Microsoft EA Cost Optimization FAQs
Q: How can we reduce costs within a Microsoft EA?
A:
Reducing costs in an EA is about aligning what you’re paying for with what you use.
Key approaches include:
- Eliminate wasted licenses: Regularly identify any licenses assigned to departed employees or those that are unused. Reclaim and reassign those, or plan to reduce them at renewal. By cutting out this “shelfware,” companies can save significantly.
- Optimize license levels: Ensure each user has the appropriate license type. Not everyone needs the most expensive edition. For example, consider giving power users Office 365 E5, while most users receive Office 365 E3 or use cheaper “F” (Frontline) licenses for kiosk/shift workers. Tailoring licenses to actual needs prevents overspending on unnecessary features.
- Use Software Assurance benefits: Take full advantage of training vouchers, planning services, and other SA perks. These can offset costs you’d otherwise pay externally (like training fees or consulting for deployments). That indirectly reduces overall IT spending. For example, using included training days means you don’t have to pay for that training out of pocket.
- Monitor and adjust usage: Implement a process (and possibly tools) to track license usage continuously. This helps identify if, for example, 100 Visio licenses haven’t been used in three months – you could then reassign or drop those. Ongoing monitoring lets you take corrective actions mid-term (like reassigning underused licenses instead of buying new ones).
- Negotiate at renewal: As discussed in the renewal section, use the renewal to renegotiate pricing and terms to be more favorable. Even in the midst of a mid-term review, if your company’s situation changes (e.g., an economic downturn forcing budget cuts), consider consulting with Microsoft. Occasionally, they may work with you (via an EAS conversion or payment deferrals) to keep you as a customer, which can effectively reduce costs.
By taking these proactive steps, organizations can substantially reduce EA spending without impacting software usage. It’s common for enterprises to free up a significant percentage of their EA budget by cutting unused licenses and securing larger discounts in negotiations.
Q: What strategies can help us optimize license usage in an EA?
A: Some effective strategies to maximize license usage and minimize waste are:
- Regular usage audits: Don’t wait for yearly true-ups. Run quarterly or biannual reports on license assignment vs. actual usage. For cloud services, check active user counts vs. licensed users. This identifies underuse early, allowing you to reassign or plan reductions.
- License Reclamation Process: Establish a process to reclaim licenses when employees leave or their roles change. For example, when HR processes an employee exit, IT should immediately free up their licenses for reuse (e.g., remove them from Office 365). Similarly, if a user no longer needs a certain software, managers should have a way to notify IT to remove it. This ensures licenses aren’t left assigned to people who no longer need them.
- Departmental accountability: Consider implementing chargeback or showback mechanisms for business units to cover their portion of EA costs. When departments see the direct cost of licenses they “own,” they become more vigilant about releasing licenses they don’t need. Even if you don’t charge costs back, simply showing each department its usage and cost can motivate them to avoid waste.
- Use of SAM tools: Deploy Software Asset Management tools (or built-in admin center reports) to automatically track usage. Many tools can highlight “inactive” licenses (e.g., users who haven’t logged in for 90 days). These insights let you know where to cut or reassign.
- Policy for New Software Requests: Integrate License Management into IT Service Requests. For instance, IT should check the EA pool for any spare or reclaimable licenses when someone requests Microsoft software that requires a license. Also, ensure no new deployment of Microsoft software happens without involving the licensing team to account for it.
These strategies create a culture and system of continuous license optimization. Over a three-year EA, this can yield big savings—you’re effectively squeezing maximum value out of what you’ve paid for and not paying for anything unnecessary for longer than necessary.
Read Microsoft EA Renewal FAQs
Q: How do we avoid paying for unused licenses (“shelfware”) in an EA?
A: To avoid shelfware:
- Implement active tracking: Maintain an up-to-date inventory of license assignments and usage. If a license shows no activity for a defined period (e.g., 60 or 90 days), investigate whether the user or asset still requires it.
- Enforce a leavers process: As mentioned, when people leave, have a checklist item to remove or reallocate their licenses immediately. Additionally, when a project concludes, reclaim the project-specific licenses. Tie license management into HR offboarding and project closure procedures.
