Maximizing Cost Savings in Your Microsoft EA Renewal
Executive Summary
Renewing a Microsoft Enterprise Agreement (EA) is a prime opportunity for CIOs and IT procurement leaders to optimize costs.
This article explains how to identify and eliminate wasted licenses, right-size your subscriptions, and negotiate better terms so you minimize spending without compromising IT needs.
It’s a practical guide for enterprise CIOs, CTOs, and IT Asset Managers looking to achieve significant savings during an EA renewal while maintaining compliance and value.
Audit Your Current Usage for “Shelfware”
Cost optimization begins with a clear picture of what you’re paying for versus what’s used.
Start your renewal preparation by auditing all licenses and subscriptions under your existing EA:
- Identify Unused Licenses: Look for “shelfware”—licenses purchased but not deployed or rarely used. Common examples include Office 365 applications like Project or Visio, which are assigned widely but used by only a few, or cloud services that are enabled but not fully adopted.
- Reclaim and Reallocate: Once identified, plan to drop these unused licenses at renewal or reassign them to users who genuinely need them. For instance, if you have 500 Visio licenses but only 50 active users, you could remove or reduce 450 licenses in the new agreement, instantly cutting costs.
- Tools and Data: Use software asset management tools or Microsoft’s usage reports to gather accurate data on active users, login frequencies, and service consumption. Be sure to cover all products—Windows, Office apps, Azure services, Dynamics 365 modules, etc. A data-driven approach prevents relying on assumptions and ensures you only renew what’s truly needed.
Real-world example: A large enterprise discovered that 20% of its purchased Microsoft 365 E5 seats were unassigned or assigned to ex-employees.
Removing those at renewal saved thousands of dollars over the next three years.
Read Microsoft EA Renewal Timeline and Checklist for CIOs.
Right-Size License Levels and Products
Not every user or system needs the most expensive license tier.
To maximize savings:
- Downgrade Over-Provisioned Users: Analyze usage patterns to see if premium licenses are justified. If many users with Microsoft 365 E5 aren’t using the advanced security or analytics features, consider downgrading a portion to E3 or E1. The cost difference is significant – for example, E5 can cost ~$57 per user/month while E3 is around ~$36. Downgrading 100 users from E5 to E3 could save roughly $252,000 over three years (assuming a ~$21/month difference).
- Optimize Server and Cloud SKUs: Review server licenses and Azure subscriptions. You might be paying for Data Center editions or high-tier Azure plans, whereas Standard or lower tiers would suffice. Ensure you’re not double-paying: if you have Software Assurance enabling hybrid use, leverage it rather than buying new cloud licenses outright.
- Eliminate Redundancies: Check for overlapping capabilities. For example, if E5 includes advanced threat protection and you’re also buying from a third-party vendor, you might drop the extra tool or use it as a negotiation point for a lower EA price. Align products with actual business needs—if an on-premises product (like Skype for Business) was replaced by a cloud service (Teams), don’t renew those old licenses.
- Consider Niche Needs Separately: Evaluate whether specialized software (developer tools, BI, etc.) needs to be included in the enterprise-wide agreement. Sometimes, it’s cheaper to handle certain low-volume licenses via other programs or even standalone subscriptions outside the EA if they don’t meet the volume discount threshold.
You ensure every dollar in the renewed EA is tied to value by right-sizing and cutting excess. This might also simplify your environment, reducing support and maintenance overhead.
Leverage Volume and Timing for Discounts
Microsoft EAs offer built-in volume discounts and negotiating room – savvy CIOs use these levers to shrink costs:
- Understand Discount Tiers: EA pricing levels (A, B, C, D) correspond to the number of users or devices. Higher tiers (more licenses) yield bigger baseline discounts. If you’re near a threshold (e.g., 2,400 users for Level C pricing), consolidating purchases or including an affiliate’s licenses might bump you to the next tier for an extra discount. However, don’t add unused licenses just for a discount – the goal is net savings, not more spending.
- Negotiate Below MSRP: Treat Microsoft’s price list as a starting point. Enterprise deals routinely achieve 15–30% off or more on big-ticket products. Research what similar companies pay (through peers or consultants) and push Microsoft to match discounts. For instance, if the list price for an Office 365 E3 is $32/user/month, a 20% discount could bring it to ~$25.6, significant at thousands of seats.
