The Three Pillars of Proposal Evaluation
A renewal proposal is Microsoft's initial offer — it's up to you to analyse it and decide what to accept, negotiate, or decline. Every proposal should be evaluated across three dimensions:
Cost Analysis
Licence quantities, unit prices, discounts, year-by-year escalation, one-time vs recurring charges, total 3-year TCO
Contractual Terms
Reduction rights, price protections, payment terms, unused balances, lock-ins, audit clauses, changes from current contract
Bundled Services
Product bundles & upsells, Azure commitments, consulting/training credits, discount dependencies on bundles
Master EA renewal negotiation tactics
EA Renewal Guide →1. Break Down the Costs
Licence Quantities & Unit Prices
Verify every SKU quantity against your actual needs (from your internal usage review). Microsoft's quote may replicate or inflate current counts, assuming growth. If you find 1,000 E5 licences quoted but only 800 users need E5 (rest could use E3), flag those 200 extras immediately. Don't pay for what you don't need just because it's on the proposal.
Pricing & Discount Benchmarking
Calculate the effective discount percentage for each major product and overall. Compare against benchmarks: what discount did you get last time? What do similar organisations receive? At minimum, compare to Microsoft's current price lists. Watch for hidden increases — a "flat" renewal might mean you've lost a discount if Microsoft raised list prices. Lower discounts than expected = immediate negotiation point.
Year-by-Year Cost Trajectory
Verify whether costs remain flat or escalate annually. An EA may show fixed annual costs for 3 years with current quantities, but growth assumptions may inflate Years 2 and 3. For Azure or consumption services, check for anticipated annual spend increases or required ramp-ups. Ensure any planned changes are explicitly outlined, not buried in assumptions.
One-Time vs Recurring Charges
Identify one-time fees (perpetual licence purchases, true-up payments) versus recurring subscriptions. Note any credits or funding (e.g., Azure credits for Year 1) — account for these properly rather than letting them inflate the perceived value of the deal. Credits expire and may create pressure to over-consume.
Total 3-Year Cost of Ownership
Add up the complete term cost. A proposal focusing only on "yearly" cost can be deceiving — a small yearly increase could be millions over 3 years. If an Azure commitment is included, incorporate the cost plus overage risk if you under-consume. Understanding TCO is essential for internal budgeting and comparing alternatives.
Microsoft's initial proposal often includes inflated quantities and reduced discounts compared to your current deal. Never accept the first proposal at face value. The initial offer typically has significant room for improvement — it's the buyer's diligence and negotiation that realise those improvements.
2. Scrutinise Contractual Terms
Cost is only one side. The terms and conditions can significantly impact the deal's value and flexibility.
Reduction & Flexibility Rights
What does the proposal say about reducing licences? Traditional EAs don't allow reductions during the term (only additions via true-up), but you reset at renewal. If considering CSP or EAS (Enterprise Agreement Subscription), note that these may allow reductions at specific intervals. Check whether EAS — which lets you drop licences at each anniversary — is an option in the proposal.
Price Protections & Caps
Does the proposal lock your per-user price for all 3 years? (EA usually does for initial products.) Strategically, consider negotiating a cap on price increases for the next renewal — e.g., a clause stating any increase at the following renewal is capped at 5%. If the proposal includes Azure consumption, check whether unit rates are fixed or can change with price list updates.
Payment Terms & Financing
Review the payment schedule. Standard EAs are annual upfront, but you may negotiate quarterly payments (sometimes with a financing fee). For large Azure commitments, ensure spread-payment terms are documented. Align payment terms with your cash flow preferences — don't accept unfavourable timing just because it's the default.
Unused Balances & "Use It or Lose It"
For prepaid elements (Azure Monetary Commitment), unused credits are typically forfeited at term end. Negotiate flexibility or a smaller commitment if you're unsure of usage. Spot whether the proposal assumes a large commitment that could become wasted spend — this is a high-risk term for many enterprises.
Lock-Ins & Changes from Current Contract
Check for requirements to adhere to other agreements or renewals as a condition of pricing. Compare to your current agreement's terms: if you had flexible provisions (licence transfers, training vouchers, special amendments), ensure they carry over. Review any new contract language — Microsoft updates standard terms over time, including liability, data processing, and audit clauses.
Build the right internal team for renewal
Renewal Negotiation Team →3. Identify & Evaluate Bundled Services
Product Bundles (E3 → E5 Upsells)
If your current agreement is largely E3, the renewal may push E5 — bundling security, compliance, and voice features at ~50% more per user. Evaluate each bundled component: will you use it? Many E5 features go untouched. Price out E3 + selective add-ons as a comparison — you may achieve the same result for much less. If only 200 users need advanced analytics, don't buy E5 for 2,000.