- Rightsize new deployments: Don’t over-provision licenses “just in case.” You need a license for what you currently have, as you can always add more via true-up if needed. For example, if rolling out Visio to a team of 50, license exactly 50, not 100. This avoids paying for extra capacity that might never be used.
- Periodic reviews: Conduct periodic audits (at least annually, preferably quarterly) to detect any accumulation of unused licenses. This aligns with the monitoring strategy, a formal step to take action based on the monitoring data.
- Awareness and training: To help police prevent waste, ensure those in charge of budgets understand the cost of licenses. Sometimes, managers hold onto licenses “just in case.” Educate them that unused licenses still incur costs and should be released if not needed—they can always obtain one again quickly if circumstances change.
By continuously purging “dead wood” licenses, you ensure you’re only paying for what’s actually in use. Many companies have realized significant savings by conducting a one-time cleanup and implementing these practices to maintain cleanliness thereafter.
Q: How can Software Assurance benefits help reduce costs?
A:
Software Assurance (SA) benefits provide value-added services that you’d otherwise have to pay for, thereby reducing overall costs:
- Training & Education: SA often includes Training Vouchers that can be redeemed for Microsoft courses. Using these (instead of paying for equivalent training externally) can save a lot. For example, if you have 20 training days worth $20,000 and you utilize them, that’s $ 20,000 saved (cost avoided) in your training budget.
- Planning Services: SA provides Planning Services (days of consulting for specific deployments, such as SharePoint and Teams). If you utilize these for an upcoming project, you potentially save on hiring external consultants for that planning work.
- Upgrade rights: With SA, you’re entitled to new versions of software released during your term at no extra charge. You don’t have to allocate a budget for upgrades – you avoid that expense. For instance, a company with Windows 10 SA can upgrade to Windows 11 without purchasing new licenses, thereby saving the cost of new OS licenses.
- Support: Some SA packages include support incidents or even 24×7 problem resolution support for certain products. It is cost-effective to use these instead of paying Microsoft (or a partner) for support incidents.
The key is to use these benefits. They are part of the EA’s value proposition. If they go unused, you effectively paid for something and got nothing (which increases your effective cost per license). Companies that rigorously utilize SA benefits effectively lower their total cost of ownership.
For example, if you tally the dollar value of all the training, consulting, and support you consumed via SA, you can subtract that from the EA cost when calculating ROI.
It’s not a cash “refund,” but services you didn’t have to pay for elsewhere, which is money saved.
Read Microsoft EA Negotiations FAQs.
Q: Is an EA always the most cost-effective option?
A:
It depends on the organization’s size and the stability of usage. For large enterprises with 500+ users who consistently use a broad range of Microsoft software, an EA is usually very cost-effective (due to volume discounts and simplified management).
However, an EA might not be the cheapest route for smaller organizations or those with unpredictable needs.
For example, a company with 200 users is unlikely to qualify for an EA and would likely overshoot their needs if they tried. Or an organization that expects to downsize significantly in a year might prefer CSP’s flexibility to reduce licenses, even if per-unit cost is a bit higher, to avoid paying for unused capacity locked into an EA.
It’s worth conducting a comparative analysis: obtain quotes for EA, CSP, and Open Value for your product mix. For many mid-to-large enterprises, the EA is cheaper per unit (especially when considering SA benefits and fixed pricing).
However, in some scenarios—such as a startup of 600 that might double or halve in size over the next two years—they may find CSP’s month-to-month model more cost-effective, despite slightly higher prices, because they pay exactly for what they use.
In summary, EAs are cost-effective for their target profile (large, relatively stable usage across multiple products) but are not a one-size-fits-all solution. Each organization should validate that the EA delivers value compared to other options. If not, it’s worth discussing adjustments with Microsoft or considering a switch to a different program.
Q: Can switching to cloud subscriptions (e.g., Microsoft 365, Azure) through an EA save money?
A:
It can, if done thoughtfully. By moving to cloud services via your EA, you often secure better pricing or incentives than buying cloud services separately.
For example:
- Microsoft 365 bundled subscriptions can be more cost-effective than licensing the equivalent capabilities à la carte (such as Office, Exchange CAL, Skype, and advanced security separately). Many companies save by consolidating to an M365 plan under EA.