- Multi-Year Cost Consideration: Look at the total 3-year cost, not just unit prices. Microsoft might offer a tempting first-year discount, but with built-in increases in years 2 and 3. Calculate the full term’s expense and negotiate caps on year-over-year increases. Ideally, lock pricing per unit for all three years.
- Time Your Negotiations: Microsoft’s fiscal year ends June 30, and the last quarter (April–June) is when sales teams push hard to close deals. You might secure extra concessions by negotiating in Q4 of Microsoft’s year (or Q2/Q3 for a year-end December renewal). However, avoid last-minute renewal panic – start discussions early so you’re not cornered into accepting a subpar offer due to time pressure.
Consider Alternative Licensing for Cost Efficiency
Renewal is a chance to rethink how you buy Microsoft services.
In some cases, shifting certain workloads or users to a different licensing model can save money:
- Assess Cloud Solution Provider (CSP) Options: Some organizations move specific subsets of users (or even the whole environment) to Microsoft’s CSP program at renewal. CSP is a month-to-month subscription model with no long-term commitment. While the per-unit cost can be higher than an EA with volume discounts, you pay only for what you use and can scale down any time. For a company that is shrinking or has fluctuating staffing, this flexibility might avoid overpaying for unused licenses.
- Mix and Match: You don’t have to put everything in one EA. Perhaps maintain an EA for core products used enterprise-wide (ensuring volume discounts on those) and use CSP or separate subscriptions for experimental or small-scale deployments. For example, keep Windows and Office under EA, but buy a handful of Power BI Pro licenses via CSP if only a few analysts need them, especially if that avoids raising your EA commitment.
- Evaluate Microsoft Customer Agreement (MCA) for Azure: If a huge part of your spend is Azure and Microsoft pushes you to the newer MCA (consumption-based) model, compare the costs. Under EA, Azure can have discounted pre-committed spend or pay-as-you-go at a fixed discount. Under MCA, you pay standard rates but with full flexibility. Depending on your cloud usage stability, one may be cheaper. Leverage whichever model gives the better deal, and consider negotiating Azure commitments as part of the EA renewal for an extra discount if you know you’ll spend a certain amount on Azure anyway.
Any shift in the licensing approach should be carefully analyzed. The key is to avoid paying “enterprise” prices for areas where a lighter model would do, and vice versa.
Microsoft sales reps might not suggest this mixing – it’s up to you to explore it and use it as a cost negotiation tactic.
Plan for True-Ups and Future Growth Wisely
A common budget pitfall is overcommitting to licenses “just in case.”
To keep costs lean:
- Commit Low, Adjust via True-Up: In an EA, you’re generally locked into the initial quantity for each product, with the ability to add more annually via True-Ups. Instead of buying 10% extra licenses upfront for projected growth, consider starting with what you need now (or a modest buffer) and plan to True-Up annually if growth occurs. True-Up additions will cost then, but you avoid paying from day one for users or usage that might not materialize until year 2 or 3 (if ever). This prevents wasted spend on idle licenses.
- Negotiate Future Unit Prices: If you expect growth, negotiate price protections for added licenses. For example, if you’ll likely add 500 Microsoft 365 users next year due to an acquisition, try to lock in today’s discounted rate for those future True-Ups. Otherwise, you might face higher list prices or fewer discounts later.
- Avoid Over-Engineering the Agreement: Microsoft might now push enterprise-wide adoption of new products (like a security suite or an AI add-on) with attractive pricing. Be cautious – only include it if you’re sure it will be utilized. It’s often better financially to exclude a nice-to-have product from the EA and pilot it separately than to bundle it and pay for all users when only a small group uses it. You can always add it later once the value is proven.
- Keep an Eye on Support Costs: While the EA covers software licensing, remember that support (Premier/Unified Support) is a separate contract. If your EA renewal significantly changes your product mix (e.g., moving more to cloud), check how that affects your support costs. You may negotiate a support credit or discount as part of the overall deal, or adjust support levels to fit the new environment, indirectly saving costs.
By anticipating how your needs might change—but not overpaying for them upfront—you balance cost savings and flexibility.