Upsells to New Products
The proposal may include products you never licensed — Power Platform, Dynamics 365 modules, Azure services. Treat with healthy scepticism: are they included as a trial that becomes costly later? Are they simply padding the deal? You are not obligated to accept every line. Remove items that don't serve a genuine, documented need.
Azure Consumption Commitments
Many EA renewals include Azure Monetary Commitment — agree to spend a set amount over the term. Evaluate carefully: does the committed amount align with your cloud strategy and realistic forecasts? Overcommitting for a discount can backfire — companies have locked in large commitments and then struggled to utilise the budget. Negotiate a smaller commitment if uncertain, or request flexibility (carryover of unused funds, though rarely granted).
Other Bundled Benefits
Consulting days, FastTrack services, training vouchers, promotional discounts on new products. List them all and evaluate: will you actually use them? If Microsoft offers 100 consulting hours but you have no project for them, that's not a real benefit. Ensure offers are documented (how to redeem, expiration). Don't let add-ons distract from the core pricing negotiation.
Discount Dependencies on Bundles
Be aware if pricing is conditional on purchasing a specific bundle. Microsoft may say "20% off E3, but only if you also purchase Azure XYZ or upgrade X% of users to E5." Clarify whether discounts change if you alter or remove bundle components. If a bundle item is truly unnecessary, argue that you still deserve the discount on the core — or at least understand the trade-off.
If it doesn't bring value to your organisation, it shouldn't incur a cost on your agreement. Don't be afraid to unbundle the proposal. Microsoft's bundle pricing can obscure the fact that some components are overpriced individually. Negotiating components separately may yield savings — price out the à la carte alternative as leverage.
4. Assess Strategic Alignment
Licences vs Usage Projections
Compare what's being sold to what your internal teams forecast. If you plan to hire 500 staff in two years, check the proposal accounts for it. If layoffs or divestitures are expected, you'll be over-licensed with static numbers. Consider only committing to what you know and handling growth via true-up or separate purchases later.
Cloud vs On-Prem Mix
Proposals increasingly push cloud subscriptions. Ensure the cost accounts for any on-prem pieces you still need (Windows Server with SA, SQL Server on-prem, etc.). Evaluate whether staying on-prem for certain workloads with SA might be cheaper than Microsoft's proposed cloud alternative — accounting for hardware, third-party, and transition costs.
Roadmap Fit & Future-Proofing
Are there products that might become important in a year (Windows 365, Azure AI services)? If they align with your roadmap, negotiate favourable terms — pilot quantities or ability to scale later at locked pricing. If not on your roadmap, they're safe to cut. Be aware of what they are in case that changes.
Licensing Programme Choice
The proposal may default to EA renewal, but consider whether a different programme or mix would be better. What if you moved some services to CSP or MCA for flexibility? Run scenario analyses: EA vs CSP vs month-to-month Azure. Just the threat of changing models can generate negotiation leverage — Microsoft confirms no penalty for switching programmes at renewal.
5. Quantify Value of Bundles & Extras
Third-Party Price Comparison
For E5 security features, quantify what it would cost to buy similar capabilities separately (Microsoft à la carte or a third-party vendor). If you find a significant cost difference, use it in negotiation: "We can achieve the same with a third-party for less — this needs to be priced more competitively or removed."
Dollar-Value Every Benefit
Azure credits: real money only if you plan to consume that much. Free consulting: valuable only if you have a project ready. Put a dollar value on each bundled benefit and determine if it truly offsets something you'd otherwise pay for. Benefits go unused when they aren't explicitly documented and planned for.
Document Soft Benefits
If Microsoft touts support, customer success manager, or other "soft" benefits, ensure they're documented in writing. Understand how to utilise them and for how long. Undocumented benefits have a habit of disappearing after signature.
A renewal proposal is often Microsoft's opening position — it's designed to protect their interests. Your job is to transform it from a passive quote acceptance into an active, value-driven negotiation. The initial offer almost always has room for improvement.
Real-World Examples
Bundled Suite vs À La Carte
Professional Services FirmThe renewal proposal moved all 2,000 users from Office 365 E3 to Microsoft 365 E5, resulting in a 40% increase in annual costs. The CIO broke down the E5 bundle: advanced security (ATP), phone system, Power BI Pro, and more. Many components overlapped with existing tools or weren't planned for deployment (third-party security solution in place, Teams Phone not ready).
