: Enterprise Discount Strategies
- Microsoft EA Renewal FAQs
- CIO Playbook: EA Renewals vs. MCA-E in 2025
- CIO Guide: Top 20 Trends in Microsoft EA Renewals
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Learn more →Fredrik Filipsson
Fredrik Filipsson brings 20+ years of experience in enterprise software licensing, having worked directly for IBM, SAP, and Oracle before co-founding Redress Compliance. He has helped hundreds of Fortune 500 organizations optimize Microsoft EA costs, navigate complex renewals, and negotiate better terms across M365, Azure, and on-premises licensing. Redress Compliance maintains complete vendor independence — no commercial relationships or referral fees from any software vendor.