- Azure through an EA (with an Azure Monetary Commitment) typically comes with a discount off pay-as-you-go rates, and you have price predictability. If you have substantial Azure usage, putting it in the EA with a committed spend can yield savings (and Microsoft sometimes adds bonus credits for EA Azure commitments).
- Cloud subscriptions might also reduce other costs. For example, migrating to Office 365 under EA may reduce your on-premises infrastructure and maintenance costs. Those indirect savings add up.
However, one must manage cloud usage well. The cloud can also increase costs if you don’t monitor consumption. Therefore, while the unit prices may be lower through EA, actual spending depends on usage. The EA at least addresses some costs (such as per-user services).
One company found that moving to Microsoft 365 via the EA eliminated separate licenses for anti-virus, archiving, and conferencing (which came with Microsoft 365)—that consolidation saved them a lot more than just the cost of the Microsoft license.
In summary, shifting to cloud services under an EA can save money if you take advantage of bundled offerings and volume discounts and actively manage your cloud consumption to avoid sprawl.
It’s not automatic – you must ensure you’re not double-paying (e.g., still paying for on-prem licenses and cloud simultaneously beyond the necessary transition period) and trim redundant solutions that the Microsoft cloud replaces.
Q: How does an EA help with budgeting and predictability of costs?
A:
One big benefit of an EA is cost predictability. With an EA, you typically lock in pricing for the term (three years), which means you know in advance what your annual payments will be.
This shields you from Microsoft’s list price increases during that period. It also allows you to spread payments annually (or even make equal monthly payments) rather than making large one-time purchases, smoothing out your cash flow.
Finance teams appreciate that an EA converts many variable costs (such as when to upgrade or fluctuating license purchases) into a steady, predictable expense.
Additionally, since true-ups happen on a known schedule (annually), you can plan for any growth-related costs as part of your budget cycle. Many companies set aside a contingency in the budget for expected true-up additions.
In contrast, if you were buying licenses ad-hoc, you might face unplanned expenditures whenever a project spins up or a new version releases. The EA’s structure avoids that: you budget the EA payment, and you’re covered for new versions and moderate growth.
For example, a CIO might say, “Our EA costs $1M per year for the next three years, and that covers all our Microsoft software for our current 1,000 users plus anticipated growth.”
That kind of stability is valuable. Also, with an EA, you don’t have to worry about sudden price hikes – e.g., if Microsoft raises Office 365 prices by 10%, your EA price for Office 365 is locked until renewal so that you can defer impact.
In short, an EA converts unpredictable, sporadic spending into a predictable OPEX line item, making IT financial planning much easier.
Q: How can the true-up process be used to manage costs effectively?
A:
The annual true-up can be leveraged as a cost management tool rather than just a billing exercise. For one, it allows you to defer costs until needed – you don’t pay for growth licenses until the true-up.
In essence, Microsoft provides a credit line: you deploy what you need in the year and settle up once a year at the same discounted rate. This means you’re not paying upfront for licenses you might not need; you pay only when you need them.
Additionally, you gain valuable insights into your growth by analyzing your true-up each year. If true-ups are consistently high, that indicates growing usage – you might use that trend to negotiate better terms at renewal (since you proved expansion).
If true-ups are zero or low, that indicates stable usage. Maybe you initially over-provisioned and can adjust it at renewal to save costs.
To use true-ups for cost management:
- Ensure you have a good handle on changes in your environment so the true-up doesn’t surprise you. If you conduct a mid-year internal audit, you may even account for likely true-up charges in your budget ahead of time (e.g., “we expect to add ~50 users, that will cost $X at true-up, which we’ve budgeted accordingly”). That avoids scrambling for funds.
- Some companies treat the EA true-up as a yearly “true-down opportunity” in practice: they might discover some unused licenses and decide not to report any growth for those – effectively offsetting new needs with old unused ones (this is informal; officially, you should report net increases, but if they removed deployments equal to new ones, the true-up could be zero). They planned and balanced to minimize cost.
The key is tracking: by keeping track of license moves throughout the year, you can minimize the net growth you have to pay for. Use true-up time to remove any excess (since you can drop at renewal, not at true-up, but you can internally identify things to drop and do it concurrently so you don’t carry them forward).
