Microsoft Enterprise Agreement True Up: Cost Reduction and Negotiation Strategies

Microsoft Enterprise Agreement True-Up

The Microsoft Enterprise Agreement True-Up is an annual reconciliation process to align your paid licenses with actual software usage under a Microsoft Enterprise Agreement (EA).

It ensures enterprises remain compliant and pay for any growth in users or deployments.

Done correctly, the True-Up can help avoid unexpected costs, provide valuable insight into software consumption, and set the stage for better budgeting and negotiations with Microsoft.

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Understanding the Microsoft Enterprise Agreement True-Up Process

A Microsoft EA True-Up is essentially a yearly “checkpoint” where you true up (or reconcile) any increases in software usage against the licenses you initially purchased. In a typical three-year Enterprise Agreement, you’ll perform a True-Up before each anniversary (usually 30 days prior).

During this process, your IT asset management team reports any additional Microsoft Enterprise Agreement True-Up needs – for example, new employees added, new devices or servers deployed, or new Microsoft products introduced since the last count.

If your organization has used more licenses than originally contracted, you must purchase the additional licenses to remain compliant.

How it works: Suppose you started your EA with 1,000 Windows 10 Enterprise licenses.

If over the year your company grew and deployed 100 extra copies of Windows, the True-Up is when you buy those 100 extra licenses (typically at the same per-unit price agreed in your EA).

If you didn’t deploy anything new, your True-Up report simply confirms “no change.”

This yearly reconciliation ensures you’re paying for what you use – no less (to avoid compliance issues) and no more (to avoid overspending on unused licenses).

Key point: A True-Up is not a negotiation event – it’s a contractual obligation.

The prices for any added licenses are usually pre-negotiated in your EA so that you won’t haggle over cost at True-Up time.

The focus is on accuracy, ensuring that all new usage is accurately counted.

By understanding this process and preparing for it year-round, enterprises can turn the True-Up from a stressful annual scramble into a routine business practice.

True-Up Cost Drivers and Budget Impact

Several factors drive costs during a True-Up, and understanding them helps in budgeting and cost control.

The primary cost drivers include organizational growth (e.g. onboarding new employees who need Office 365 or Windows licenses), infrastructure expansion (deploying new servers or databases), new software deployments (rolling out a Microsoft product that wasn’t initially in your EA), and mergers or acquisitions (bringing in another company’s users and systems under your agreement).

Each of these situations increases license requirements, which in turn increases your True-Up bill.

Budget impact:

Without proactive management, True-Up costs can catch you off guard.

For instance, if a business unit spun up several new SQL Server instances mid-year without IT’s knowledge, you might face a large unplanned database license purchase at year-end. These unbudgeted expenses disrupt financial plans.

ITAM professionals should collaborate with finance to forecast and allocate funds for expected growth. The good news is that Enterprise Agreements provide price protection during the term – the unit price for licenses is typically locked in at signing.

This means if you add 100 licenses in year 3, you pay the same unit rate agreed upon in year 1 (shielding you from Microsoft’s list price increases during the EA term).

However, adding licenses via True-Up often requires a lump sum payment for the remainder of the term.

In practice, if you add those 100 licenses with one year left on a three-year EA, you pay for one year of those licenses all at once. Proper budgeting ensures you have money set aside for such one-time charges.

The cost of inaccuracy: Accuracy in counting drives cost control.

Overestimating usage can lead to buying licenses you don’t need (wasting budget on shelfware), while underestimating or under-reporting usage is even worse – it creates a compliance gap that might result in audit penalties later.

The goal is to report exactly what’s needed – no less and no more.

To illustrate the impact of managing True-Ups proactively, consider the following comparison of outcomes:

As the table shows, the Microsoft Enterprise Agreement True-Up shouldn’t just be an afterthought or a box-ticking exercise.

It can have a profound impact on your IT budget, financial predictability, and relationship with your vendor. Managing it proactively turns it into a strategic tool rather than a costly surprise.

