Dynamics 365 Licensing in Enterprise Agreements (EA vs CSP)

Dynamics 365 Licensing in Enterprise Agreements (EA vs CSP)

Introduction: Microsoft offers multiple channels and agreement types for purchasing Dynamics 365 licenses. The enterprise’s primary options are the Enterprise Agreement (EA) and the Cloud Solution Provider (CSP) program.

Each approach has distinct advantages and trade-offs. For CIOs managing large Dynamics 365 deployments, understanding EA vs CSP is crucial for cost optimization and operational flexibility.

This article compares Dynamics 365 licensing under an EA versus through a CSP in the context of enterprise customers. We’ll explore differences in commitment length, pricing, discounting, true-up vs. subscription models, support, and when an organization might consider one.

By the end, CIOs will be better equipped to decide which licensing vehicle aligns with their strategy or how to transition between them without losing value.

Read CIO Playbook: Negotiating Microsoft Dynamics 365 Contracts.

Dynamics 365 Under an Enterprise Agreement (EA)

Overview: An Enterprise Agreement is a volume licensing contract designed for large organizations (typically 500+ users or devices minimum). It covers a 3-year term (or sometimes a 5-year term) and is ideal for enterprises standardizing on Microsoft’s suite.

When you include Dynamics 365 in an EA, you commit to a certain quantity of licenses for the term, often with the benefit of discounted pricing for that volume.

Key Characteristics of EA Licensing for Dynamics 365:

• Commitment & Term: You commit upfront to a set number of Dynamics 365 licenses (by product) for a three-year period. You can increase counts during the term via annual true-ups, but generally, you cannot decrease until the EA is up for renewal. This long-term commitment offers predictability – you know your base Dynamics 365 cost for 3 years – but it’s less flexible if your needs drop. Organizations opt for EA when they foresee consistent or growing use of Dynamics, allowing them to comfortably commit to multi-year use.
• Pricing & Discounts: EAs typically provide better unit pricing for Dynamics 365 than pay-as-you-go options. Microsoft usually extends volume discounts in an EA, meaning the price per user per month for a given Dynamics module will be lower than retail (Web direct) pricing. Additionally, enterprise customers can negotiate custom discounts on top of the standard volume pricing. The EA also locks in pricing for the term – you’re protected from list price increases for the quantities you’ve committed. In many cases, EAs allow adding additional licenses at a fixed price (negotiated in the contract), giving growth cost certainty.
• True-Up Process: EAs handle changes via an annual true-up instead of monthly adjustments. If you exceeded your originally licensed quantities during the year, you report and pay for the additional usage once per year (backdated to when it was first used). If you ramp up usage, you don’t pay immediately, but you’ll settle it at your anniversary. The downside is if you scaled down, you cannot get credit until renewal. An EA trades flexibility for stability – it assumes an upward or steady trajectory, not downsizing.
• Payment & Enterprise-Wide Use: EA payments for Dynamics 365 are typically annual in advance (for the agreed quantities). The licenses are enterprise-wide, so you can reassign them internally as needed without changing the agreement – e.g., if one division’s user count drops and another’s increases, you can shuffle licenses around since the EA is an org-wide contract.
• Support and Relationship: With an EA, you usually have a direct relationship with Microsoft (through a licensing solution provider for paperwork). Enterprises often have a Microsoft account team, and support is purchased separately (often via a Unified Support agreement for large EAs). Thanks to their substantial commitment, Microsoft Account teams tend to give EA customers a high-touch engagement.

Ideal Scenarios for EA:

Companies with a large, relatively stable user base for Dynamics 365 and who want to negotiate the best price per user often prefer EAs. The EA works well if you plan to standardize Microsoft across the board (since you can include Dynamics, Office 365, etc., all in one deal).

It’s also suitable if you value price predictability – budgeting is easier when you have fixed pricing for 3 years. However, if you anticipate major fluctuations (like big downsizing or uncertain adoption), the EA’s rigidity can lead to paying for unused licenses until renewal.

Dynamics 365 via Cloud Solution Provider (CSP)

Overview: The Cloud Solution Provider program is Microsoft’s channel for purchasing cloud services (including Dynamics 365) on a subscription basis through a partner.

You can think of CSP as a more flexible, pay-as-you-go model. CSPs can be direct (the partner manages your subscription) or indirect (through a distributor). Still, your experience is similar – you work with a partner who provides and manages your Dynamics 365 subscriptions.

