CSP and the New Commerce Experience (NCE)
☁️ Cloud Solution Provider (CSP) Programme
CSP is Microsoft's partner-led licensing programme for cloud services. Instead of buying directly from Microsoft under a large agreement, organisations purchase through a qualified CSP partner (reseller or managed service provider). CSP offers an "evergreen" arrangement — add or remove licences as needed, billed monthly for usage. There is no minimum seat requirement, making it popular for small and mid-size organisations that don't meet EA's minimums. Microsoft has positioned CSP as the primary channel for cloud licence procurement, effectively modernising how customers of all sizes buy software.
🔄 New Commerce Experience (NCE)
NCE is Microsoft's new licensing commerce platform, introduced to standardise subscription sales and management across all channels including CSP and direct. Rolled out for seat-based offers in 2022, NCE changed fundamental CSP rules: it introduced defined term commitments and a stricter cancellation policy. Under legacy CSP, customers could reduce seats or cancel at any time with daily proration. Under NCE, annual-term subscribers cannot reduce seat count or cancel mid-term outside a short 7-day initial window. NCE brings CSP more in line with EA: price predictability for longer terms vs a premium for month-to-month flexibility.
📄 Microsoft Customer Agreement (MCA)
The MCA is the universal purchasing contract every customer must accept when buying modern Microsoft services. It replaces bespoke agreements with a standard evergreen agreement under which subscriptions are purchased as needed. If purchasing through CSP, you sign an MCA facilitated by your partner. If purchasing directly, you also operate under the MCA. For mid-sized customers, MCA typically means buying through a CSP partner ("breadth motion"); for very large ones, it may involve a direct relationship without an LSP ("enterprise motion").
How CSP/NCE Differs from Previous Models
Under the pre-NCE world, CSP was very flexible — partners could suspend or reduce subscriptions at any time with proration. Under NCE, annual-term commitments allow cancellations or seat reductions only within the first 7 days; after that, you're locked in. A traditional EA is a 3-year contractual agreement with Microsoft (typically requiring 500+ seats) offering volume discounts and price protection. CSP with NCE is subscription-based rather than contract-based — you subscribe to what you need, each subscription renewable at its anniversary. There is no organisation-wide commitment or financial penalty for not renewing, aside from losing the service.
📚 Related Reading
NCE Licensing Options: Subscription Terms and Pricing
📅 Monthly Term (Month-to-Month)
Maximum flexibility. You commit every month. At month end, you can renew, cancel, or reduce quantity. The trade-off is cost: monthly-term subscriptions are priced approximately 20% higher than the annual-term price. Best for temporary or uncertain needs — project-based teams, seasonal workers, pilot programmes. Month-to-month subscriptions auto-renew each month unless actively cancelled.
📆 Annual Term (12-Month Subscription)
Standard NCE commitment. You commit for a full year and get base pricing (no 20% premium). Your rate is locked for 12 months even if Microsoft raises prices. You can pay upfront (lowest cost) or monthly. From 2025: annual subscriptions paid monthly incur an additional 5% premium compared to upfront annual payment. Once purchased, you cannot decrease quantity or cancel until the 12 months are over (aside from the 7-day cancellation window). Ideal for steady-state needs — your full-time employee base.
🗓️ Multi-Year Term (36-Month Subscription)
Maximum price predictability. Currently available primarily for select Dynamics 365 offerings and a few specialised subscriptions (most M365 plans don't yet offer 3-year via CSP). Locks pricing for the entire 36 months — protection from price increases during the period. Payment typically in full upfront or annually. The drawback is the commitment: bound for three years with no ability to reduce quantities after the 7-day window. Only recommended for core, unchanging needs with a compelling pricing reason.