They counter-proposed: stick with E3 for most users, buy just 200 E5 licences for power users needing Power BI and advanced features, and continue with existing security unless Microsoft discounted heavily.
Microsoft relented and offered a customised deal — E3 plus the security add-on at a steep discount for those who needed it. The result was a much smaller increase and a solution aligned to actual needs, saving hundreds of thousands over the term.
Azure Commitment Oversight
RetailerThe EA renewal included a new Azure consumption commitment of $2 million over 3 years. The cloud architect flagged that current Azure spend was only ~$400K/year. Unless projects ramped significantly, $2M was overshooting. They calculated that overcommitting by $1M would waste more money than the extra 5% discount Microsoft offered for the higher commitment.
Negotiated Azure commitment down to $1.2M with the same discounted rates. Six months in, this proved wise — usage grew but still tracked under the original aggressive target. They would have left significant money on the table trying to hit $2M.
Price Cap Negotiation
Tech CompanyThe company recalled a significant price increase at their last renewal because prior discounts didn't carry over. The new proposal still lacked guardrails on future pricing. Learning from experience, they negotiated a "not to exceed X% increase" cap on pricing for the next renewal.
Microsoft's initial reaction was that they don't fix future prices. The customer agreed to a slightly higher Year 1 price in exchange for a contractual addendum: at the next renewal, core product prices would not increase by more than 5% if they renewed.
The final deal included a clause locking their discounts for the next cycle — an unconventional but valuable term that protected against future price shocks and rewarded loyalty.
Removing Unnecessary Products
EnterpriseThe proposal included 500 licences each of Visio and Project Online — copied from the old EA. The IT asset manager found that only ~100 power users actually used them; alternatives existed for others. Microsoft had simply replicated old quantities without usage validation.
Microsoft initially tried to retain them by offering a modest discount. The customer had already decided to use cheaper third-party diagramming tools for most users.
Removed 400 Visio and 400 Project licences from the deal, saving considerable costs and simplifying the agreement. If they hadn't checked every component against actual needs, they would have blindly renewed hundreds of unused licences.
Recommendations
Engage Stakeholders in Review
Circulate proposal details to IT subject matter owners, finance analysts, and licensing specialists. Let your security team review E5 security bundles, have finance validate the costing maths, and get cloud architects to validate Azure commitments. A collaborative review catches issues one person might miss.
Create an Evaluation Scorecard
Build a checklist with traffic-light coding: Green = must-have/acceptable, Amber = needs clarification or improvement, Red = problematic or unnecessary. This guides negotiation focus — green items are acceptable, red ones you'll push back on or remove, amber you'll discuss.
Validate All Assumptions
Check every assumption with your data. If Microsoft assumed growth or product adoption, confirm against your actual plan. Don't accept "we assumed you'd want 20% more of X" unless you truly do. Challenge inflated assumptions in your counter-proposal.
Prioritise Top 3–5 Changes
Identify the changes that would make the biggest difference (cost or risk reduction) and focus there first. Maybe it's cutting an unnecessary bundle, lowering an Azure commitment, or securing a price reduction on the main SKU. Lesser issues can be addressed later or conceded as trade-offs.
Get Clarifications in Writing
If any part is unclear — "Includes Defender ATP for all users" — ask Microsoft to clarify in writing. Services might be trials or have usage limits. Get clarity to avoid post-signature disputes: "We thought we had X, but turns out we didn't."
Prepare Alternative Scenarios
Outline alternatives: A) Renew EA with changes (fewer licences, better discount). B) Shift scope to CSP or cloud-only. C) Drop certain Microsoft products entirely. Knowing these gives negotiation leverage — subtly letting Microsoft know you have options. Also prepares you internally if you need to pivot.
Leverage Independent Benchmarks
Use third-party benchmarks for pricing and terms. Independent licensing advisors or peer connections can share discount ranges or special terms others received. If companies of your size typically get 20% off and you're getting 10%, confidently push for better. General market knowledge is fair to use as leverage.
Don't Be Afraid to Walk Away
If the proposal is far from acceptable, articulate your concerns clearly. Be willing to delay or walk away — not signing by the deadline is better than locking into a bad contract. Showing willingness to consider alternatives (month-to-month Azure, alternative vendors) can pressure Microsoft to improve the offer.
Verify the Final Agreement
Double-check that final paperwork accurately reflects all negotiated changes. Verbal agreements sometimes don't make it into the documents. Meticulously reconcile pricing, quantities, and any additional terms (price caps, special concessions). This is where earlier documentation and clarity requests pay off.
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