CIO Playbook: Negotiating Microsoft Pricing and Discounts (2025)

CIO Playbook: Negotiating Microsoft Pricing and Discounts (2025)

Microsoft’s recent price hikes across key products and services are putting CIOs and IT procurement leaders on high alert. A proactive negotiation strategy is now essential to manage costs on large-scale Microsoft contracts.

Read our Microsoft Negotiation Guide.

This playbook provides an executive-focused approach to securing the best pricing and terms in 2025.

We cover Microsoft’s latest price increase trends, effective negotiation tactics (from multi-year price caps to competitive benchmarking), and guidance tailored to each contract type, including Enterprise Agreements, Microsoft Customer Agreements, and CSP reseller contracts.

CIOs should leverage every available advantage – timing deals with Microsoft’s fiscal calendar, pressuring Microsoft with credible alternatives like AWS or Google, and aligning with Microsoft’s own sales incentives – to maximize discounts and contain costs.

In short, enterprises must treat Microsoft license negotiations as an ongoing, strategic initiative.

The recommendations in this playbook will help CIOs drive substantial savings, protect against future price surges, and optimize their Microsoft licensing investments.

The Changing Microsoft Pricing Landscape (2022–2025)

Microsoft has introduced significant price increases in the past few years, affecting cloud services, software subscriptions, and regional pricing.

These hikes, often justified by added product value or currency adjustments, directly impact enterprise IT budgets.

Notable recent increases include:

• Microsoft 365 (Office 365) – ~10–15% price increase on core M365 commercial plans in March 2022 (e.g., Office 365 E3 rose from $20 to $23 per user/month). This was Microsoft’s first major Office 365 pricing update in a decade, adding pressure on renewals post-2022.
• Power BI – 40% jump for Power BI Pro licenses effective April 1, 2025 (from $10 to $14 per user/month) and a 25% increase for Power BI Premium Per User (from $20 to $24)​. These hefty hikes are pushing customers to consider higher-tier bundles that include Power BI, such as Microsoft 365 E5, or explore alternative BI tools.
• Azure Regional Adjustments – ~5–15% price adjustments in various regions to align with USD currency rates. For example, in 2023, Microsoft raised Azure and Microsoft Cloud prices by 11% in Euros and 9% in the UK. In early 2024, increases of 6–10% were observed in markets such as India, Korea, and Taiwan, and even 20% in Japan. Conversely, some regions experienced reductions when their currencies strengthened, but the overall trend is upward.
• Other Products – niche and ancillary services have also seen boosts. Microsoft Teams Phone standalone plans increased by 13–25% in 2025 (e.g., Phone Standard, from $8 to $10 per user per month). Certain government and education plans experienced phased raises (e.g., Office 365 G1 for the public sector increased by a total of 35% over 2022–2025 in staged increments). Microsoft 365 Copilot, an AI assistant, was introduced in 2023 for $30 per user per month, along with new high-cost add-ons to consider.

Implications for CIOs: These trends indicate that baseline costs for Microsoft services are rising and are likely to continue rising annually.

Enterprises renewing their Microsoft agreements in 2025 should expect sticker shock if they opt to roll over their existing contracts.

CIOs must anticipate these hikes and negotiate aggressively to mitigate them, whether by locking in current prices before the increases take effect, seeking offsetting discounts, or exploring alternative solutions.

The climate also makes multi-year price assurance more critical than ever: without negotiated caps, an organization could face an unbudgeted 10 %+ jump in years two or three of an agreement.

In summary, understanding Microsoft’s pricing trajectory provides the context and urgency for the negotiation strategies that follow.

Key Negotiation Strategies for Better Pricing

Achieving favorable pricing and terms from Microsoft requires a strategic, disciplined negotiation approach.

Below are best-practice tactics that enterprise CIOs and procurement teams should employ:

• Secure Multi-Year Price Protections: Wherever possible, negotiate price holds or caps on fees for your contract. For an Enterprise Agreement (typically a 3-year term), insist that unit prices for key licenses are fixed for all years (or that any annual increase is capped at a minimal rate, e.g., 0–5%). This guards against Microsoft’s mid-term price hikes. For example, some enterprises have negotiated a “price lock” for the full term, which shielded them when Microsoft later announced global increases – they continued to pay the old rate and saved millions in potential fees. Be aware of Microsoft’s tactic to introduce new product editions or SKUs. Ensure your price protections apply to successor products or equivalent licenses, so Microsoft can’t bypass a cap by renaming a service.
• Benchmark and Demand Competitive Discounts: Go into negotiations armed with market pricing benchmarks. Research the discount percentages that similar enterprises (in terms of size and industry) receive off Microsoft’s list prices. Large organizations under Enterprise Agreements often achieve 15–30% off the list price of Microsoft 365 or Azure, with the very largest deals even reaching 40–45% off the list price. Use these figures as a baseline for your expectations. If Microsoft’s initial quote only offers (for example) 10% off, push back and cite the precedent of peers getting 20–30% off. Make Microsoft justify any gap between your deal and market norms. If you have a Software Advisory firm or a Licensing Solution Partner (LSP) with insight into other deals, leverage that data. The goal is to maximize the discount percentage through persistence and evidence – don’t accept the first offer. It’s common for Microsoft to hold back its best offer until late in negotiations, so plan for multiple rounds of counterproposals. Pro tip: If budget allows, consider offering something in return for a bigger discount – for instance, committing to a larger upfront purchase or a longer contract term – to give Microsoft’s sales team an incentive to approve an exception.
• Bundle and Leverage Volume for Value: Microsoft’s product portfolio is extensive, encompassing Office 365, Azure, Dynamics 365, and various security suites, among others. Bundling these can be a powerful negotiating lever. Microsoft rewards customers who adopt more of its products and services. CIOs should identify any new needs or planned investments and bring them into the negotiation. For example, if you anticipate deploying Dynamics 365, Power Platform, or additional security add-ons within the next year, consider negotiating them as part of the current deal bundle. By increasing the deal size and Microsoft’s “share of wallet,” you can often unlock greater overall discounts. Microsoft may offer introductory pricing or additional concessions on the new product, knowing it is displacing a competitor or expanding its footprint. Similarly, consolidating separate purchases into a single negotiation (e.g., renewing Office 365 while also expanding Azure usage) provides cross-leverage: you might agree to a larger Azure commitment in exchange for better pricing on Microsoft 365 licenses, or vice versa. Caution: Only bundle products you genuinely intend to use – shelfware benefits no one. However, if an expansion is truly part of your plan, timing it with your negotiation can yield a “bundle discount” that would not be available if negotiated later in isolation.
• Right-Size Commitments and Avoid Shelfware: Before finalizing any agreement, do a thorough assessment of your actual license usage and cloud consumption. Microsoft sales reps may push for increased quantities or higher-tier plans across the board, but only commit to what you need. Examine whether you have unused (“shelfware”) licenses from the last term – e.g., surplus Office 365 seats or under-utilized Azure services – and use that data to negotiate a reduction or a better price. For instance, if you purchased 5,000 Azure user licenses but only 4,000 are being actively used, you can argue for a 20% reduction in the renewal count or demand additional discount to keep the higher count. Microsoft will typically let you reduce unused licenses at renewal (except for certain committed suites), so take advantage of that to optimize costs. Negotiation tip: Emphasize that your budget is constrained and that you cannot pay for excess capacity “just in case.” By demonstrating a willingness to scale back, you put pressure on Microsoft to offer more attractive pricing to maintain or grow the deal’s value. The result should be a contract aligned to your actual needs, at the best possible unit rates.
• Negotiate Flexible Terms (True-ups, Downgrades, Payment): Beyond just per-unit pricing, enterprise customers should negotiate the terms and conditions that can affect cost over time. Strive for favorable true-up terms – e.g., ability to true-down as well as true-up annually, so you can decrease license counts if your workforce or usage shrinks (Microsoft’s standard EA terms typically don’t allow reducing license counts mid-term, but you might negotiate exceptions or at least ensure you won’t be penalized at renewal for reduction). Seek to carry forward any discount percentages to additional licenses purchased mid-term – for example, if you add 500 new users in year 2, ensure they receive the same negotiated rate. If your organization may need to transition users from one product to another (for example, from E5 to E3 licenses), consider negotiating to preserve credits or achieve price equivalence to avoid cost spikes. Also, consider the payment structure: Microsoft might offer an extra discount for upfront payment of a 3-year deal compared to annual billing. If you have the cash flow, offer to pre-pay for a year or the full term in return for a few extra points off the price – revenue now is valuable to them. Conversely, if cash flow is a concern, consider negotiating extended payment terms (such as net 60 or 90 days instead of 30 days) at no additional charge. Every point of flexibility you secure will either save money or provide valuable agility during the contract.
• Maintain Leverage Through the Term: Treat the Microsoft agreement not as a one-and-done transaction, but as an ongoing relationship to manage. Microsoft will continue to introduce new products or features (for example, the allure of Microsoft 365 E5 upgrades, or new AI services) throughout your contract. Set the expectation early that any significant upsell or addition must come with commensurate discounts or value concessions. If Microsoft knows you won’t simply accept new proposals at face value mid-term, they’ll be more likely to present compelling offers. It’s also wise to include a “most favored pricing” clause if you can – while Microsoft rarely agrees to formal most-favored-customer terms in public sector or enterprise, you can at least state your expectation that if better promotional pricing becomes available, you should benefit from it. In short, maintain pressure politely even after signing: continue to review your Microsoft spend quarterly and proactively discuss optimization with Microsoft or your LSP. This sets the tone that your organization is diligent and will renegotiate if things become misaligned.

By employing these strategies – price protections, targeted discounts, bundle leverage, and flexible terms – CIOs can significantly lower their effective costs compared to a standard Microsoft quote.

Many enterprises have saved tens of millions of dollars over a contract term by taking a hard line in negotiations and not simply accepting the default renewal. It requires preparation, internal alignment, and sometimes tough conversations, but the outcome is a more sustainable Microsoft investment.

Leveraging Competitive Alternatives

One of the strongest cards CIOs can play in Microsoft negotiations is the presence of viable competitive alternatives. Microsoft’s dominance across productivity, cloud, and business applications is well-known, but it is rarely absolute – most enterprises have choices.

By making it clear that you are willing to consider those choices, you can dramatically improve Microsoft’s offer.

Here’s how to use competitive pressure to your advantage:

• Benchmark Against AWS and Google: When negotiating Azure pricing or overall cloud spend with Microsoft, consider simultaneously evaluating Amazon Web Services (AWS) and Google Cloud Platform (GCP) for comparable workloads. Even if a wholesale cloud switch isn’t in your plan, obtaining a proposal or quote from AWS/GCP for a portion of your workload (or using public pricing calculators) will give you concrete data. Share with Microsoft that you have cost comparisons and that certain projects could move to AWS or Google if the economics are better. This will keep Microsoft’s Azure pricing team engaged and willing to deal. Microsoft sales reps know that cloud loyalty is hard-earned; they will often respond to an AWS threat by sweetening Azure discounts or offering credits to ensure Azure remains attractive. Ensure that Microsoft understands that every workload is contestable – if they sense that all your eggs are in the Azure basket, your leverage will diminish.
• Consider Google Workspace vs. Microsoft 365: For the Office productivity suite, the main competitor is Google Workspace (formerly G Suite). While many large enterprises standardize on Microsoft Office, some have successfully piloted Google’s solution for subsets of users or new acquisitions. Let Microsoft know that Google Workspace is on your radar – perhaps not for all users, but maybe for a specific department or a cost-sensitive segment of the business. Even this consideration can be powerful: Microsoft will fear a foothold for Google that could expand. In past negotiations, organizations have received improved Microsoft 365 terms after demonstrating proof-of-concept trials of Google for email and collaboration or citing an ongoing RFP. Microsoft may counter with discounted pricing on Microsoft 365 or throw in additional services (e.g., advanced security features or extra storage) at no extra cost, aiming to quash the appeal of Google. The key is credibility: if you mention Google, be prepared to discuss functionality and how you would handle migration, signaling it’s a real option, not a bluff.
• Other Microsoft Alternatives: Depending on the product domain, identify what credible alternatives exist and tactfully remind Microsoft of them. Examples: For Dynamics 365 (ERP/CRM), alternatives might include SAP, Oracle, or Salesforce. For Power BI, alternatives include Tableau or Looker. For Teams telephony or collaboration, competitors like Zoom or Cisco Webex come into play. You don’t need to issue ultimatums, but do drop references to these evaluations in discussions: e.g,. “Our CFO is also reviewing Salesforce’s offer, so we need Microsoft’s best proposal on Dynamics to make the case internally.” Microsoft’s account team will usually escalate such scenarios internally, often resulting in special approvals, such as additional discounts or incentives, to win the competitive battle.
• Back Up Your Position with Data: Whenever possible, use data to strengthen your competitive leverage. This could include TCO (total cost of ownership) analyses, independent analyst reports, or even quotes from competing vendors. For instance, if Google offered you a 20% lower price for similar email and collaboration services, bring that information (in a sanitized form) to Microsoft and ask them to match or beat the value. If AWS has a program offering $$ credits for migrating a workload, mention that and ask Microsoft if they will provide equivalent Azure credits. The more concrete your alternative, the more seriously Microsoft will take it. Remember, Microsoft’s worst fear is losing wallet share to a rival, so even partial defection scenarios can unlock major concessions.
• Be Mindful of Overplaying: While leveraging competitors is crucial, be credible and specific rather than blustery. Microsoft sellers are skilled at reading customers – an unrealistic bluff (e.g., claiming you’ll move all 50,000 of your users to Google next month) might be dismissed as posturing. Instead, focus on plausible scenarios (e.g., moving a particular application to AWS, or considering Google for a new branch office) that make Microsoft uncertain about future expansions. This balanced approach keeps Microsoft on its toes without poisoning the relationship. The message you want to send is: “We prefer to keep a strong partnership with Microsoft, but we have options and will exercise them if the value isn’t there.”