Microsoft’s standard EA terms favor consistent counts, so you must insert flexibility where you can or choose an approach like CSP for truly unpredictable needs.
Recommendations
- Start early with a thorough internal audit of all EA-covered software. Before renewing, cut out or reassign any licenses not actively used so you’re not paying for shelfware going forward.
- Align license levels to actual user needs. Don’t automatically renew everyone at the highest SKU – downgrade where premium features aren’t needed. This right-sizing can yield major savings.
- Leverage Microsoft’s discount structure by consolidating volume where it makes sense, but always push for additional discounts. Use benchmarks from similar enterprises to strengthen your case in negotiations.
- Time your negotiations strategically, aiming for periods when Microsoft is more likely to concede (such as the end of the quarter or year). But never let the timeline force you into a bad deal. Maintain the option to walk away or explore alternatives.
- Consider a hybrid licensing approach. Renew an EA for your stable core business and use CSP or other models for areas where you need flexibility. This prevents overspending on parts of the business that don’t fit a one-size EA model.
- Negotiate value-adds and protections. Ask for price locks on future additions, include training credits or workshops in the deal, and ensure any promised discounts or terms are captured in writing. These extras increase the ROI of your EA at little to no extra cost.
- Plan your EA like a three-year budget. Don’t just look at the first year—project the full term. Account for known growth or reductions each year and structure your licensing plan (and cash flow schedule) to avoid surprises.
- Engage stakeholders in cost decisions. Ensure finance and business unit leaders understand the trade-offs of license cuts or changes. This alignment prevents last-minute requests for unnecessary renewals “just in case,” which inflate costs.
- Keep a post-renewal management plan. Cost optimization isn’t a one-time task. After renewal, continuously monitor usage and have quarterly reviews to reclaim licenses or adjust subscriptions so you stay efficient throughout the EA period.
FAQ
Q1: How do I determine which licenses are “shelfware” before renewal?
A: Gather data from Microsoft admin portals and asset management tools to see active usage. Look at login/activity reports for cloud services and installation counts for on-prem software. If a product or service shows significantly lower usage than the number of licenses owned, flag it as shelfware. Common culprits are optional add-ons (Visio, Project, Power BI Pro) or surplus Office 365 seats. Engaging end-user managers can also help confirm if certain tools aren’t needed. By compiling this information 6–12 months ahead, you can confidently decide what to cut in the new EA.
Q2: Can we reduce the quantity of certain licenses when renewing our EA?
A: Yes. Renewal is signing a new 3-year agreement, so you can adjust your license counts (and even remove products) based on current needs. This is your chance to “true-down.” For example, if you initially had 2,000 Windows 10 enterprise licenses but only 1,800 devices now, you can renew with 1,800. Microsoft will price the new EA on those quantities. Meet any program minimums (500 users/devices for an EA). Note that after renewal, during the term, you can usually only increase via True-Ups, not decrease, so set the baseline wisely.
Q3: What kind of discount can large enterprises negotiate on an EA renewal?
A: It varies, but large enterprises (thousands of seats) often negotiate 20-30% off Microsoft’s list prices, sometimes more for huge deals or strategic products. The EA program provides some discount tiers (Level A, B, C, D), but you can usually get an additional percentage off beyond those if you negotiate. Factors that influence the discount include the size of the deal, how close to Microsoft’s end of quarter/year you’re negotiating, and whether you have competitive alternatives. Always ask for more discount than you expect – it sets a tone for negotiations. And use any market data or past quotes as leverage.
Q4: Is it worth downgrading users from E5 to E3 to save money?
A: In many cases, yes. E5 offers advanced features (security, analytics, telephony) that not all users need. If your analysis finds that only 30% of users benefit from E5 features, you could renew only those in E5 and put the rest on E3. The cost difference is substantial – E5 can be 50-60% more expensive than E3. By downgrading unnecessary E5s, companies save millions over the EA term. Ensure that the users moved to E3 get the functionality they require for their jobs (E3 still includes core Office apps, email, etc.). You can also retain a few extra E5 licenses in a pool to assign on demand if someone suddenly needs an upgrade later.
Q5: Our company is growing – how do we avoid a huge true-up bill each year?
