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Microsoft's Shift from EA to MCA

Microsoft is moving away from Enterprise Agreements towards the Microsoft Customer Agreement (MCA), especially for customers who buy directly from Microsoft. Starting in 2025, Microsoft is phasing out EAs for many mid-sized customers in favour of MCA. Enterprise Agreement "Level A" customers (up to approximately 2,400 users) will no longer be able to renew under an EA and must transition to either an MCA or another model.

Why Microsoft Introduced the MCA

The MCA is a simplified, evergreen (non-expiring) digital contract designed to replace older agreements. Key characteristics include no minimum seat requirements, modular terms that update dynamically as you add services, and a single agreement covering all cloud services such as Azure, Microsoft 365, Dynamics 365, and Power Platform without needing separate enrolments or annual renegotiation.

Key Drivers of the Transition

Unlike the rigid 3-year EA term, MCA is evergreen with monthly, annual, or 3-year subscription options. Organisations can scale licences up or down more fluidly without a hard renewal deadline every three years.

EAs typically require 500+ users and enterprise-wide coverage of core products. MCA has no minimum user/device requirement, eliminating "shelfware" licences purchased just to meet EA thresholds.

Under MCA, customers can add services or licences via Microsoft's web portals without formal ordering paperwork. Microsoft's New Commerce Experience enables even large enterprises to transact in a self-service manner.

MCA terms update dynamically to include new services and policy changes, reducing the need for signing new contracts but also providing less negotiation leverage on contract language compared to a heavily negotiated EA.

Some EA-specific benefits may not carry over to MCA, including "Step-up" licences and certain Software Assurance perks such as training vouchers and long-term support rights. Review which benefits you rely on (dual use rights, licence mobility, etc.) and confirm how they translate under an MCA or CSP alternative.

Recommendation: Begin planning your transition strategy well before your EA expires. Engage Microsoft or your licensing partner to understand MCA pricing and terms. Large EA customers with custom discounts will need to negotiate those into their MCA or consider a CSP partner who can offer comparable discounts.

EA vs. MCA vs. CSP: Operational Comparison

Choosing the right licensing model involves understanding the operational differences. Each model offers distinct advantages and constraints:

Enterprise Agreement: Offers predictable costs and comprehensive benefits at the cost of flexibility. Three-year commitment, processor-based reporting, and Software Assurance perks.

Microsoft Customer Agreement: Provides greater agility and direct control but may lack some legacy perks. Evergreen digital contract with flexible subscription terms.

Cloud Solution Provider: Sits in between. Flexibility similar to MCA, but you outsource some management to a partner. Often includes volume discounts comparable to EAs.

Many organisations may mix models depending on the best pricing and management fit. Strategic licensing advisory helps determine the optimal mix for your specific situation.

Managing M365 Subscriptions and Licences under MCA

With an MCA in place, IT administrators have direct control to provision and de-provision licences in real time. Effective management of Microsoft 365 licences is critical to avoid overspending.

Licence Assignment via Admin Centre

Navigate to Billing > Your Products to view each subscription and see purchased versus assigned counts. From here, you can increase or decrease licence quantity on the fly for flexible-term subscriptions. Under Users > Active Users, select users and use Assign/Unassign Licence to manage access. Changes take effect almost immediately.

Consider using Group-Based Licensing via Azure AD (Entra ID) for efficiency. Assign a licence SKU to an Azure AD security group. When a user joins the group they automatically receive a licence, and when removed, their licence is revoked. This is especially useful for large organisations and onboarding/offboarding batches.

Managing Licence Additions and Removal

With monthly-term subscriptions, you can decrease quantity at any time. Microsoft reduces the charge in the next monthly invoice. This is the most flexible option for fluctuating staff counts.

With annual-term subscriptions, you commit to a number of licences for the year. You can unassign licences from users but generally cannot reduce the total purchased quantity until the annual term ends. Plan to turn off auto-renew or renew with a lower count if needed.

Best practice: Keep approximately 10 percent of headcount on month-to-month subscriptions as a buffer for unexpected changes, even though the unit cost is slightly higher. This allows rapid downsizing without penalty.

Internal Policies to Implement

New Hire Process: Map job roles to licence types (e.g., Salesperson to E5, Contractor to F3). Use Azure AD groups or scripts to automate based on department or role attributes.