In summary, do not let Microsoft assume your business is captive. Even if a full switch is unlikely, demonstrating a willingness to adopt a multi-vendor strategy will substantially improve your negotiating position.

Many enterprises have saved 5–15% in costs by simply introducing credible competition into the conversation. Microsoft’s final offer will invariably be more generous when they know every dollar is on the table.

Timing Your Negotiations with Microsoft’s Sales Cycles

When you negotiate with Microsoft, what you negotiate can be almost as important as how you negotiate. Microsoft’s sales organization works on quarterly targets and a fiscal year that ends on June 30, creating windows of opportunity for customers.

By timing your procurement decisions wisely, you can tap into Microsoft’s internal incentives and maximize the concessions they offer:

• Leverage Microsoft’s Fiscal Year-End (June 30): Microsoft, like many vendors, applies enormous pressure on its sales teams to hit quotas by the end of Q4 (April–June). The weeks leading up to June 30 are a peak period for deal closings. As a customer, aligning your EA renewal or large purchase with Q4 can give you extra bargaining power. Sales reps, anxious to close deals in Q4, often return with last-minute enhancements, such as larger discounts, additional products, or favorable terms, to secure the signature in time. CIOs report that dragging negotiations into late May or June, for a June 30 signing, produced better pricing than earlier in the year. Use this to your advantage by planning your internal approval process so that you’re prepared to execute at the end of Q4. Let Microsoft know that a deal this quarter is possible if the terms are right. That conditionality puts the onus on them to make it attractive.
• Quarter-End Deals and Microsoft’s “Hockey Stick”: In addition to year-end, Microsoft also faces quarterly pressures at the end of March (Q1), June (Q2), and September (Q3). While not as pronounced as Q4, these quarter-end periods can still be leveraged. Often, Microsoft will have “flush” days when it aims to capture any remaining opportunities. Late December in particular can be opportune – it’s halfway through Microsoft’s fiscal year, and they may offer special promotions to secure business before the new calendar year. We often see one-time discount programs or extra licensing perks floated in late Q2 for deals that close by December 31. If your renewal is off-cycle (say, due in February or August), you have less natural leverage. Still, you can sometimes negotiate a short extension or early renewal to align with a quarter boundary. For example, if your EA expires in August, you might extend it to September 30 to leverage Q1 end, or even out to June 30 of the next year (with prorated terms) to sync with year-end. Microsoft will accommodate date adjustments if it means landing the deal in a target quarter.
• Consider Microsoft’s offer to “close early”: In recent years, Microsoft has become aware of customers waiting until the eleventh hour. They sometimes attempt to preempt the end-of-quarter rush by offering incentives for earlier signing. For instance, a sales team might say, “If you can commit to the renewal in April instead of June, we’ll throw in an extra 2% discount or add 6 months of free Audio Conferencing.” These offers can be tempting and are worth evaluating – occasionally, Microsoft wants to avoid internal bottlenecks and will make the deal slightly richer if you close a bit sooner. Strategy: Weigh the guaranteed incentive for early signing against the possibility of even better terms if you hold out. If the early-sign bonus is modest, it might be worth politely declining and continuing to negotiate into the quarter-end. However, if it’s a substantial concession that meets your objectives, taking the deal early can remove uncertainty. The key is not to sign too early and leave leverage on the table – ensure you’ve still negotiated hard on all elements before accepting an early close offer.
• Plan Your Negotiation Timeline: Regardless of quarter timing, start the negotiation process early on your side. Large enterprises should begin internal planning 12-18 months before a major EA renewal. This lead time lets you gather requirements, benchmarks, and executive alignment. Then, engage Microsoft (or your LSP) at least 6+ months before renewal in preliminary talks. Microsoft often issues preliminary renewal quotes 3–4 months in advance; treat that as the start of serious negotiations. By being ahead, you maintain control of the timeline and can afford to wait until quarter-end without panic. Microsoft will sense if you’re desperate or rushed (which weakens your position), so early prep ensures you can methodically push the deal into a favorable timing window on your terms.
• Coordinate with Internal Deadlines: Ensure your finance and legal teams are prepared for an end-of-quarter crunch, if that’s your plan. It’s no use pushing Microsoft to June 29 if your approvers or signatories are on vacation or need weeks to review and approve a contract. Alert your CFO or CEO early that you may need rapid approval at quarter’s end, and involve Legal in reviewing draft terms well in advance of the final days. This way, when Microsoft comes back on June 25 with an improved offer, you can execute quickly. Many CIOs set a “soft deadline” internally, a week before quarter-end, to finalize terms, leaving just the final signature for the last day. Effective project management internally ensures you can capitalize on timing leverage without risking a lapse in your contract coverage.