2025 Pricing Structure at a Glance
| Option | Price vs Base | Flexibility | Best For |
|---|---|---|---|
| Month-to-month | +20% premium | Cancel/reduce any month | Contractors, seasonal, pilots |
| Annual, paid upfront | Base price (lowest) | Locked 12 months | Core workforce, stable needs |
| Annual, paid monthly | Base + ~5% | Locked 12 months | Cash-flow-conscious organisations |
| Multi-year (36 mo) | Base price, locked 3 yrs | Locked 36 months | Mission-critical, fixed-capacity |
CSP/NCE vs Enterprise Agreement vs MCA — Decision Matrix
| Factor | CSP / NCE | Enterprise Agreement (EA) | MCA (Direct or via Partner) |
|---|---|---|---|
| Flexibility | High. Month-to-month options, easy scale-up. Annual terms lock you in but individual subscriptions managed independently. Suitable for dynamic environments. | Low–Medium. 3-year agreements. Quantities adjusted at annual anniversaries only. Cannot reduce below contractual commitments until EA ends. | Medium. Evergreen agreement, no fixed term. Flexibility depends on channel: via CSP = same as CSP; direct = start/stop as needed but may lack custom EA terms. |
| Price & Discounts | List price (partner-driven discounts only). No built-in volume discounts from Microsoft. Price protection per subscription term only. Less cost-efficient at very large volumes. | Volume discounts (Level A–D pricing). Negotiated enterprise pricing possible. 3-year price protection on initial order. Per-user costs often significantly lower than CSP at scale. | Standard pricing. No automatic volume discount. Very large customers may negotiate deals (especially Azure). Pay-as-you-go pricing — potentially higher unit cost but freedom to pay only for what you use. |
| Minimum Threshold | No minimum. Open to organisations of all sizes. Even 1 user can purchase via CSP. | 500+ seats (commercial). ~250 for public sector. Microsoft steering sub-500 customers to CSP. | No minimum. Universal agreement. Transaction method depends on size: small = via CSP partner; large (~2,400+ users) = direct with Microsoft. |
| Partner Dependency | High. CSP requires a partner for purchasing and Tier-1 support. Good partners add value; poor ones slow changes. You can change partners but requires tenant transfer coordination. | Medium. LSP handles procurement logistics. Direct engagement with Microsoft account managers. Partner is mostly a reseller for quoting and compliance paperwork. | Variable. Via CSP = partner-dependent. Direct = no partner involved. Some large customers hire independent advisors since Microsoft sales won't proactively optimise your costs. |
| Admin Complexity | Low. No multi-year contract to negotiate. Manage active subscriptions via partner portal or M365 admin centre. Watch for subscription sprawl (varied renewal dates). Less paperwork than EA. | High. Lengthy negotiation process. Annual true-up reports required. SA benefits management. Dedicated licensing specialists needed. Higher overhead but bundled governance for large estates. | Low–Medium. Evergreen agreement, no periodic renewal negotiation. If transitioning from EA, may lose consolidated reporting. Discipline needed to track multiple subscriptions and invoices. |
Need help choosing between EA and CSP/NCE?
Microsoft Optimisation Services →Cost Optimisation Strategies Under CSP/NCE
🔀 Mix and Match Licence Terms
You don't have to put all users on the same term. Commit the stable core to annual licences (lower price) and retain a portion on monthly terms for variable users. Example: a company with 1,000 users and ~200 contractors could purchase 800 annual licences and 200 monthly licences. If contractors leave, cancel those monthly licences the following month. Even at the 20% monthly premium, only paying for 6 months of use (100 × $12 × 6 = $7,200) beats 12 months of annual commitment ($12,000). Identify minimum seats needed year-round vs those likely to be idle in some months and allocate accordingly.
📊 Plan Around Microsoft's Pricing Announcements
Microsoft announces price increases or premiums well in advance (e.g. the 5% monthly billing surcharge, the March 2022 M365 price increases). Time your commitments strategically. If a price hike kicks in on April 1, renew or extend subscriptions before that date to lock in current pricing. If on monthly terms today and prices are rising in two months, switching to annual a month in advance locks the lower rate for a year. Treat Microsoft's roadmap like a commodity price — lock in rates when favourable.
🔒 Leverage Multi-Year Commitments Selectively
For mission-critical products expected to remain at fixed capacity long-term, consider 3-year NCE terms (where available) to hedge against future price increases. But be cautious: only commit for products and user counts you're certain about. A practical approach: slightly under-commit on the 3-year plan and keep a buffer on annual/monthly terms. Example: 500 Dynamics users with 400 guaranteed long-term → commit 400 on 3-year (locked pricing) and keep 100 on annual (flexibility to adjust each year).
🔍 Optimise Usage and Avoid Idle Subscriptions
Under NCE's restrictions, the cost of mistakes is higher — once locked in, you pay. Regularly audit licence assignments: ensure you're not paying for unassigned or underutilised licences. Set reminders 1–2 months before each renewal to review seat counts. Right-size user plans: if users are on M365 E5 but don't use E5 features, downgrade to E3 at renewal. Annual subscriptions cannot be reduced mid-term, but you can decide not to renew unused seats.
🤝 Negotiate Value with CSP Partners
CSP doesn't offer built-in volume discounts from Microsoft, but partners can set their own pricing. Mid-sized customers can often get 3–5% off list price, or bundled value-added services (support, training, migration). Shop around: let partners know you're comparing EA vs CSP — at 2,000+ seats your account is significant. A partner who proactively helps optimise licences (saving money indirectly) may be worth more than one offering a small discount but no advisory help.