Ensuring Accurate Usage Tracking

“Inaccurate usage” data is a silent budget killer in True-Ups. The foundation of a smooth True-Up is an accurate inventory of your deployments and usage.

Enterprises should invest in robust Software Asset Management (SAM) practices to track every license entitlement and every installation or user consuming a license.

This involves maintaining up-to-date records of key metrics, such as the number of PCs running Windows 11 Enterprise, the number of users assigned an Office 365 E5 subscription, and the number of SQL Server cores in your data center, among other relevant metrics.

Modern SAM tools can automate much of this discovery and tracking, but process and governance are just as important – someone needs to regularly review the data.

Practical steps to ensure accuracy include conducting regular internal license audits (e.g., quarterly or at least semiannually) to reconcile what is deployed with what’s recorded in your asset management system.

If there are discrepancies, you have time to investigate and correct them before the True-Up. For example, an internal audit might reveal that 50 contractor accounts were left active in Active Directory even after the contractors had terminated their contracts.

Shutting those accounts or reassigning their licenses will prevent paying for 50 unnecessary Office 365 seats.

Conversely, audits may uncover unrecorded usage (for example, a development team installing Visual Studio on several machines without informing IT). Catching that early means you can budget for those licenses and avoid a compliance gap.

Avoiding inaccurate counts:

Always double-check unusual spikes or drops in usage with the relevant business units to ensure accuracy. If a department reports that they need 100 new Visio users, verify whether all 100 are still active or if some were temporary.

It’s easy for counts to become inflated due to outdated records (people who have left, servers that have been decommissioned, etc.).

By cleansing your data – removing or updating any obsolete entries – your True-Up report will accurately reflect reality, rather than an overestimation.

This accuracy has two major benefits: you minimize overspending by only buying what you truly need, and you mitigate compliance risk by ensuring you aren’t under-reporting.

Essentially, good data hygiene in your ITAM system translates directly into cost savings and risk avoidance.

Finally, keep an eye on license entitlements vs. usage. Track license assignments (who or what is consuming a license) and monitor actual usage where possible.

Some Microsoft products (especially cloud services) have admin portals that show active use.

If a user hasn’t logged into a licensed service in six months, that might indicate you can reallocate that license to someone else before buying new ones. By continuously right-sizing license allocations, you prevent paying for inaccurate or outdated usage at True-Up time.

Optimizing and Reducing True-Up Costs

A True-Up doesn’t have to mean a spike in spending. With smart planning, you can reduce the cost impact.

Here are several optimization strategies:

• Clean Up Before You Count: Before submitting your True-Up numbers, perform a thorough cleanup of unused licenses and redundant deployments to ensure accuracy. Identify accounts that can be removed or software installations that can be decommissioned. For instance, if you find 100 Visio licenses assigned to ex-employees or unused PCs, reclaim or retire them before you finalize your usage count. This way, when you report usage to Microsoft, those 100 licenses won’t be part of the “additional purchase” – potentially saving a significant sum. Essentially, true-up on paper internally before you true-up with Microsoft.
• Reharvest and Reallocate: Often, organizations have licenses that are paid for but not being utilized efficiently. A common example is discovering a batch of Office 365 accounts that were set up for a project that ended. Rather than purchasing new licenses to meet a different team’s needs, reassign the unused subscriptions to the relevant team. By optimizing within your existing license pool, you can reduce the number of new licenses needed at year-end.
• Consider Alternative Licensing for New Needs: If a new requirement emerges mid-term (say your developers suddenly need a premium Visual Studio add-on or your analytics team wants Power BI Pro), evaluate if it must be added to the EA immediately or if a separate purchase or cloud subscription makes more sense. Sometimes, if the need is temporary or highly variable, using a cloud subscription outside the EA or a short-term license can be more cost-effective than purchasing a permanent EA license for it. Be mindful of contract rules, but don’t assume the EA is the only way to license new software – flexibility can save money.
• Align Deployment Timing with EA Schedules: If you know you must undertake a large deployment, timing can affect costs. For example, deploying 500 new Windows 11 Enterprise seats in month 1 of your agreement versus month 10 has very different payment timings. In month 1, you’ll pay for almost the full term for those via True-Up; in month 10, you’d pay only for the final months of that term (since True-Up is prorated). This isn’t to suggest delaying needed projects just to save a bit on licensing, but if a deployment can wait a few weeks to align with a new EA cycle or renewal, it might reduce the immediate cost. Always weigh operational needs against such optimizations, but smart scheduling can soften the financial impact.
• Monitor Usage Trends and Adjust Commitments: Throughout the EA term, track your license usage trends relative to your initial commitment. If you see certain licenses consistently underused, you might plan to true-down at renewal (i.e., not renew those unnecessary licenses for the next term). While this doesn’t save money in the current term, it prevents overspending in the next cycle. On the other hand, if a product’s usage is skyrocketing, consider negotiating a better volume discount for it in the next agreement, as you now know it’s a significant part of your environment. In short, use the data from each True-Up to inform smarter licensing choices moving forward.