A: Growth is great, but can lead to big true-up costs if not managed. One strategy is to negotiate pricing for expected additions upfront. For example, if you anticipate adding 500 users next year, negotiate the per-user cost for those now as part of the renewal (maybe even pre-purchase some at a discount). Another tactic is aligning your EA start date to just after a growth surge. If a merger or expansion is to happen in 3 months, the EA will begin post-expansion so that those users are included in initial counts at the negotiated rate. Also, budget internally for true-ups: treat them as expected incremental expenses rather than surprises. Regular quarterly internal audits can predict your true-up, so you can plan finances or adjust usage accordingly.
Q6: Microsoft is pushing many new products in our renewal quote (Teams Phone, Power Platform add-ons, etc.). How do we decide whether to include them?
A: Be cautious and evaluate each on ROI. Microsoft often bundles or recommends new offerings during renewal. First, check if you already own similar capabilities – for instance, do you need a Power BI Pro EA subscription for all, or does only a small team need BI? Perhaps only license that team via a smaller deal. Consider a pilot outside the EA first if the new product is new. You can negotiate the option to add it later at the same discount rather than committing all users now. If Microsoft offers it free or deeply discounted for year 1, understand the full-term cost – sometimes, price jumps can bite in years 2 and 3. Only include what aligns with your strategic roadmap and provides clear value; otherwise, keep your EA lean.
Q7: We have many on-premises server licenses with Software Assurance (SA). How does renewing or not renewing SA impact cost?
A: Software Assurance typically costs about 25% of the license annually and is bundled into EA product pricing. If you drop a certain server product from your EA renewal (thus not renewing SA), you lose rights like version upgrades and maybe some cloud benefits for that product, but you also stop paying that yearly fee. To save costs, assess if you still need those servers or if they can run without continuous upgrades. If a server product is stable and you don’t plan to upgrade it in the next couple of years, you might decide not to renew its SA and just keep using the last version you have (this is known as letting licenses lapse into perpetual use). However, be careful: if you later need to upgrade or if Microsoft audits for compliance on newer versions, you’d have to purchase new licenses. It’s a trade-off between potential future flexibility and immediate savings.
Q8: Can we negotiate our Microsoft support costs or include support in the EA negotiation?
A: Yes, you should bring it up. Microsoft Premier/Unified Support is separate from the EA, but at renewal time, you have leverage. Some organizations negotiate a discount on support fees or get Microsoft to throw in some support hours/credit,s especially if they’re upping spend on cloud services. You can also consider lowering your support tier if your EA product mix changes (for example, fewer on-prem servers might reduce support complexity). While support might not be officially part of the EA contract, the overall relationship value is considered. At minimum, ensure you know when your support contract is up for renewal and align its discussion with the EA negotiations for a holistic cost picture.
Q9: How do we handle subsidiaries or affiliates in our EA to save money?
A: Microsoft allows enterprise affiliates to be covered under one EA, which can help reach higher volume discount levels. If you have smaller subsidiaries that currently have separate Microsoft agreements (or even use retail licenses), consider rolling them into the master EA at renewal. This increases your total license count (potentially pushing into a better pricing tier) and simplifies management. Just ensure you have the legal authority to include them and that their addition genuinely results in the cost per unit going down. Conversely, if a subsidiary operates independently and is small, sometimes it might be cheaper to use CSP or Open licenses rather than being forced into the large EA’s commitments. Evaluate it case by case, but often centralizing purchases yields bargaining power.
Q10: How can we optimize our costs throughout the 3-year term after we complete an EA renewal?
A: Treat EA management as an ongoing process. Schedule periodic (e.g., quarterly or biannual) reviews of license assignment and usage. If people leave the company, reclaim their licenses promptly to avoid needing extras. Keep track of Azure consumption against commitments so you don’t overrun (incur pay-as-you-go at higher rates). Also, stay informed on Microsoft’s product changes – they sometimes introduce new bundles or licensing options mid-term that could be beneficial (or changes that could increase costs unless you proactively adjust). If you see parts of your EA are not being utilized as expected one year in, reach out to your Microsoft rep to see if you can swap some licenses or make adjustments – they may not allow reductions. Still, in some cases, they might accommodate a mid-term optimization if it means you adopt new services. Finally, start planning for the next renewal early (again!) with all these insights, so the cost optimization cycle continues.
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