In summary, timing is a tactical lever: aligning your deal with Microsoft’s fiscal urgency can extract value that might otherwise be unattainable.

But it requires walking a fine line – using the deadline to your advantage without compromising the quality of your decision.

By starting early yet finishing late (in Microsoft’s quarter), you tilt the odds in your favor. Microsoft’s need to make its numbers can become your organization’s opportunity to save money and gain better terms.

Aligning with Microsoft’s Sales Incentives

Understanding what Microsoft wants out of the deal is as important as knowing what you want. Microsoft’s sales incentives and strategic priorities in 2024– 25 heavily influence its pricing flexibility.

In essence, Microsoft is more likely to give ground if your negotiations help them achieve their goals.

CIOs should familiarize themselves with Microsoft’s current “sales plays” and align their asks accordingly:

• Know Microsoft’s Hot Buttons: As of 2024, Microsoft’s growth focus areas include Azure cloud adoption, upgrades to Microsoft 365 E5 (the highest-tier Office 365 suite), Dynamics 365 (cloud CRM/ERP), and newer offerings like Security & Compliance add-ons and AI services (e.g. Azure OpenAI, Copilot). Sales reps have internal targets and bonus incentives for these products. If your organization has needs in any of these areas, use that to your advantage. For example, let your representative know that if Microsoft can make Azure more cost-effective, you have a pipeline of projects that could be moved to Azure (instead of AWS). Or, mention that you are evaluating an upgrade from Office 365 E3 to E5 for certain users, but need a compelling offer to justify it. This signals to Microsoft that there’s additional revenue to be won – but only if the price is right. Microsoft often responds by offering discounts or trial periods when it senses an opportunity to secure a strategic advantage.
• Azure Consumption Commitments: One specific lever is committing to a certain level of Azure usage, often formalized as an Azure Consumption Commitment (ACC) or a similar arrangement outlined in your contract. If you’re confident in your cloud growth, you may be able to negotiate a deal where you commit to spending a certain amount on Azure over the next three years. In return, ask Microsoft for better unit pricing on Azure services or a sizable upfront credit. Microsoft may also provide free support, upgrades, or engineering resources for Azure projects as part of the incentive package. Be careful: only commit to levels you truly expect to meet. Overcommitting can lead to wasteful spending in an attempt to avoid penalties. However, a well-calibrated Azure commit can unlock deeper discounts (often an extra 5-10% beyond standard) and also get Microsoft more invested in your success (since they want you to hit the commit). It essentially trades some of your flexibility for cost savings – a good deal if you’re confident in your cloud trajectory.
• Dynamics 365 and Power Platform Deals: If you currently use competing products (Salesforce for CRM, SAP for ERP, etc.) and are considering Microsoft’s Dynamics 365, make that known during negotiations. Microsoft has aggressive “competitive win-back” programs – they might offer Dynamics 365 at a steep discount for the first year or bundle it into your EA at a nominal cost to displace the incumbent. Even if a full switch is a long-term proposition, showing interest can yield short-term perks. Similarly, adopting the Power Platform (Power BI, Power Apps) as a standard may result in extended free licenses or implementation support. Microsoft aims to encourage the wider adoption of its business applications, so they are inclined to be generous initially, expecting to recoup revenue as usage expands later. CIOs can capitalize on this by negotiating pilot programs or opt-in clauses – e.g., “We will adopt Dynamics 365 for our France division next year at this special price, with an option to roll out globally at the same rate if successful.”
• Security and Compliance Add-ons: Microsoft 365 E5 includes advanced security features (such as Defender and Purview), and Microsoft encourages customers to use them (or the standalone equivalents for E3 customers). If security is a priority for your organization, be sure to discuss it during the negotiation. You may be able to negotiate with Microsoft to include certain security or compliance add-ons at no additional charge or a significant discount for the duration of the agreement. Sometimes, Microsoft also funds deployment and adoption services via partners (through programs like FastTrack or deployment credits) if you commit to using their security stack. Essentially, you are telling Microsoft, “Help us adopt your security tools, and we’ll be more invested in the Microsoft ecosystem.” In return, they might absorb some of the cost.
• Preview Programs and New Technologies: Microsoft frequently introduces new technologies (for example, the recent rollout of generative AI features or the new data platform, Microsoft Fabric). Early customer success stories are gold to them. If your enterprise is technologically forward-leaning, you can volunteer to be a reference or early adopter in exchange for special pricing. This can be as simple as agreeing to be a case study or co-develop a press release about your usage of the new tech. Microsoft may reciprocate with extra discounts or extended trial periods for those new services. This only works if the new technology fits your roadmap, but if it does, being an early design partner often comes with both soft benefits (influence over the product) and hard benefits (cost concessions).
• Understand Partner Incentives (for CSP deals): If you purchase through a Cloud Solution Provider (CSP) partner, it’s useful to know that Microsoft provides rebates and incentives to those partners for selling certain products. For instance, in a given year, Microsoft might offer partners additional margin for selling more Azure or for every Microsoft 365 E5 seat sold. If you know your CSP reseller is getting a 5% rebate on Azure growth, you can push them to share some of that incentive with you (perhaps as a discount or service credit) to win your business. In essence, trace Microsoft’s incentives through the channel – what Microsoft pays partners can indirectly reduce what you pay if you negotiate astutely with the partner.

In summary, think of negotiation as a two-way street: you want lower costs, while Microsoft representatives want to maximize their product penetration and meet targets.

Find alignment by identifying areas where giving Microsoft a “win” also gets you a better deal.

This could mean trading a broader commitment for a bigger discount, or agreeing to adopt a new Microsoft solution on the condition that the pricing is irresistible.

When done right, both sides feel they gained something: you achieved cost efficiency and value, while Microsoft gained a deeper customer footprint (albeit at a lower unit price). That is the essence of a win-win negotiation.