Departures Process: Immediately disable accounts and reclaim licences when employees leave. Integrate with HR offboarding checklists to avoid "ghost users" consuming seats.

Periodic Access Reviews: Perform licence audits quarterly to identify users who haven't logged in or used services for 30-90 days. Reclaim unused licences and reduce subscription counts accordingly.

Renewal Management: Even though MCA is evergreen, individual subscriptions have specific renewal dates. Treat these dates like EA anniversaries. Review needs 1-2 months prior. Decide whether to reduce quantity, change edition, or cancel before auto-renewal locks you in for another full term.

Managing Azure Subscriptions under MCA

With the move to MCA, Azure management becomes more integrated into the Azure Portal and follows a pay-as-you-go model unless you have separate Azure commitment discounts.

Azure Billing Structure under MCA

Under an MCA you have a Billing Account visible in the Azure Portal's Cost Management + Billing section. This contains Billing Profiles (e.g., one per region or business unit, each with its own invoice), Invoice Sections (grouping subscriptions for invoicing), and Azure Subscriptions associated with invoice sections. This hierarchy is more flexible than the EA's fixed Department/Account structure.

Key Operational Best Practices

Establish an internal process or request form for creating new Azure subscriptions to avoid sprawl. Each subscription should have a clear owner, purpose, and naming convention.

Use RBAC (Role-Based Access Control) to control who can manage resources or view costs. Enforce least privilege. Give finance teams "Invoice Reader" roles, and restrict who can create new subscriptions to a central cloud team.

Configure budgets for each subscription or resource group to catch runaway cloud spend. Use Cost Analysis to break down charges by service, resource group, or tag.

Mandate that all Azure resources are tagged with department, project, or environment information. Azure Policy can enforce required tags at resource creation, crucial for showback/chargeback.

With pay-as-you-go, you truly pay only for what you use. Continuously optimise. Use Azure Advisor, shut down underutilised VMs, and purchase Reserved Instances or Savings Plans where it makes financial sense.

Set up cost anomaly alerts. The agility of the cloud makes it easy to overspend quickly if something is misconfigured. Real-time monitoring is essential for operational excellence.

EA to MCA Migration: When transitioning Azure from EA to MCA, resource access does not change. It's essentially a billing swap. Work closely with Microsoft during migration to align invoice timing and inform resource owners of any new subscription IDs. After moving, decommission the old EA enrolment.

Licence Hygiene Best Practices

Poor licence hygiene can cost enterprises millions in wasted spend or compliance issues. These best practices ensure you use what you pay for and pay only for what you need.

Identifying and Removing Inactive Users

Use M365 Admin Centre Reports to identify inactive users (no login in 30-90 days). Cross-check that departed employees' licences are removed. Leverage Azure AD access reviews or third-party tools to automate identification.

Align HR and IT Processes

Align HR and IT so that departures immediately trigger account disabling and licence reclamation. Integrate HR systems with identity management, or at minimum, include "remove licences" on the last-day checklist.

Right-Size Licences to User Needs

Right-size licences to user needs. Frontline workers may only need F3 instead of E3. Conversely, buying E1 plus separate add-ons may cost more than a single E3. Review periodically whether users are in the correct tier.

If a user has M365 E5, don't also assign standalone Power BI Pro or Office 365 E3. Regular audits of per-user licence lists can catch anomalies. Watch for users with multiple Exchange Online plans.

Maintain a Renewal Calendar

Keep a centralised calendar of renewal dates. 90 days before renewal, review if you need the same quantities. Don't rely on auto-renewal. Treat each subscription like a mini-contract that needs a decision.

Create Licence Scorecards

Present each department with a summary of their licence usage and costs ("licence scorecard"). This promotes awareness and accountability. Department heads can identify discrepancies and opportunities for optimisation.

Establish KPI Targets

Many CIOs now include licence utilisation as a KPI: "less than 5 percent of licences unassigned" or "90 percent or higher of purchased licences have active users." These targets ensure efficient use of Microsoft investments and make optimisation a continuous discipline rather than an annual scramble.

Showback and Chargeback for Cloud Costs

As IT expenditures shift to subscription and consumption models, CIOs must implement mechanisms to allocate and recover costs internally. Showback reports costs without billing departments, increasing transparency. Chargeback directly bills departments for their usage, transferring cost ownership.