📅 Co-Term and Simplify Renewals
If you have dozens of different end dates, something may auto-renew without scrutiny — possibly at higher price or more seats than needed. Try to align new purchases with existing terms: request that new subscriptions co-terminate with your main renewal date, paying a pro-rated amount for the shorter initial term. A consolidated annual renewal cycle makes it easier to review all licences in bulk, negotiate changes, and avoid missing the 7-day cancellation windows scattered across the calendar.
⚖️ Consider EA/CSP Hybrid Approaches
For organisations around 500–1,000 seats, evaluate both EA and CSP quotes. One strategy: use CSP for most day-to-day needs, but negotiate an EA for large stable workloads (e.g. 3,000 M365 E3 users) to get volume discount. Put variable or smaller products in CSP. Example: EA offers 15% discount on 3,000 users (meaningful savings) while 500 variable seats remain in CSP with flexibility. Over 3 years, the combined approach can outperform doing all 3,500 at full CSP price. Ensure clear internal governance on which licences are procured via which channel.
Licence Procurement Planning Guidance
📌 Lock In Rates When You Can
If you know a price increase is coming, consider early renewal or longer-term commitment before the change takes effect. NCE allows new subscriptions at any time — you could overlap a new annual subscription with an existing one, then let the old one lapse. Similarly, if you foresee needing a product for 2+ years and it offers a 3-year term, evaluate the price security vs commitment risk. This is financial planning: lock in your "interest rate" now if you expect it to go up later.
📌 Use Annual Commitments for Steady-State Needs
Licences for full-time employees and long-term roles should be on annual (or multi-year) commitments. The ~20% monthly premium accumulates quickly at scale. If you have 1,000 employees but typically carry a few vacancies, keep 950 on annual and 50 on monthly to handle hiring ebb and flow. Minimise month-to-month where predictability is available.
📌 Reserve Monthly Licences for Uncertain Demand
Project teams, interns, contractors, seasonal workers — these are prime candidates for monthly-term licences. The cost is higher per month, but if only needed for part of the year, the premium is far cheaper than paying a full unused annual commitment. Also use monthly terms during pilots of new services: start monthly while testing, then switch to annual once committed. Regularly review whether "flex licences" are still needed.
📌 Mind Renewal Dates and Auto-Renewal
Keep a calendar of all subscription renewal dates with reminders well in advance. NCE auto-renews at the same term and quantity if you take no action — this can lead to cost creep. Plan a review of needs ~1 month before each renewal. Some partners allow "scheduled changes" at renewal (e.g. inputting a seat reduction ahead of time). Treat each renewal like a mini-negotiation: an opportunity to adjust and optimise, not a rubber-stamp.
📌 Coordinate Licensing with Financial Planning
The 5% monthly-billing premium highlights the need for Finance collaboration. On a $120/year licence at 1,000 users, the 5% adds $6,000/year. Decide if lump-sum annual payments make sense. Work with Finance to plan for larger payments timed with budget cycles. Ensure Finance is aware that switching from EA to CSP changes billing frequency and invoicing. Align on expected cash outflows to capture savings opportunities.
📌 Evaluate Support and Management Needs
Under CSP/MCA, you won't have traditional EA support agreements like Software Assurance benefits. Consider if you need additional support from your partner or Microsoft's Premier/Unified Support separately. A good support plan can save money by reducing downtime. Don't overpay for support you don't need, but don't underinvest if lacking support would jeopardise operations. Finding the right balance is part of optimising overall Microsoft spend.
📌 Stay Informed and Adapt
Microsoft licensing updates frequently. Assign someone to monitor partner blogs, Microsoft announcements, and licensing news. Missing the 5% billing premium announcement could mean incorrect budgets. New licensing models or programmes may save money — or increase costs if not proactively managed. Treat Microsoft licensing as an ongoing discipline, not a one-time procurement task.
Renewal Timeline Strategy and Checklist
Renewal Planning Timeline
6–9 Months Before Renewal
Assess and forecast. Gather data on licences in use vs purchased. Engage business unit leaders about anticipated changes (hiring, layoffs, acquisitions, projects). If an EA ends within the year, evaluate whether to renew or transition to CSP/NCE. Reach out to partners or Microsoft for initial quotes and programme information. This is homework and intel gathering — no final decisions needed yet.
3–4 Months Before Renewal
Decide on strategy. Choose broad approach: EA vs CSP, annual vs monthly mix. If switching programmes, formally engage with necessary parties. Request quotes for different scenarios (all annual vs some monthly, 1-year vs 3-year, EA vs CSP comparison). Internally, narrow down exact products and quantities. Host a meeting with IT, Finance, and Procurement stakeholders to review the plan. Give leadership a heads-up on significant changes planned.
