Case Study – Microsoft Negotiation Service – Brazilian Bank – Microsoft EA Negotiation Saves 25% and Improves Audit Protections
Background
A large Brazilian bank with operations throughout South America (20,000 employees in total, with 5,000 IT users in corporate offices in São Paulo and Rio de Janeiro) was approaching the renewal of its Microsoft Enterprise Agreement.
The bank’s Microsoft footprint was extensive: Office 365 for all corporate staff, a mix of E3 and E5 licenses; Windows Server and SQL Server licenses for on-premises core banking systems (with Software Assurance under the EA); and growing use of Azure cloud services for certain digital banking applications.
The banking sector in Brazil is tightly regulated, and the bank had been through a Microsoft audit a couple of years prior, which was a painful experience. The audit resulted in an unexpected true-up spend due to some compliance gaps.
This time around, as they entered EA negotiations, the bank sought not only to reduce costs due to budget pressures (the economy had been volatile), but also to secure stronger contractual protections against audits and compliance ambiguities.
They engaged Redress Compliance for expert assistance, looking to leverage Redress’s knowledge of both Microsoft’s tactics and the banking industry’s needs.
A quantifiable goal was set: achieve at least 20-25% cost savings on the renewal and ensure the contract had terms that would prevent a repeat of the audit ordeal.
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Challenges
The renewal challenges for the bank included budget constraints vs. rising Microsoft costs. Microsoft’s initial renewal quote suggested a 10% cost increase, partly attributed to currency exchange rate shifts (since Microsoft’s pricing in Brazil can be affected by the real versus the USD) and partly due to Microsoft pushing more users to E5 for advanced security.
The bank, however, was under pressure to cut IT costs, so this increase was unacceptable. Another critical challenge was managing audit risk.
The prior Microsoft audit had found some inadvertent unlicensed usage (mostly around SQL Server virtualization and some users accessing systems without proper CALs).
The EA contract at the time included standard audit clauses that gave Microsoft significant leverage.
The bank’s legal and compliance teams sought new terms that would provide the bank with more flexibility – for example, clarity on how compliance checks would be conducted, and the ability to remediate issues without incurring heavy penalties.
There was also a trust deficit; the bank felt that Microsoft’s local team might use the threat of audits to upsell, which made them skeptical going into negotiations. Additionally, the bank’s IT landscape was evolving – they were cautiously moving some workloads to Azure, but still had significant on-prem systems.
Microsoft was pushing Azure consumption commitments and bundling those with the EA, which the bank saw as potentially locking them in. They needed flexibility to choose where to run workloads without paying double or wasting credits.
Finally, as a Brazilian bank, they faced some unique challenges, such as ensuring data residency and providing support in Portuguese, which they wanted to be reflected in the support terms of the contract.
How Redress Compliance Helped
- Cost Benchmarking and Localization: Redress Compliance analyzed Microsoft EA pricing benchmarks for Brazil and Latin America, discovering that often Brazilian enterprises could negotiate significant discounts to counteract currency fluctuations and local market conditions. They prepared a detailed benchmark report for the bank, showing that similarly sized banks in other markets had secured discounts of 20-30% overall on Microsoft 365 and Azure deals. Redress used this data to challenge Microsoft’s pricing. They also factored in the currency aspect – negotiating with Microsoft to price a substantial portion of the EA in USD at a fixed exchange rate or provide a buffer, thereby shielding the bank from a sudden devaluation of the real, which would increase their costs. Microsoft, wanting to maintain the account, showed flexibility here: they provided additional discount points specifically to offset exchange rate risk. In numbers, Redress successfully negotiated about a 25% cost reduction on the Microsoft 365 and server products portion compared to the initial quote. This was achieved through a combination of increased discounts and the bank agreeing to a sensible three-year plan for gradually increasing Azure usage (but at their own pace and locked rates).
- Robust Audit Clause Negotiation: One of Redress’s key moves was to tackle the audit clause head-on in the EA. Leveraging their experience, Redress drafted a modified audit clause for the bank to propose. It included provisions such as: Microsoft must provide at least 30 days notice before initiating any formal audit; any discovery of licensing shortfalls would lead first to a discussion and an opportunity for the bank to purchase necessary licenses at pre-negotiated rates (no surprise “penalty” fees); and the frequency of audits was capped (for example, Microsoft couldn’t audit more than once in 2 years unless a serious compliance issue was found). This was a bold ask, but Redress argued it was justified given the bank’s regulatory environment – an unexpected audit could conflict with banking regulations on data privacy and cause undue stress. Microsoft initially resisted major changes to its standard terms of service. Still, Redress had prepared the bank’s executives to potentially escalate this issue with Microsoft’s upper management, emphasizing that it was a deal-breaker. Ultimately, Microsoft agreed to incorporate most of the requested language, providing the bank with significantly improved audit protections. Essentially, the bank now had contractual assurance that any licensing issues would be handled collaboratively, not punitively.
- Optimization of License Allocation: On the technical side, Redress assisted the bank in scrutinizing its current license allocation. They identified that about 2,000 E5 licenses could be downgraded to E3 because those users (mostly in operations and retail banking branches) were not using E5-specific features. They also found some duplication where certain users had multiple accounts or unnecessary add-ons. By cleaning this up before renewing, the bank avoided renewing licenses that were not needed. Redress also recommended an external SQL Server usage assessment, as Microsoft’s audit had previously highlighted SQL issues. Hence, Redress proactively helped the bank use a third-party tool to ensure they were correctly licensing their SQL Servers (e.g., accounting for all the cores in virtual environments and leveraging their Software Assurance benefits for failover servers). The assessment enabled the bank to right-size its SQL license count, and they negotiated the EA renewal accordingly, potentially reducing SQL spend by turning off some unused instances or consolidating databases. These optimizations contributed to the cost savings and also set the stage for a smoother compliance posture.