Implementation Steps

For M365: associate every user with a department/cost centre via Azure AD or HR system. For Azure: tag resources with department or use separate subscriptions per business unit. Under MCA, use one Invoice Section per department.

Generate monthly or quarterly IT cost reports for each business unit. Present these alongside context. Visibility alone often prompts questions like "Can we reduce that cost?" Start with showback to work out data kinks and build cultural readiness.

Coordinate with Finance to set up internal billing codes. For M365, charge a flat rate per user per month by licence type. For Azure, charge actuals with a month delay, or charge a fixed monthly budget and reconcile quarterly.

Export Azure cost data via APIs and combine with directory data to create automated dashboards. Use Power BI to join licence assignments with departmental information. Consider third-party IT Financial Management tools if complex.

Address Shared Services: For broadly shared infrastructure (company-wide SharePoint, ExpressRoute), allocate by user count, specific usage metrics, or treat as central overhead. Be explicit in policy about which services are charged back vs. centrally funded.

By implementing showback/chargeback, CIOs transform IT from a black-box cost centre into a transparent service provider. When departments see they "own" their cloud costs, they naturally optimise. Reinvest savings to fund further projects. Positive reinforcement drives engagement.

Controlling Self-Service Purchases

Microsoft's self-service purchase capability lets end users buy licences (Power BI, Power Apps, Power Automate, Project, Visio) using their corporate Azure AD account and a credit card without IT involvement. By default, all eligible products are enabled for self-service in a tenant.

Risks of Uncontrolled Self-Service

Compliance and Security: Users purchasing software on their own may bypass normal vetting. Shadow IT and Redundant Spend: IT may be unaware, leading to duplicate licences. Support Ownership: If a user leaves with an active subscription, it could continue charging indefinitely. Budgeting: Purchases outside standard procurement bypass spending controls.

Governance Options

In the M365 Admin Centre, go to Billing > Your Products > Self-service purchases tab and disable each product. This forces purchases through IT/procurement, maintaining oversight. Unless your organisation explicitly wants this freedom, disabling is generally safer.

If enabled, regularly check the Admin Centre for new self-service subscriptions. Communicate a policy that employees should not expense self-purchased Microsoft licences without approval. Take over and merge any discovered subscriptions.

Use the MSCommerce PowerShell module to enumerate products and disable self-service at scale. Schedule a script to run periodically so when Microsoft adds new eligible products, they're auto-disabled before anyone can purchase them.

Review the list of products with self-service capability immediately. Decide on a policy and configure your tenant. Update IT policies and educate procurement/finance. They may notice small charges on credit cards for Microsoft and can flag them to IT.

True-Up and True-Down Strategies

In legacy EA licensing, true-up was an annual ritual and true-down was only allowed at renewal. In modern subscription models (MCA/CSP), these concepts operate continuously.

Under Enterprise Agreement

True-Up: Annual assessment of usage increases at each EA anniversary. A final true-up occurs at the end of the 3-year term. True-Down: Generally not allowed mid-term. You can only decrease at renewal, setting a new baseline.

Under MCA: Continuous Optimisation

Review licence needs monthly (or at least quarterly). Make incremental adjustments instead of large, once-a-year jumps. If you open a new branch with 20 hires, simply add 20 licences, and remove them when those positions close.

If you foresee downsizing (e.g., a project ending), put those users on monthly subscriptions so you can cancel with minimal penalty. Commit only core, stable staff to annual terms. Keep contingent/seasonal staff on monthly.

In MCA pay-as-you-go, you save money by not using resources, opposite of EA's "use it or lose it" pre-paid commitment. Embrace auto-scaling, shut off VMs on weekends, and right-size instances continuously.

Limit who can adjust licence quantities to designated IT asset managers. Require a short justification for any reduction (ensuring no user loses needed access) and budget confirmation for additions above a threshold.

Financial Impact: Under EA, adding licences late in the year was financially advantageous. Under MCA, you pay as soon as you add. Budget-wise, costs spread more evenly. No large surprise true-up bills. Communicate this change to your finance team so they're prepared for the different spending pattern.