Negotiation Tactics by Agreement Type

Microsoft offers multiple licensing contract vehicles, primarily the Enterprise Agreement (EA), the Microsoft Customer Agreement (MCA), and the Cloud Solution Provider (CSP) program.

Each has its negotiation dynamics. CIOs should tailor their strategy to the contract type to maximize influence:

Enterprise Agreement (EA) – Enterprise Enrollment

The EA is a 3-year agreement designed for large enterprises, typically those with 500+ or 2,400+ users, depending on the program. It usually offers the best built-in volume discounts and price protections, but it also requires committing to certain spend levels across the entire enterprise.

Key tactics for EA negotiations:

• Maximize Volume Level and Discounts: Microsoft EAs have tiered pricing levels (A, B, C, and D), based on the number of users or devices. Higher tiers get better unit pricing. Ensure your organization is classified at the correct level for your size. If you’re near a threshold (e.g., 4,800 users, which might be just below Level D), argue for Level D pricing anyway, given growth or total, including contingent staff, etc. Additionally, explicitly negotiate an incremental discount on top of the standard tier price. Don’t assume the price list is final – Microsoft can and will give an extra percentage off for strategic clients. Ask for a detailed quote from your EA and scrutinize each line item’s unit price against public benchmarks or past deals. Push for consistency: if Microsoft offered 20% off Office 365 during the last renewal, insist that 20% is the minimum now (even if list prices have increased). Use the EA’s multi-year nature to your advantage by locking those discounts for the full term.
• Negotiate Renewal Terms Upfront: One often overlooked aspect is negotiating not only the current term but also setting expectations for renewal. Some companies manage to include language or side letters that cap the price increase at renewal time (e.g., “any renewal of the same product will be at no more than 5% above the Year 3 price”). Microsoft may resist binding future terms, but at a minimum, try to get a commitment that your achieved discount level (say 25% off) will carry forward to the next EA if you renew. This prevents Microsoft from pulling back discounts later (a common tactic to pressure an upsell – they sometimes threaten that “if you stay on E3 at renewal, your discount drops, so you might as well move to E5”). If you can’t get formal renewal caps, at least document in writing with your account team that the expectation is to maintain similar pricing. It will set a baseline for the next round of negotiations.
• True-Up Management: In an EA, you declare a quantity of licenses, then add any additional (“true-up”) annually. A smart tactic is to negotiate the pricing of true-ups. Ideally, any additional licenses during the term are at the same unit price as the initial ones (this is usually the case, but it’s best to clarify). If you anticipate significant growth, you might even negotiate a larger upfront discount, knowing you’ll make up for it later (trading immediate revenue for a better rate). Additionally, request forgiveness or flexibility on true-ups. For instance, some organizations negotiate the right to opt out of certain services at an anniversary or to have a grace period before new users are counted. While Microsoft’s standard EA doesn’t allow drops until renewal, large customers have obtained exceptions for specific components, especially when moving from old software to cloud services. The goal is to avoid paying for unneeded licenses for too long.
• Maintain EA compliance, but use it as Leverage: Microsoft may conduct license audits. Stay on top of your entitlements to avoid compliance penalties – but also use it as a negotiation point. If you discover you’re under-deployed (e.g., you bought 10% more licenses than used), point this out at renewal and use it to justify a discount (“we overpaid last term, so we expect a concession this term”). Conversely, if you’re slightly over, Microsoft might use that to upsell. Instead, negotiate a fix within the renewal (“we’ll true up those extras at our discounted rate if you waive any back penalties”). Show that you manage your EA tightly; Microsoft tends to give better deals to customers who demonstrate control, and thus are less likely to drastically reduce it at renewal.
• Use an LSP Effectively: With an EA, you’ll be working with a Licensing Solution Provider (LSP) who transacts the agreement. Choose an LSP that is willing to advocate for you and provide licensing insight (more on LSPs below). You can pit LSPs against each other for the best proposal. While Microsoft ultimately sets EA pricing itself, LSPs can sometimes offer to reduce their fees or provide value-added services, such as training or extra support, as part of the deal. They can also escalate issues within Microsoft on your behalf. Make sure the EA documents (Product Selection Form, pricing annex) reflect every discount and special term agreed. Before signing, double-check that your negotiated perks (e.g., special transition SKUs, free add-ons, service credits) are captured in writing in the EA or an addendum. The EA contract paperwork is complex; insist that nothing is left “to faith”. If it’s not written, it’s not enforceable.

Cloud Solution Provider (CSP) – Reseller Subscription Model

The CSP program involves buying licenses as subscriptions from a Microsoft partner (reseller).

This model is commonly used by small to mid-sized organizations but is also employed by some enterprises for specific needs or regions.

It offers flexibility (with month-to-month or annual terms), but typically at close-to-list prices, unless the reseller offers a discount.

Negotiation strategies for CSP:

• Shop Among CSP Resellers: Unlike an EA, where pricing is more centralized, CSP pricing can vary from one reseller to another. Partners have leeway in setting their resale prices (Microsoft provides a base wholesale price, and partners add their own margin). This means, as a customer, you can request quotes from multiple CSP providers for the same licenses. Use the competitive reseller market to your benefit. Some large IT providers (CDW, SHI, SoftwareOne, etc.) and even Microsoft-affiliated CSPs might offer better discounts or bundling (e.g., a CSP might bundle in their managed services or offer a one-time credit). Let each know you’re evaluating several options. Even a small 5% discount off the CSP list across a big tenant can be meaningful. Also consider non-price factors, such as support responsiveness, portal capabilities, and value-added services, which vary by CSP. Consider these factors in your decision, but make it clear that price is a key consideration for commodity licenses.
• Ask About CSP Volume Discounts: Although CSP doesn’t have formal volume tiers like EA, large purchases made through CSP can still receive special treatment. If you are buying, say, 5,000 M365 licenses via CSP, the partner may be able to negotiate with Microsoft for better-than-standard pricing (especially if you are a net-new large customer for that partner). There are also incentive programs where Microsoft gives partners a rebate for large deals or strategic products, which they can pass on to you. In negotiation with a CSP reseller, probe them on “What discount can you provide for this volume? Are there any Microsoft promotions we qualify for?” Even if Microsoft’s published CSP price is fixed, the partner’s margin is negotiable. On huge deals, partners might be willing to take near-zero margin to win, because Microsoft rewards them on the back end.
• Leverage Flexibility for Cost Savings: The CSP model’s strength lies in its flexibility – utilize this to your advantage. For example, under CSP, you can easily reduce license counts at the next monthly or annual renewal cycle for that subscription. If you expect a portion of your workforce to fluctuate, CSP can help avoid the over-purchase that often occurs in a 3-year EA. Negotiate short-term or trial arrangements for uncertain needs. You might request a 3-month trial of 500 licenses at a discounted rate, with the option to drop or continue. CSP partners often can provision and then adjust with less formality than an EA amendment. While this is less about price per unit, it’s about not paying for what you don’t need, which is equally important. Structure your CSP subscriptions in granular chunks (by department or project) so you can scale them down individually if needed. A good CSP provider will help optimize this process and may even proactively suggest ways to reduce costs, thereby building trust and fostering a long-term partnership.
• Mind the New Commerce Experience (NCE) Terms: Microsoft’s NCE has standardized CSP subscriptions to have penalties for early cancellation on annual terms and a premium for month-to-month (typically +20% for monthly commitment). In negotiations, determine the optimal mix of monthly and annual terms required. If you need full flexibility, consider negotiating the monthly price premium – some partners might waive part of it if you have a large account. Conversely, if you can commit to a yearly term, ensure you secure the 1-year term at the regular rate and lock in that price. If worried about future price changes, you could even ask for a 24- or 36-month subscription term via CSP (NCE allows multi-year for some products), which secures today’s price for that duration (though you still typically pay annually). Essentially, use CSP’s term options creatively to either maximize flexibility at minimal added cost or lock in a price.
• Keep an Eye on Price Adjustments: Microsoft can change CSP pricing with notice, often tied to currency adjustments or new price announcements. Ensure your contract with the reseller stipulates that you will be informed well in advance of any price changes to your subscriptions. Some CSPs might even agree to price protection for a set period as part of the deal, for example, “we will not raise your per-seat rate for 12 months.” If Microsoft announces a global increase, you may not be able to avoid it entirely under CSP. Still, a good partner might help soften the blow, perhaps by accelerating your renewal before the increase takes effect or by offering a temporary discount to offset it. Maintain a close relationship with the CSP account manager and request to be notified of upcoming Microsoft pricing news. This allows you to react (e.g., renew early to extend current rates, as many did before the March 2022 M365 increase).

Microsoft Customer Agreement (MCA) – Direct Cloud Agreement

The MCA is Microsoft’s modern purchasing agreement for cloud services, which has started to replace older programs.

It’s essentially an evergreen agreement (no fixed end date) under which you can buy Azure services, Microsoft 365, and other services directly from Microsoft or through partners, with all purchases governed by Microsoft’s standard terms.

Many enterprises on EA may eventually transition to MCA in the future. Negotiation under an MCA requires a slightly different mindset:

• No Automatic Volume Discounts – You Must Negotiate Them: Unlike EAs, MCAs don’t come with preset volume pricing tiers. By default, if you simply go to Microsoft’s web portal and accept the MCA, you pay list prices. However, enterprise customers can negotiate custom pricing under an MCA (often referred to as an MCA-E for enterprise). Essentially, you’d work with your Microsoft account rep to secure discounted price sheets or private offers that apply to your MCA purchases. When transitioning to an MCA, ensure that you expect the same or better pricing than your expiring EA. You may negotiate a memorandum or a special bid that your account team sets up, so that when you buy under the MCA, the prices are adjusted accordingly. Don’t assume this will happen – you need to get it in writing explicitly. If Microsoft is pushing you off an EA to an MCA (as is happening for some mid-size customers), use that as leverage: “We’ll agree to move to MCA for simplicity, but only if you maintain our discount of X% on these products for Y years.” Without that, MCA customers could see cost jumps of 10–30% as prior EA discounts disappear.
• Ensure Price Increase Transparency: Under an MCA, since it’s evergreen, Microsoft can adjust pricing with notice (usually 30-60 days for online services). While you might not be able to stop the adjustments, negotiate for predictability and the ability to renegotiate. For instance, ask your representative for a clause that allows you to discuss contract adjustments or even terminate specific services without penalty if annual Azure prices increase above a certain threshold. At a minimum, keep language that ties you to public pricing transparency – Microsoft should inform you of changes through official channels. The key here is avoiding sudden or unexpected increases. In an EA, you’re shielded during the term; in an MCA, you’re exposed once any price protection period you negotiated expires. So treat an MCA a bit like being on month-to-month rent – you need ongoing vigilance. Organize quarterly business reviews with Microsoft to review spending and preview any upcoming price changes. That way, you can proactively address them (by seeking offsetting discounts or altering usage patterns) rather than reactively paying more.
• Manage Consumption Commitments and Overage: If you sign an Azure consumption commitment under an MCA (which is common for large cloud deals), clarify what happens if you exceed or fall short of the commitment. Negotiate flexibility on overage pricing – e.g., any usage beyond the commit still gets the same discounted rate. Likewise, if you under-consume, make provisions to carry forward any unused commit value into the next year or convert it to other Microsoft services. Microsoft may not readily allow carryover, but sometimes, for strategic deals, they permit a percentage rollover or allow you to apply unused Azure commitment funds to expenses such as Microsoft 365 bills. The point is, under an MCA, you have to continually optimize; get Microsoft to participate in that optimization by agreeing to terms that reduce waste.
• Co-term and Renewal Alignment: One benefit of MCA is that you can co-term different purchases, but it can also result in fragmented end dates for various subscriptions. Ask Microsoft to align expirations or renewal opportunities for major services, giving you natural negotiation points. For example, if you make a big Microsoft 365 purchase under MCA in July and an Azure commitment in November, you might request a clause to have both reviewed together annually. The MCA doesn’t force a single renewal date, so you need to create your cadence for reviewing and negotiating. Consider establishing an internal policy to review your Microsoft pricing annually or every other year, even if there is no formal renewal date prompting the review. You can approach Microsoft for an informal pricing discussion at your convenience. They may not lower prices unilaterally, but if you present competitive information or a request for better terms due to budget cuts, etc., they can grant concessions on an MCA at any time – but only if you ask. So, don’t be shy about treating an MCA like a contract that’s always up for negotiation in parts.
• Engage Experts if Needed: The shift from an EA to an MCA can be complex. Without an LSP managing quotes, you’ll deal directly with Microsoft’s commerce portals and reps. Ensure your team is up to speed on how Azure and online service pricing work under MCA. If needed, involve a licensing consultant or Microsoft’s FastTrack team to avoid missteps. For instance, under MCA, it’s easy to accidentally purchase the wrong SKU or miss out on a special offer that isn’t automatically applied. During negotiations, explicitly ask, “Are these the best available rates, and are there any promotions we can take advantage of?” The onus is on you, to some extent, in MCA to catch opportunities. Microsoft’s account team should help, but they handle many accounts – you need to continuously advocate for your interests.