Key Characteristics of CSP Licensing:

• Subscription Flexibility: CSP allows you to add or remove Dynamics 365 licenses more flexibly. Typically, you subscribe on either a monthly or annual term per license. If monthly, you can reduce or increase the count month-to-month. If annual (to get a better rate), you’re committed for a year for that license, but that’s still shorter than a 3-year EA. This “only pay for what you use” model is attractive for organizations with variable staffing or seasonal usage. For instance, if you hire 100 contractors for a 6-month project who need Dynamics access, under CSP, you could add 100 licenses for those months and remove them, only paying pro-rata. Under an EA, you’d have to true-up and then be stuck with those licenses (or at least their cost) until the end of the term.
• No Large Upfront Commitment: Unlike EA, you don’t have to project your 3-year needs and commit all upfront. No minimum number of users is required (CSP can be used even for small quantities). This makes CSP accessible to mid-market or growing businesses that can’t accurately forecast long-term. Cash flow-wise, CSP is pay-as-you-go, usually billed monthly or annually per subscription – you aren’t on the hook for a huge upfront contract (though annual CSP subscriptions may have early termination penalties if canceled mid-term).
• Pricing & Discounts: CSP pricing is generally based on Microsoft’s current list price (Retail price). Partners may offer a small discount or bundle in services, but the room for deep discount negotiation is less than EA. Microsoft provides partners a margin, and some partners pass a portion of that to the customer as a discount (for example, a partner might give you 5% off the Microsoft MSRP as a courtesy). However, you typically won’t get the 15-30% off enterprise discount that a well-negotiated EA could achieve. That said, CSP’s big “discount” is the cost optimization of paying only for active users. Many enterprises find that the waste they eliminate by trimming licenses via CSP can outweigh the higher per-license price. Additionally, Microsoft’s New Commerce Experience (NCE) for CSP now offers 1-year and 3-year subscription options, which can lock pricing similar to an EA, often with some discount for committing to those terms. So, CSP is becoming more like mini-EAs (you can choose a longer term per license for stability or stick to monthly for agility).
• True-Up vs. True-Down: CSP has no formal true-up – you just adjust your subscriptions as needed. If you need more licenses, you add them and pay moving forward (prorated for the first partial period). If you need less, reduce at the next renewal interval (or monthly). CSP’s ability to “true-down” is a major advantage. For example, suppose your company undergoes a reorg and 100 Dynamics users are no longer needed. In that case, you can reduce those subscriptions and stop paying for them (effective at the end of that billing period). In EA, you’d continue paying until the end of the term for those 100.
• Partner Managed Support: With CSP, your first line of support is the CSP partner. Microsoft expects partners to handle customer issues and only escalate to Microsoft if needed. Many CSP partners, especially large ones, provide 24/7 support as part of the service. This can be a plus if the partner has strong expertise (you get more personalized support), or a downside if the partner is not responsive (an extra layer between you and Microsoft). Some partners include managed services, user training, or adoption help as part of their value-add, which can offset costs you’d otherwise incur internally.
• Administrative Control: Functionally, you still get an admin portal (through the Microsoft 365 Admin Center) to manage Dynamics 365 users and licenses, whether EA or CSP. The difference is that with CSP, you might use the partner’s portal or have to request them to make certain changes depending on the model. Many partners give the customer full self-service admin. Just ensure you clarify how much control you maintain—you don’t want to wait on a partner for simple license adds/removals if it can be helped.

Ideal Scenarios for CSP: Organizations that need flexibility or have uncertain Dynamics 365 user counts often choose CSP. For example, a fast-growing company that might double or halve in size in two years would benefit from CSP’s agility.

Also, smaller enterprises that can’t meet EA minimums (or don’t want to commit to 3-year contracts) will go CSP. Some large enterprises are also starting to mix models – e.g., core stable users on EA, but extra project-based users on CSP.

CSP can also be a stepping stone: a company might start on CSP and later, once usage stabilizes, move to an EA for better pricing (or vice versa if they want to break an EA into more flexible terms).

EA vs CSP: Head-to-Head Comparison

For clarity, here’s a side-by-side comparison of key factors for Dynamics 365 under EA vs CSP:

Considerations When Switching

Some enterprises with EAs contemplate moving to CSP to gain flexibility (especially if Microsoft pushes them in that direction for mid-sized usage), or vice versa, to consolidate spend for discounts. If you consider a switch:

• Model the 3-Year Cost: Before changing, do a side-by-side financial comparison. Calculate your costs under the current EA (with its discounts but including any shelfware) versus projected costs under CSP (perhaps a higher unit price but only paying for what you need). For example, if you currently have 1000 licenses but only 900 are effectively used, CSP would drop those 100 unused licenses and charge only for 900. However, if your EA has a 20% discount on all 1000, you lose that 20% on the 900 if you go CSP at list price. You need to see which scenario saves more. Often, if you have a lot of shelfware, CSP wins; if you are highly optimized and heavily discounted, EA might still be cheaper.
• Transitional Discounts: Microsoft and partners sometimes offer incentives to transition from EA to CSP. For instance, Microsoft might allow customers to carry their EA pricing into CSP for a year or offer a temporary discount to match previous rates. These can ease the shift. As a CIO, negotiate for price parity—e.g., “We will move to CSP if you ensure we keep our $x per-user pricing for the first 12 months.” Partners can also structure agreements to minimize any double-paying during a switch.
• Contract Timing: You typically switch at the end of an EA term to avoid penalties. Plan it so that your EA isn’t automatically renewed or extended. If you’re moving from CSP to EA, you’d time it so that you sign an EA and then let your CSP subscriptions lapse or be transferred into the EA (some partners can transition the billing at renewal time).
• Operational Impact: End users won’t see a difference – this is purely a licensing backend change. But your finance and IT asset management processes will change. CSP requires more active month-to-month management (which is also an opportunity to optimize continuously). Ensure your team or partner has the processes to handle that (like checking each month for license count changes). On EA, you might only formally check once a year at true-up (though you should more often). So switching to CSP can actually instill a healthier discipline of continuous monitoring.
• Cloud Solution Provider Partner Selection: Choosing the right partner is key if you move to CSP. Look for a partner with experience in large enterprises, good support infrastructure, and maybe additional services (like license optimization advisory). Since you won’t negotiate price as much, the partner’s value will be in the service quality and any extra benefits they bring.

Read How to Optimize Dynamics 365 Licensing Costs.

CIO Recommendations

• Assess Your Needs for Flexibility vs. Price: Evaluate how stable your Dynamics 365 user count and usage are. If your headcount and Dynamics requirements are predictable, an EA’s locked-in pricing and discounts may yield the lowest total cost. If you experience frequent changes or are unsure about future needs, the flexibility of CSP to scale down (and up) on demand can prevent overspend. Choose the model that aligns with your operational reality.
• Understand Cost Trade-offs: EA often provides better per-user pricing due to volume discounts, while CSP lets you pay only for actual usage. Do a detailed financial comparison over a multi-year period. Sometimes a hybrid approach works: keep a core set of licenses in an EA and put more variable users on CSP. The goal is to minimize paying for unused licenses while still getting good prices for the used ones.
• Leverage Renewal as a Decision Point: The end of your EA term is the natural time to consider a switch. Don’t simply renew by default – review CSP options when your EA is up for renewal (and vice versa). If renewing EA, get a CSP quote through a partner for an equivalent scope as a sanity check on cost and flexibility. If moving to CSP, negotiate transitional pricing to avoid a sudden cost spike. Ensure continuity by planning the switch before the EA expires to avoid licensing gaps.
• Maintain License Governance Either Way: Implement strong internal license management regardless of EA or CSP. EAs can breed complacency (since you’ve paid upfront), leading to shelfware, and CSP can lead to negligence if no one is watching monthly charges. Set ownership to monitor Dynamics 365 license usage and cost. In an EA, strive to keep utilization high so you’re not renewing unnecessary licenses. In CSP, licenses are adjusted promptly when people join or leave. Good governance will maximize the benefits of whichever model you choose.
• Don’t Be Swayed by One-Size-Fits-All Advice: Microsoft reps might push mid-sized customers off EA to CSP, or partners might push one model because it benefits them. Make the decision based on your organization’s interests. If Microsoft is encouraging a program change, insist on a clear comparison of what you might lose or gain. For example, if leaving EA means losing a 25% discount, ask how they will compensate for that in CSP. Similarly, if staying EA means committing beyond your comfort, explore if a shorter-term EA or a compromise is possible.
• Review Support and Service Implications: With an EA, ensure you budget for a support agreement (Premier/Unified) as it’s not included. With CSP, evaluate the partner’s support capabilities – test their responsiveness if possible. The quality of support could affect your administrative overhead. If your internal team is strong and you don’t need partner hand-holding, CSP still can work; just ensure you have direct admin access and the ability to escalate issues to Microsoft through the partner when needed.
• Consult Licensing Experts for Transitions: If contemplating a move between EA and CSP, involve independent licensing experts (like Redress Compliance) or advisors. They can objectively analyze the pros/cons and the financial impact. They can also help negotiate with Microsoft or the CSP partner to get the best of both worlds (for instance, securing custom terms in a CSP agreement to mirror some EA benefits). This external perspective ensures you’re not missing hidden costs or gotchas in the switch.

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