1–2 Months Before Renewal
Execute and finalise. For EA: finalise negotiated terms, prepare paperwork. For CSP/NCE: work with partner to schedule changes in portal (seat reductions, cancellations, term changes). Request a pro forma invoice for the post-renewal state. Secure financial approval. If transitioning EA→CSP, coordinate logistics to ensure seamless handover with no service gap. Complete all legal reviews.
Renewal Date (Day 0)
Verify everything. For CSP: confirm new term lengths and seat counts have taken effect correctly in admin portal. Minor errors can still be fixed within the 7-day window. For EA: ensure countersigned copies are in order and Microsoft has provisioned services. Quick audit: did you get what you paid for? Verify licence keys, tenant subscriptions, and entitlements match the plan.
1–2 Months After Renewal
Review and learn. Check first/second invoice carefully for discrepancies (wrong seat count, missing discount). Report issues immediately to partner or Microsoft. If transitioning to a new model, gather team feedback on the new process. Document lessons learned while fresh — what worked, what would you do differently — and update your internal playbook accordingly.
Practical Planning Checklist
Understand Your Licence Inventory
Maintain an up-to-date inventory of all Microsoft licences: products, seat counts, term (monthly/annual), renewal dates, and purchase channels (EA vs CSP). This is the foundation for all planning and cost optimisation.
Monitor Usage and Needs
Implement quarterly or biannual licence usage reviews. Check M365 admin centre reports for inactive users or unassigned licences. Track business events (department changes, hiring, downsizing) that warrant licensing adjustments at next renewal.
Stay Educated on Licensing Changes
Assign someone to monitor Microsoft licensing news: pricing updates, new bundles, programme changes. Announcements via partner centre, blogs, and webinars can alert you to things like the 5% premium or programme retirements. Incorporate changes into planning rather than reacting last-minute.
Engage with a Trusted Partner or Advisor
If under CSP, ensure your partner is proactive and knowledgeable. They should inform you of changes, help optimise, and provide clear billing. If not getting value, evaluate other partners. If not using a partner (MCA direct), consider an in-house licensing expert or contracting a licensing consultant for periodic reviews.
Align Licensing Strategy with IT Roadmap
Coordinate with IT architects about plans. Rolling out new Dynamics 365 modules? Replacing a Microsoft solution with third-party? Such insights are crucial — don't commit to 3-year licences for products you may drop. Conversely, plan for volume increases if new services are widely adopted.
Coordinate Budget Early
Talk to Finance well before renewals. If anticipating cost increases (more users, known price hike), prepare in advance. Clarify payment structure: "We need $X in June for upfront payment to avoid the 5% premium." Finance appreciates advance notice, avoiding scrambles for approvals at renewal time.
Check for Compliance
In CSP, compliance means ensuring you have a subscription for every active user who needs one. Don't drop necessary licences in pursuit of savings and accidentally become underlicensed — audit penalties far outweigh savings. If retaining on-premises software under separate agreements, ensure those are compliant too.
Document Decisions and Commitments
Record why licensing decisions were made (e.g. "200 seasonal agents on monthly due to turnover"). Useful for continuity when personnel change. Document negotiated terms or partner pricing agreements so they can be verified and revisited later.
Use Tools for Management
Explore partner portals, Microsoft's admin centre, or even a simple spreadsheet to centrally track all subscriptions. Don't rely on memory or scattered emails. Self-service portals can reduce manual errors and provide scheduling capabilities for changes at renewal.
Plan for Contingencies
What if you suddenly need to cut costs mid-year? Which subscriptions could be dropped quickly? What if your CSP partner went out of business? Do you know the transfer process? What if Microsoft retires a product you use? Risk management is part of licence management — think these through so you have strategies in place rather than reacting ad hoc.
The new CSP/NCE model requires a more proactive approach to licence management. Gone are the days of "set it and forget it" annual true-ups. Now you need to make informed choices upfront — mixing terms, timing commitments — and stay on top of subscription renewals. If done right, a mid-size organisation can achieve very efficient licensing: pay for exactly what you need, scale down when you don't, and avoid the scenario of being locked into too many licences. Proactive management and strategic planning turn what could be a complex licensing shift into an opportunity to optimise costs and streamline software asset management.
Need Help Navigating Microsoft's CSP and NCE Shift?
Whether you're evaluating EA vs CSP for your next renewal, need help optimising your NCE subscription mix, want to negotiate with CSP partners from a position of strength, or require a comprehensive Microsoft licensing review — our independent Microsoft licensing specialists deliver vendor-neutral expertise to reduce costs, avoid compliance risks, and secure favourable terms.