In summary, whether under EA, CSP, or MCA, understand the rules of the purchasing model and take advantage of every flexibility it offers. EAs are about big upfront negotiations and long-term commitments – push hard then and lock in benefits.

CSP is about ongoing flexibility and shopping around – keep the pressure on the reseller market. MCA is about continuous management – stay vigilant and treat every major purchase as a chance to negotiate. Tailoring your approach in this way ensures that you’re not leaving money on the table due to the contract’s mechanics.

Using Licensing Partners and Resellers Effectively

Microsoft’s sales channel involves partners at almost every stage – from global LSPs who facilitate Enterprise Agreements to CSP resellers who manage your subscriptions.

These intermediaries can be valuable allies in negotiation if managed correctly.

Here’s how CIOs and procurement leaders should work with partners:

• Leverage the Licensing Solution Provider (LSP): For an EA, the LSP (also known as a reseller or partner, such as Insight, SoftwareOne, SHI, Dell, etc.) serves as your interface for quotes and procurement. While Microsoft sets the base pricing and discounts, LSPs often have insight into what discounts are achievable and the tactics that work. Treat your LSP representative as part of your team – share your goals and budget constraints candidly and ask them to help make the business case to Microsoft. A good LSP can run benchmark reports (some have anonymized data from other clients) to tell you if Microsoft’s offer is fair. They can also escalate within Microsoft on your behalf if negotiations stall; LSPs have their own Microsoft channel managers who can sometimes advocate for a better deal to close a big renewal.
• Beware of LSPs’ Conflict of Interest: It’s worth noting that LSPs are compensated by Microsoft based on the volume of sales (and sometimes by the enterprise through fees). Generally, they want you to get a good deal so you remain a customer, but they also benefit when you spend more. So, while leveraging their knowledge, maintain your independent analysis. If an LSP is not being aggressive enough in pushing Microsoft, you may need to introduce competition. Nothing motivates a reseller more than the prospect of losing the account. About 6–12 months before your EA renewal, consider quietly bidding out to one or two other licensed service providers (LSPs). You can request pricing proposals from them to see if they offer any additional concessions, such as lowering their admin fee or providing free services like SAM assessments or training credits. Even though the license prices will ultimately equalize (since Microsoft controls that), the value-added incentives might differ. Your incumbent LSP, if they know you’re looking around, will usually sharpen their game and be a stronger advocate to keep you.
• Use CSP Partners’ strengths: If you make some purchases through CSP, the choice of reseller can significantly impact your experience and cost. Some CSPs specialize in SMBs and may not have the support depth for complex enterprises; others cater to large enterprises, offering 24/7 support and advisory services. Decide what you need: is it just transaction efficiency, or do you want guidance on license optimization? For pure efficiency, you might choose a CSP that offers an excellent self-service portal and low overhead costs. For guidance, you might consider selecting one that offers consulting services (perhaps at a slightly higher margin). Negotiate both the service package and the price. For example, you could say, “We’ll commit to using you as our CSP for 3 years, but in return, we want a dedicated support engineer assigned and a 5% discount on licenses.” The CSP might agree because they value the long-term relationship. In short, in CSP, you’re not only negotiating with Microsoft (indirectly), you’re directly negotiating with the partner for both price and service level.
• Hold Partners Accountable: Once you have an LSP or CSP in place, set expectations for performance. Communicate that you expect timely updates on Microsoft products and pricing changes, as well as proactive suggestions to help you save money, and advocacy during any disputes. For instance, if Microsoft announces a new product that could replace something you pay for, your partner should bring that to you with an analysis. You can formalize this through a quarterly business review, where the partner must demonstrate the value they have delivered. If they know you expect this, they are more likely to go the extra mile. Remember, partners often juggle many clients – the squeaky wheel gets the grease. Don’t hesitate to escalate within the partner’s organization if needed; for example, involve their licensing practice lead if you feel your representative isn’t fighting hard enough for discounts.
• Understand Partner Incentives: As mentioned earlier, Microsoft offers partners rebates for selling specific products, such as Azure consumed revenue incentives or bonus fees for each Microsoft 365 subscription. It’s fair game to discuss this with your partner. While they may not disclose their rebate details, you can say, “We know Microsoft is incentivizing Azure growth – how can we work together so that both of us benefit? Perhaps you can provide a credit back on our account if we exceed certain Azure spend targets.” Innovative deal structures like rebate sharing can align your partner’s success with your cost objectives.
• Use Third-Party Advisors if Needed: Sometimes neither you nor your LSP has the deep expertise or capacity for a high-stakes negotiation. Engaging an independent licensing advisor or negotiation consultancy can be worthwhile for very large contracts. Firms like Redress, as advisors separate from resellers or boutique negotiators, are familiar with Microsoft’s playbook. They can coach your team on when to stand firm, how to structure asks, and even join calls with Microsoft to articulate why you need a certain term. Microsoft is accustomed to this; many Fortune 500 companies use consultants. If you do bring in an external advisor, loop in your LSP as well and ensure that roles are clear: the advisor provides strategy, while the LSP handles official quoting. The partner ecosystem is there to help you – either directly or via external experts – so that you’re not facing Microsoft alone.

In essence, treat partners as an extension of your negotiation team, but manage them closely. A great partner will provide valuable market intelligence and push Microsoft in ways you may not be able to on your own.