Common Pitfalls and How to Avoid Them

Zombie Licences After Staff Changes

Months after layoffs or attrition, IT discovers hundreds of licences still allocated for former employees. Fix: Automate licence removal when accounts are disabled. Run monthly reports of disabled users with active licences. Audit after any large organisational change.

Subscription Sprawl Without Central Tracking

Multiple subscriptions across Azure and M365 created without central tracking, leading to duplication and management complexity. Fix: Establish a central registry of all subscriptions. Require tagging with owner and project. Consolidate same products that exist via multiple channels.

Upgrading Everyone to Premium Editions

Upgrading everyone to E5 for a few features but then not deploying those features. Paying approximately 50 percent more per user with no ROI. Fix: Pilot top-tier licences with a subset first. If E5 features are unused after a year, downgrade to E3 plus targeted add-ons.

Auto-Renewal Surprises

A 1-year Visio subscription auto-renews because no one remembered to cancel it. Now you're locked in and double-paying. Fix: Maintain a renewal calendar with alerts 60 and 30 days before each term ends. Assign responsibility to a specific person or team.

Multiple User Accounts Consuming Licences

Users with multiple accounts (standard plus admin plus guest) each consuming a licence unnecessarily. Fix: Use Privileged Identity Management for admin roles instead of second accounts. Use Azure AD reports to check for multiple accounts sharing the same email.

Loss of Institutional Knowledge

Tribal knowledge about why certain licences exist disappears when staff leave. Fix: Document your licence allocation strategy and special cases. Record assumptions like "50 E5 kept for contingency. If unused by Q4, drop them."

Tools Without Action

Investing in SAM (Software Asset Management) tools but not taking action on their findings. Fix: Pair tools with process. Designate that every month an ITAM analyst produces a report and a manager signs off on actions to take.

Avoiding these pitfalls requires a blend of technical tools, process rigour, and people awareness. Regular internal audits and post-mortems help. If you find an unused licence that sat for a year, trace back how it happened and fix the process.

Planning and Governance Checklist

Use this checklist to ensure your Microsoft cloud governance framework covers all critical bases.

Licensing Inventory and Planning

  • Compile a list of all Microsoft licensing agreements (EA, MCA, CSP) with end/renewal dates
  • List all active subscriptions: M365 SKUs, Azure subscriptions, Dynamics, Power Platform
  • Identify which subscriptions are mission-critical vs. nice-to-have
  • Document estimated user/resource growth for the next 12-24 months

Governance and Accountability

  • Designate who in IT is responsible for licensing management (ITAM lead for M365, FinOps lead for Azure). Ensure they have executive support and access to tools/data
  • Create a licensing steering committee that includes IT, Finance, and business unit leaders
  • Establish escalation paths for licence-related decisions above a certain cost threshold

Transition Planning (EA to MCA or CSP)

  • If moving from EA to MCA or CSP, create a project plan covering stakeholder engagement, process changes, Azure subscription migration, and communication to IT staff
  • Conduct a licensing assessment to understand your current state and identify optimisation opportunities
  • Document any custom discounts or terms in your current EA that need to be preserved or renegotiated

Periodic Model Evaluation

  • Periodically re-evaluate whether your current programme is the best fit. If user count dropped significantly, CSP or MCA may be better. If you've grown, an enterprise MCA with negotiated discounts may save money
  • Conduct annual licensing reviews that include cost analysis and vendor benchmarking

Software Request and Intake Process

  • Have a single intake (IT service catalogue or ticket system) for any software requests. This prevents end-runs and ensures IT approves all additions
  • Establish approval workflows that balance business agility with cost control

Offboarding and Lifecycle Management

  • Documented, mandatory step to remove/reassign licences at departures and role changes
  • Conduct periodic audits with HR to ensure no former employee accounts remain enabled
  • Implement automated lifecycle management wherever possible (e.g., removing licences when accounts are disabled)

Monitoring and Reporting

  • Configure weekly licence usage emails, monthly Azure cost reports
  • Set threshold alerts for unassigned licences or Azure spend exceeding budget
  • Create dashboards that track utilisation rates and spend trends over time
  • Share quarterly business reviews (QBRs) with leadership showing ROI and optimisation wins

Continuous Improvement

  • Review and update your governance checklist annually
  • Document lessons learned from past licensing challenges
  • Stay informed of Microsoft licensing changes and adjust policies accordingly
  • Benchmark your practices against industry standards and peers