By taking these actions, enterprises can significantly reduce True-Up costs.

The focus is to only pay for what delivers value and to avoid paying for mistakes or lack of oversight. Optimizing before writing that True-Up check is one of the best cost avoidance techniques in software licensing.

Negotiation and Renewal Strategies

While the True-Up itself isn’t a negotiation point (prices and terms are set in the EA contract), the information and experience you gain from it are invaluable for negotiating your Microsoft Enterprise Agreement renewal.

Microsoft’s sales teams often have “price uplift” expectations for renewals, commonly targeting a 10-20% higher spend than in the previous term.

They assume your organization’s use of Microsoft technology will expand and try to price the new agreement accordingly.

However, armed with data from your True-Ups, you can push back on these assumptions and negotiate more favorable terms.

Leverage True-Up data:

Well before your EA expires (ideally starting 6-12 months in advance), analyze all the True-Up reports from the current term. Identify areas where you over-licensed or under-used software – these are opportunities to reduce quantities or cut products in the next agreement.

Additionally, identify areas where you experienced unexpected growth – this is where you may need a higher quantity, but also where you can inquire about a volume discount or a different licensing model to save money.

For example, suppose you purchased 20% more SQL Server cores during the term due to new projects, which would be reflected at renewal.

In that case, you might negotiate a better tiered price for SQL Server or consider an Unlimited License Agreement (if it makes sense) to accommodate such growth more cost-effectively.

Negotiate early and assertively:

Engage with Microsoft (and/or your reseller) to clearly outline what you do and don’t need going forward.

If only 800 of your 1,000 Office 365 E5 licenses are actively used, plan to renew for 800 (dropping 200 unused licenses) and use that change as part of your negotiation strategy.

Microsoft may resist the reduction or attempt to upsell other services to compensate for the revenue loss, but having hard usage evidence strengthens your case. Also, if Microsoft proposes a price increase on certain products, question it.

Ask for justification and present your counter: perhaps you can commit to a longer term or a broader product adoption in exchange for maintaining or lowering unit prices.

Explore contract options:

Renewal is the time to consider if the Enterprise Agreement is still the right vehicle.

Microsoft now offers alternatives, such as the Microsoft Customer Agreement (MCA) or cloud subscription models, that may be a better fit if your company has changed in size or IT strategy (for instance, if you’re now more cloud-focused).

Even within an EA, you can negotiate terms like price caps on specific products, flexible quantity adjustments for certain subscriptions, or pilot programs for new technology.

Use the leverage of renewal – Microsoft wants to keep your business – to secure concessions.

If you’ve managed your True-Ups well, you’ll have a reputation as a savvy customer, which can lead Microsoft to bend a bit more in negotiations to avoid losing you.

Address future needs and avoid surprises:

Communicate any foreseen changes in your organization during negotiation.

If you anticipate an acquisition or divestiture, discuss how it might be handled in the contract (e.g., include clauses for adding a large number of users at the same discount or the ability to transfer licenses if part of the company is sold).