In summary, true-ups include a bill and a checkpoint to reconcile licenses.
By actively managing throughout the year, the true-up bill should be expected and optimized to include only necessary additions. This ensures you only pay for what you need to add at the agreed-upon rates, not a penny more.
Q: What are “right-sizing” licenses, and how does it apply to EA?
A:
“Right-sizing” means giving each user or system the appropriate type and amount of licensing – no over-licensing (which wastes money) and no under-licensing (which causes compliance issues).
In EA terms, this often refers to tailoring the license edition or bundle to the user’s needs. For example:
- If only 10% of your users need the advanced features of Office 365 E5, right-sizing would mean assigning E5 to those 10% and E3 to the remaining 90%.
- If some users don’t need Office (perhaps kiosk workers who just need email via a browser), right-sizing might assign them an F3 license instead of a full desktop suite.
- The concept also applies to server infrastructure – e.g., right-sizing Windows Server licenses by virtualizing and consolidating workloads so you’re not licensing idle servers.
In an EA, you have the flexibility to adjust this mix at renewal (and, to some extent, via true-up for adding different licenses).
A concrete example: a company initially purchased the full EMS E5 suite for all users but found that many weren’t using certain EMS components. At renewal, they right-sized by giving only IT admins the full EMS E5 and moving regular staff to EMS E3, saving costs while still meeting their needs.
Another example is that right-sizing could involve reducing the number of Visio or Project licenses to exactly the number of people who actively use them, rather than licensing an entire department by default.
Applying right-sizing may involve some analysis (identifying who uses what) and possibly reassigning licenses or renegotiating the EA to include more of one SKU and fewer of another. The payoff is potentially big savings or at least better utilization.
Q: Can we negotiate price reductions in the middle of an EA term?
A:
Generally, once an EA is signed, the pricing is fixed for that term. Mid-term adjustments to reduce prices are uncommon – Microsoft expects the three-year commitment to hold.
You typically have to wait until renewal to renegotiate pricing.
However, there are a few scenarios where mid-term negotiations happen:
- If you add many licenses mid-term (far beyond the initial estimates), you may be able to negotiate a better discount on those additions. For example, if in year 2, you acquire a company and need 2,000 more seats, you could try to negotiate a special one-time discount for that increase (sometimes through an amendment).
- If there are extraordinary circumstances (such as a major economic downturn affecting your company), you may be eligible to appeal to Microsoft for relief. In some cases, Microsoft might offer payment flexibility or suggest converting to an Enterprise Subscription Agreement (EAS) to allow you to drop licenses. Still, they usually won’t lower the agreed price per license mid-term.
However, outside of those, the mid-term is generally static. So, plan to optimize at renewal rather than expecting to change pricing mid-stream.
Q: Are there additional savings if we pre-pay or commit to more upfront?
A:
By default, an EA allows you to pay annually rather than all up-front, and Microsoft’s pricing is the same whether you pay yearly or all at once (the benefit of annual is you keep cash longer; the benefit of upfront is maybe currency lock or internal preference).
Microsoft typically doesn’t give an extra discount just for paying the 3-year term upfront—the financial value to them is minor. However, increasing your upfront license quantity commitment can secure better pricing (volume discount effect).
In some negotiations, customers have used prepayment as a bargaining chip—e.g., “If we pay for all three years now, can you give an extra 2% off?”
Sometimes, Microsoft might agree to book revenue, especially at the end of a quarter or year. It’s not guaranteed, but it’s worth asking if you’re in a position to do so.
One area where upfront commitment is beneficial is Azure. By committing to a specific amount of Azure spending (a monetary commitment) upfront, Microsoft provides discounts or credits compared to the pay-as-you-go model.
In that sense, committing money up front (in the form of an Azure commitment in your EA) can yield significant savings. Another example is committing to a multi-year Office 365 subscription via EA, which can protect against price increases that monthly subscriptions might face.
Also, consider that pre-paying might avoid future price increases due to currency fluctuations or inflation if your EA is in a foreign currency or if there’s an interest in net present value savings (paying now vs. later might save some negligible interest—not usually a big factor given low interest rates and the time value over three years).