- Future Flexibility and Local Support: Redress ensured the new EA had flexibility for Azure. Instead of a huge upfront Azure commitment (which Microsoft was angling for), Redress negotiated a moderate commitment with the ability to increase it at locked discounts if the bank’s cloud adoption accelerated. This means the bank isn’t stuck paying for Azure capacity it can’t use, but if it does use more, it still gets a good rate. They also negotiated a clause that if certain regulatory requirements prevented some Azure use, the bank could reallocate some of that commitment to other Microsoft products – this was another protective measure. Regarding support and language, Redress secured from Microsoft the inclusion of dedicated support hours with Portuguese-speaking specialists, as part of the EA value. Additionally, an agreement was reached that any audit communications or official materials would be provided in Portuguese to prevent miscommunication. It’s a small but important detail that the bank’s team appreciated.
Outcome and Impact
- 25% Cost Savings and Budget Relief: The renegotiated Microsoft EA delivered approximately 25% savings compared to the bank’s anticipated costs had they accepted Microsoft’s initial renewal or continued on the previous trajectory. In concrete terms, this equated to several million reals saved over the term. For the bank, which was in a cost-cutting mode, this was a highly visible win – the CIO was able to report to the board that IT achieved substantial savings while improving contract terms. This went against the grain of most IT vendor renewals that tend to increase, thereby highlighting strong vendor management. The savings also opened up some budget, which the bank reallocated to its cybersecurity program and a new fintech partnership, critical areas for competitive strategy.
- Stronger Audit and Compliance Posture: With the new audit protections in place, the bank’s risk of a nasty audit surprise has been dramatically reduced. The compliance team feels much more confident that if a licensing issue arises, they will have the chance to resolve it amicably. This peace of mind is invaluable – it means IT can focus on managing licenses proactively rather than looking over their shoulder in fear of Microsoft auditors. The improved clarity on compliance (like having done the SQL assessment and being current on licensing) also positions the bank as a well-governed organization in the eyes of regulators and auditors. Essentially, the bank turned the lessons from the prior audit into a concrete, contractual, and operational action plan, and Redress played a key role in that transformation. The EA is now not just a commercial document, but part of the bank’s compliance framework, with clear processes in place to handle any checks.
- Aligned Technology Investment: The new agreement is better aligned with the bank’s technology roadmap. By not overcommitting to Azure, the bank retained the freedom to decide how and when to migrate additional services to the cloud, ensuring they do so for the right technical reasons, not just to consume a prepaid commitment. Yet, they still have Azure capacity available at a locked-in good price when they are ready, which they began to use for the backend of a new mobile banking app during the first year. Additionally, by removing unnecessary E5 licenses, they freed up those funds to invest selectively in Microsoft 365 security add-ons for specific users who needed them, which they did (they acquired some E5 Security and Compliance add-on suites for the information security team and compliance officers). Therefore, the money was used more efficiently to address genuine needs. The agreement also included an arrangement for Microsoft to provide some workshops on how to optimize their license usage and cloud consumption (a sort of proactive support Microsoft sometimes offers to large customers to keep them engaged). This collaborative stance was a significant change – the bank now views Microsoft as a partner in enabling its IT strategy, rather than just a vendor trying to lock it in.
- Better Vendor Relationship and Confidence: Through this process, the bank’s relationship with Microsoft evolved. By negotiating firmly and knowledgeably (with Redress’s expertise), the bank earned Microsoft’s respect. Microsoft recognized that the bank had external advisors and internal resolve not to accept the status quo, which means they are likely to treat the bank with more care and customization in the future. On the bank’s side, they now have a template for handling large vendor negotiations – the success with Microsoft is being discussed internally as a case study, and they plan to apply a similar rigor with other vendors, such as Oracle and IBM. The bank’s CIO and procurement lead both expressed that having Redress’s independent viewpoint was crucial: it helped them see through Microsoft’s sales tactics and focus on what mattered for the bank. In the end, they achieved a contract that not only saves money but is fair and balanced. This fairness in the contract – especially around audit and flexibility – improved the overall sentiment towards Microsoft within the bank. Instead of dreading dealing with Microsoft, the IT team feels back in control.
Client Quote
“We went into this renewal determined not to repeat past mistakes. Redress Compliance made sure we didn’t. They helped us save about 25% right from the start – which is huge for our bottom line – and they addressed the weak points in our Microsoft contract that had been causing us pain before. Now we have audit protections and flexibility that I frankly didn’t know a customer our size could get from Microsoft. Redress spoke the language of both tech and business; they knew exactly where Microsoft could bend, and they got them to bend. For the first time, I feel the Microsoft agreement is on our terms, not just theirs. This isn’t just a cost win (though saving millions is fantastic) – it’s a win for our operational stability. We can focus on serving our banking customers with the tech we need, without constant worry about surprises from our vendor. Redress was the partner we needed in our corner – truly representing our interests as if they were their own.” – CIO, Brazilian Bank
Call-to-Action
If you’re a financial institution or any business wary of vendor audits and runaway renewal costs, contact Redress Compliance for a free Microsoft agreement review or renewal strategy session. We specialize in turning the tables for our clients – achieving hard cost savings and securing contract terms that protect you. Don’t let Microsoft (or any vendor) have the upper hand. With Redress Compliance, you gain a trusted ally to navigate negotiations and guard your interests at every step.
Further Reading
- Read about our Microsoft Contract Negotiation Service.
- Read about our other Microsoft Case Studies.