By covering these scenarios up front, you won’t be stuck later paying higher costs because “it wasn’t in the contract.”

Also, try to align renewal timing with your fiscal budgeting – for example, if you know you must trim IT spend next year, aim to scale down the EA appropriately and negotiate hard on price.

In summary, negotiation is where you truly unlock cost savings.

The True-Up provides the factual groundwork – it shows your real usage trends. Use those facts to drive a strong bargaining position at renewal. Microsoft will come to the table looking for growth in your account.

Still, with preparation, you can often turn it around and achieve cost reduction or at least cost avoidance (like avoiding that automatic 15% uplift). It’s about translating your diligent management of the current agreement into a better, more efficient deal in the next one.

Avoiding Common True-Up Pitfalls

Even seasoned ITAM professionals can stumble on a few common pitfalls when managing True-Ups.

Being aware of these traps can help you steer clear of trouble:

• Last-Minute Rush: A very common mistake is treating the True-Up as a one-time year-end task and scrambling in the last weeks to gather data. This rush leads to errors, missed usage, or overestimation. Avoidance: Treat True-Up as a year-round process. Keep a running tally of license changes throughout the year, and start the formal True-Up preparation at least 2 months before the due date. Early preparation means you have time to reconcile discrepancies and get management approvals without panic.
• Inaccurate or Assumed Data: Relying on rough estimates or outdated records is a dangerous practice. Some companies simply “assume” usage based on last year plus a growth percentage, which can be way off. Avoidance: Always base the True-Up on actual data (from discovery tools, usage logs, headcount figures). If there’s uncertainty, do an extra internal audit or scan. Never guess – inaccurate usage data can mean either paying too much (for things not used) or facing compliance gaps.
• Ignoring Zero-Usage and Dormant Licenses: It’s easy to focus on what new licenses you need and forget about existing ones that nobody uses. This leads to paying for shelfware again at renewal. Avoidance: As part of True-Up prep, review current licenses for activity. If users haven’t logged in or devices haven’t been used in months, flag those licenses. You might not be able to get money back during the term, but you can often reassign those licenses to fill new needs (so you don’t buy more), or at least plan to terminate them at renewal. Don’t carry dead weight.
• Not Communicating with Finance and Leadership: Some IT teams calculate the True-Up quietly and then submit a purchase request to Finance at the last minute. The shock of an unplanned six or seven-figure expense can cause real internal friction. Avoidance: Keep your finance team and executives informed well in advance. If you foresee a big True-Up spend, discuss it in budgeting cycles. No one likes surprises – by making True-Up costs predictable, you maintain trust and avoid rushed approvals.
• Overlooking Contractual Details: Microsoft EA contracts include specifics such as deadlines (e.g., reporting 30 days before the anniversary), true-up order procedures, and sometimes even the ability to reduce certain subscription licenses on anniversaries if labeled as “reduction eligible.” If you overlook these details, you might miss a window to adjust or end up non-compliant by filing late. Avoidance: Know your contract. Mark key dates on your calendar, understand which products are fixed vs. flexible, and involve your reseller or Microsoft contact if you need clarity on terms. If something in the contract could allow for a cost-saving move (such as reducing a particular cloud service at the anniversary), take advantage of it as permitted.

By anticipating these pitfalls, you can take proactive steps to avoid them. In short: plan early, base everything on solid data, communicate openly, and read the fine print.

These habits separate a smooth True-Up experience from a painful one.