Simply paying earlier doesn’t typically lower the contractual price unless negotiated. However, committing to more (either a higher license count or a longer term) can lead to improved discounts.
Always negotiate based on volume and strategic commitments (like a broader adoption of Microsoft technology) rather than just offering to pre-pay dollars—
Microsoft responds more to commitments that increase your consumption of their products.
Q: How do enterprise discount levels (A, B, etc.) influence cost, and how can we reach a higher discount tier?
A:
The level (A, B, C, D) determines the baseline discount off Microsoft’s prices for your EA. Reaching a higher tier means a larger discount and lower cost per license.
You often need to increase the quantity of products in your EA to reach a higher tier. Strategies include:
- Consolidation: As discussed, bringing more users or products into the EA (perhaps consolidating separate agreements or including more of your workforce) can bump you to the next level. Going from 2,300 to 2,500 users might move you from Level A to Level B, instantly applying a higher discount to all licenses.
- Including more enterprise-wide products: The discount level is typically based on the number of qualified users or devices for enterprise products. If you add and license an enterprise product for everyone, you may need to recalculate the number of users and potentially raise your level. (Though Microsoft typically uses a single count of qualified users for each level, it is not additive for each product. But adding a product for all users increases the deal’s value, indirectly strengthening negotiation for better discounts.)
- Mergers and acquisitions: If you acquire a company, adding their users can help boost your tier. If you divest, be mindful that it could reduce your tier at renewal, so consider negotiating to grandfather a higher discount despite the drop (not guaranteed, but you can try citing your historical level).
- Negotiate exceptions: If you are, say, just shy of a level, sometimes Microsoft might bump you up. For example, you have 2,350 users (technically Level A) – in renewal talks, you can request Level B pricing given you’re close and may grow. They might agree to avoid nitpicking if it’s not too far off.
The impact is significant: for example, Level A might be 15% off the list, and Level B 20% off – that 5% difference on millions of dollars of software is a substantial savings. So, if you’re near a threshold, it might even be worth over-counting slightly at signing.
Some companies intentionally license a few extra “spare” licenses to hit the next tier (as noted earlier). A handful of licenses cost less than the extra discount on all licenses. You have to do the math and ensure it’s beneficial.
In summary, enterprise levels greatly influence cost by unlocking deeper discounts as you scale. To reach higher tiers, maximize the number of users, devices, and products covered in your EA and consider consolidating all possible Microsoft spending under it.
Q: What role do third-party advisors or SAM tools play in EA cost optimization?
A: Third-party licensing advisors and SAM (Software Asset Management) tools can be very valuable:
- Advisors/Consultants: They bring expertise and benchmark data from other EA negotiations. They can identify areas where you might be overspending or where Microsoft has room to give (for example, they might know that companies of your size often get an extra 5% discount on a certain product, giving you leverage to ask for it). They can also help plan your negotiation strategy, ensure you’re not missing entitlements, and even interface with Microsoft on complex licensing queries. For cost optimization, consultants often perform an analysis to ensure you have the optimal product mix (maybe they’ll find you could save money switching some users to a different license) and that you’re not over-compliant (yes, sometimes companies over-buy to be “safe” – an advisor will correct that). Engaging an advisor usually has a fee, but many see ROI in the form of EA savings that exceed the fee.
- SAM Tools: These tools automate the discovery and usage of software installations. They help maintain compliance (avoiding surprise costs due to under-licensing) and highlight inefficiencies (such as showing 100 installed copies of Visio but only 50 unique users opening the program, implying that 50 could be removed). For cloud services, specialized cost management tools can recommend reducing consumption without impact. By continuously tracking and analyzing usage, SAM tools enable you to optimize licenses in real-time, rather than only at renewal. They also simplify preparing for true-ups or renewal by having all the data ready. Some SAM tools can simulate “what-if” scenarios – e.g., what if we switch these 200 users to a different license? How do compliance and cost look? That helps make cost-optimal decisions.
In practice, many companies use a combination:
- A SAM tool for ongoing management, and
- An advisor in the lead-up to renewal for strategy.
Both help ensure you’re not overspending and making the most of your EA entitlements.
Essentially, they provide the data and insight needed to drive cost-saving actions throughout the EA lifecycle, not just at renewal.