However, ultimate accountability for the deal rests with your organization – don’t completely outsource the strategy. Utilize partners to amplify your efforts, always aligning them with your ultimate goal: achieving the best possible outcome for the enterprise.

Recommendations for CIOs

Negotiating with Microsoft is a high-stakes endeavor that can yield substantial cost savings and value gains.

Based on the best practices detailed in this playbook, here are key recommendations for CIOs and IT procurement leaders to achieve optimal results:

1. Start Early and Prepare Rigorously: Begin planning large Microsoft contract renewals at least a year in advance. Assemble a cross-functional team (IT, procurement, finance, legal) to assess current usage, forecast needs, and gather benchmarking data. Early preparation prevents last-minute scrambling and allows you to set negotiation timelines that align with your advantage (e.g. fiscal year-end).
2. Benchmark Pricing and Set Target Discounts: Don’t enter negotiations without a clear understanding of market pricing. Use peers, partners, or consultants to determine what a reasonable discount off the list price is for your size and scope. Set an aggressive but attainable target (e.g., “we aim for 25% off Azure pay-as-you-go rates” or “we need E5 at no more than $X per user, which is a 30% discount”). Let these targets guide your requests and counteroffers, and share your benchmarking evidence with Microsoft to justify why your request is fair.
3. Prioritize Multi-Year Price Protection: Given Microsoft’s trend of price increases, treat price locks and caps as must-have negotiation outcomes. Lock in today’s prices for as long as possible on subscriptions and cloud rates. Where locks aren’t possible, cap future increases at a single-digit percentage. Ensure any concessions on price protection cover equivalent products (to avoid end-runs around the cap). This will insulate your IT budget from the shock of sudden hikes on key services.
4. Leverage Microsoft’s Fiscal Calendar: Align your negotiation milestones with Microsoft’s quarter-end deadlines when you can get maximum mindshare and flexibility from their sales teams. Whenever feasible, schedule final deal discussions for late Q4 (May-June) or Q2 (Nov-Dec) when Microsoft is most eager to close. However, balance this with thorough preparation – don’t rush into a bad deal just to meet a deadline. Instead, use the date as leverage to improve an already well-structured deal.
5. Keep Competitive Options in Play: Maintain credible alternative plans for Microsoft workloads. Even if you intend to stay with Microsoft, ensure you can pivot if necessary – whether that means a pilot on Google Workspace, some apps ready to go on AWS, or a relationship with another vendor. Communicate these possibilities to Microsoft in a matter-of-fact way. It will remind them that they must continuously earn your business on merit and price. When Microsoft sees that you are not mentally “locked in”, they will be far more inclined to offer concessions to dissuade any move.
6. Exploit Microsoft’s Strategic Incentives: Align your requests with what Microsoft is motivated to sell. If you genuinely have upcoming initiatives in cloud, security, AI, etc., make those part of the deal. For example, consider trading a commitment to Azure usage or an agreement to deploy new Microsoft 365 features enterprise-wide in exchange for greater discounts or credits. This approach creates a win-win: Microsoft achieves adoption goals, and you receive financial benefits and modernized capabilities. Just be sure the incentives (discounts or support) you get are proportional to the commitment you’re making, and have a backup plan if the new technology doesn’t pan out.
7. Drive a Hard but Collaborative Bargain: approach the negotiation with a firm stance on requirements (such as budget limits and critical terms), but maintain a problem-solving attitude. Instead of adversarial ultimatums, use data and business rationale to press your case: “We need to achieve $X in savings – let’s find a way together.” Be willing to push back multiple times; Microsoft often tests a customer’s resolve. Use escalation paths if needed – involve Microsoft executives for large deals, who may have discretion to approve special terms. Throughout, stay professional and keep long-term relations in mind. The best outcomes typically emerge when Microsoft views you as a savvy, well-informed customer who is still seeking a fair partnership.
8. Optimize Contract Structure for Flexibility: Negotiate contractual elements that provide agility, allowing you to reduce unused licenses at renewal, swap entitlements of equal value, or adjust your cloud commitment if business conditions change. The goal is to avoid being over-committed or stuck with an ill-fitting contract if your company’s situation evolves (mergers, divestitures, rapid growth or contraction, etc.). Also, seek to align contract end dates with your planning cycles and avoid staggers that dilute your leverage. A clean, co-terminous agreement simplifies future negotiations and potentially allows you to bundle for bigger discounts.
9. Engage and Incentivize the Right Partners: Use your LSP or CSP partner’s expertise – ask them to suggest cost-saving measures and to advocate strongly to Microsoft on your behalf. If they deliver, reward them with continued business and a cooperative relationship. If not, be prepared to shop around for a partner who will. Don’t hesitate to change LSPs at renewal if another can offer a better combination of price and service. For CSP, negotiate not just pricing but also the support model (e.g., a dedicated technical account manager if that’s valuable to you). Partners should know that your business is contingent on them adding value and helping meet your licensing cost objectives.
10. Document every agreement and Monitor It Continuously: as you finalize negotiations, ensure that all special pricing, terms, and promises are captured in writing in the contract or supporting documentation. After signing, establish a regular cadence (quarterly or semiannually) to review your Microsoft usage and spending. Compare actuals to contract entitlements to spot efficiencies or overages. Keep an eye on Microsoft’s product and policy announcements. If you notice something that affects your deal (e.g., a new price hike or a new product that could replace an expensive one), proactively reach out to Microsoft to discuss potential adjustments. In essence, manage the agreement actively between renewals. That way, when the next major negotiation arrives, you’ll be informed, prepared, and already positioned for success.

By following these recommendations, CIOs can approach Microsoft negotiations with confidence and a well-defined strategy.

The result should be not only significant cost savings (often measured in millions for large enterprises) but also a contract that aligns with your organization’s strategic needs and risk profile.

In the current climate of rising software expenses, a well-negotiated Microsoft agreement is a critical component of IT cost control and value generation.

It’s an effort that will pay dividends throughout the contract’s lifecycle and beyond.

Read about our Microsoft Negotiation Service.

Do you want to know more about our Microsoft Negotiation Services?

Please enable JavaScript in your browser to complete this form.

Name *

First

Last

Email *

Company

Message *

Submit