Recommendations

• Establish Year-Round License Management: Don’t treat True-Up as a once-a-year fire drill. Implement an ongoing SAM program with clear ownership (e.g., a dedicated IT asset manager) to continuously track software deployments and usage. Regular monthly or quarterly check-ins on license counts will make the annual reconciliation a non-event, ensuring that nothing slips through the cracks.
• Right-Size Your Initial Commitments: When signing or renewing an EA, be realistic about your needs. Avoid the temptation to over-purchase “just in case.” It’s easier and cheaper to add licenses later via True-Up (since your price is locked) than to be stuck with hundreds of unused licenses for three years. Start with a sensible baseline and let growth dictate additions, rather than relying on guesswork.
• Forecast Changes and Budget Early: Integrate license planning into business planning. Suppose you expect to hire 200 people next year or launch a new project that will require additional software, forecast this and inform Finance and Microsoft early on. By budgeting for growth and providing Microsoft with advance notice, you can explore alternative licensing models or receive incentive discounts for those additions. Early visibility also ensures you’re financially prepared for True-Up costs when they arrive.
• Optimize Before You True-Up: Conduct an internal clean-up before submitting your True-Up report. Scrub out inactive user accounts, decommission unused VMs, and reclaim any licenses not in active use. Essentially, verify that every license you plan to report (and pay for) is necessary. This house-cleaning can significantly reduce the incremental licenses you need to purchase. It’s far better to discover and fix issues yourself than to pay for Microsoft to “fix” them via an audit or an unnecessary True-Up purchase.
• Leverage Renewal as a Reset: Use the renewal of the EA as an opportunity to realign with current business needs. Several months before your EA expires, do a full review of usage: What can be reduced or eliminated? What new needs are coming? Plan your ideal next agreement based on this analysis. Then, negotiate with Microsoft using that plan – don’t simply renew everything as is. By proactively stating, for example, “we only need 800 of these 1000 licenses next term,” you take control of the narrative and budget. Ensure that you adhere to any notice requirements for reductions (typically 30-60 days prior to contract end) to preserve the right to downsize certain licenses.
• Engage Independent Expertise: Consider bringing in a third-party Microsoft licensing expert or consultant to review your True-Up strategy and upcoming renewal. An independent advisor (who isn’t financially tied to Microsoft) can provide an unbiased assessment, find optimization opportunities, and help interpret complex licensing rules. They might identify creative cost-saving measures – for instance, moving a workload to a different licensing program – that you wouldn’t spot on your own. They can also bolster your negotiation with Microsoft by providing industry benchmarks and a reality check on what constitutes a good deal.
• Maintain Vendor Relationship Balance: Cultivate a professional, data-driven relationship with your Microsoft account team. Share your plans and usage trends with them (to a degree) so that you aren’t only talking when there’s a problem or negotiation. If Microsoft sees that you are managing your licenses well and are transparent, you build goodwill that can be useful when you do need flexibility or special considerations. Just remember to balance this with your interests – transparency doesn’t mean giving away leverage, but it does mean being a credible, factual negotiator rather than a reactive one.

Checklist: 5 Actions to Take

1. Kick Off True-Up Planning Early: Mark your calendar well in advance (at least 60-90 days before the EA anniversary). Assemble a small task force (ITAM manager, SAM tool administrator, someone from finance or procurement) and set a timeline for the True-Up process. An early kickoff ensures that everyone knows their role and there’s ample time to address any surprises.
2. Gather and Verify Usage Data: Collect the latest data on software deployments and user counts. Pull reports from your SAM tools, Active Directory (for user/device counts), cloud admin portals, and any other relevant systems. Cross-verify these numbers with department leaders – for example, confirm with HR the current employee count and with IT ops the number of active servers. This step involves establishing a single source of truth for your Microsoft product usage.
3. Reconcile and Clean the License Records: Compare your gathered usage data against your current license entitlements (what you originally purchased). Investigate any discrepancies. If you have more usage than entitlements, identify exactly where and why. If you find usage that is no longer needed (e.g., unused accounts, retired hardware), remove or reassign those licenses now. Essentially, conduct an internal audit and cleanup to ensure the list of “needed additional licenses” is as concise and accurate as possible. Document any changes you make (for audit trail and future reference).
4. Determine True-Up Needs and Get Approvals: Now, calculate the net new licenses (by product) you will need to purchase to cover any remaining shortfall. For example, you might conclude you need 50 more Windows 10, 20 more Office 365 E3, and five more SQL Server licenses. Determine the cost using your EA pricing and ensure this fits into the budget. Engage your finance team early to secure the necessary funds or purchase approvals. It’s often wise to communicate these needs to your Microsoft reseller or account manager as well, so they can prepare the formal quote or paperwork promptly.
5. Execute the True-Up and Plan Next Steps: Submit the official True-Up order through your Microsoft reseller or licensing portal by the due date. Verify that Microsoft has processed the new licenses and that your organization is now fully licensed. Once done, update your internal records by adjusting your license inventory to include the newly purchased licenses, thereby resetting your baseline. Finally, hold a brief post True-Up review meeting: what did you learn this year? Are there ways to avoid similar additions next year (e.g., better control of deployments or user onboarding)? Use these insights to start planning for the EA renewal or the next True-Up cycle, ensuring continuous improvement in your processes.

Further reading

• Benefits of a Microsoft Enterprise Agreement
• Microsoft Enterprise Agreement: A Complete Guide

FAQ

Q: What exactly is a Microsoft Enterprise Agreement True-Up, and when does it happen?
A: A True-Up is an annual reconciliation event under a Microsoft Enterprise Agreement. Each year (typically 30 days before your agreement anniversary), your organization must review its Microsoft product usage and “true up” any increases by purchasing additional licenses for anything beyond your initial allotment. In short, it’s when you report and pay for any extra licenses needed due to growth or new deployments during that year.

Q: Can we reduce our license count or get credit if our usage drops during the EA term?
A: Generally, no – during the term of a traditional Enterprise Agreement, you cannot reduce your committed license counts (this is sometimes called a “true-down”). If you purchased 1,000 licenses and your usage drops to 900, you will still retain and pay for the 1,000 until the EA ends. The primary opportunity to adjust downward is at renewal: you can choose to renew fewer licenses or reduce product offerings at that point. (One exception: certain subscription-based licenses or cloud services might allow annual reductions if explicitly stated as such in your contract, but this is not common and would be defined in the EA terms.)

Q: How can I minimize costs during the True-Up process?
A: The best ways to minimize True-Up costs are all about preparation and optimization. Maintain an accurate inventory to ensure you only pay for actual usage. Reclaim unused licenses before you report – for example, reassign licenses from departed employees rather than buying new ones. Clean up any unused or duplicate installations. Essentially, ensure that every license you purchase is truly necessary. Also, budget for expected growth in advance so you’re not caught off guard financially. While you can’t typically negotiate the price at True-Up time (prices are set in your EA), you can control how many licenses you need to add by being efficient with what you have.

Q: Will Microsoft increase our prices at renewal (what is a “price uplift”), and how do we handle it?
A: It’s very common for Microsoft to propose a price uplift or an overall cost increase at renewal. They might come in aiming for, say, a 10-15% higher annual spend in your new EA, even if your usage didn’t grow as much. This uplift can come from higher unit prices, pushing more premium products, or adding new services. To handle this, start negotiations early with clear data. If your usage has not grown significantly, use that fact to challenge any price increases. If they’re introducing higher prices, ask for justification and explore options: perhaps you could commit to a longer term or broader product adoption in exchange for holding prices steady. Remember, renewal is your chance to shop around too – Microsoft knows you have alternatives (such as AWS, Google, and other software vendors), so use that as leverage. In many cases, strong preparation and willingness to push back can significantly reduce or eliminate the proposed uplift.

Q: What happens if we don’t true-up accurately or miss a True-Up?
A: Failing to True-Up properly is risky. Suppose you under-report your usage, and Microsoft later audits you. In that case, any shortfall will have to be purchased retroactively, often at full list price rather than your discounted EA rate – and you could incur back maintenance fees and even audit penalties. Missing a True-Up deadline or failing to report can be viewed as non-compliance with your contract, which may give Microsoft the right to initiate a formal license audit. In the worst case, consistent non-compliance could result in the termination of your licensing agreement, which would affect your ability to use the software. In short, not doing True-Ups (or doing them inaccurately) won’t save money in the long term – it will likely cost a lot more once the oversight is discovered. It’s always better to stay current and transparent on license usage under your EA.

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