A comprehensive advisory for CIOs and IT sourcing leaders evaluating whether to engage Microsoft directly or through a Licensing Solution Provider (LSP)—covering pricing, global operations, contract management, and negotiation strategies.
Microsoft's Enterprise Agreement (EA) is a volume licensing contract designed for organisations with 500 or more users or devices, typically spanning a three-year term. It covers a wide range of products—from Windows and Office to Azure and Microsoft 365—under one agreement, with built-in volume discounts and the ability to "true-up" annually for growth.
When entering an EA, enterprises face a strategic decision: engage directly with Microsoft or work through an authorised Licensing Solution Provider (LSP). In direct markets, you sign an EA straight with Microsoft. In indirect scenarios, you purchase the EA through an LSP who interfaces with Microsoft on your behalf.
Understanding the direct and indirect models is crucial because they impact pricing transparency, support quality, administrative burden, and your ongoing relationship with Microsoft. The wrong choice can lead to overspending, compliance gaps, or operational friction across global operations. For more on Microsoft EA structures, see our Microsoft Licensing Knowledge Hub.
Under a Direct EA, your organisation signs the agreement directly with Microsoft—no reseller in the contracting process. Microsoft provides pricing and you pay Microsoft directly for licences and subscriptions.
You negotiate terms and pricing with Microsoft's enterprise sales team. Communication lines are direct, which can speed up issue resolution and reduce miscommunication. Many enterprises value having Microsoft's ear for support, escalations, and strategic planning.
With no intermediary, you maintain full control over procurement and licence management. Your internal team handles adding products, managing true-ups, and ensuring compliance. This autonomy means you can tailor the engagement closely to your needs and timelines.
The flip side of control is responsibility. A direct EA demands strong in-house licensing expertise and capacity. Your team must understand Microsoft's product terms, keep up with programme rules, and manage the administrative load (tracking usage, processing annual true-ups). Enterprises often dedicate licensing specialists or a Software Asset Management (SAM) team for this purpose.
Organisations with significant licensing expertise, a desire for direct vendor engagement, and the need for large-scale negotiations where they prefer to deal directly with the source. A multinational bank with a mature IT procurement department opted for a direct EA, appreciating faster communication with Microsoft's account team and the ability to negotiate custom contract terms—but invested in training a dedicated licensing manager to oversee the agreement.
In an Indirect EA, an authorised Microsoft partner—typically a Licensing Solution Provider—acts as an intermediary. Your agreement may still ultimately be a Microsoft contract, but the LSP handles pricing, orders, and support on Microsoft's behalf.
A good LSP brings deep knowledge of Microsoft licensing programmes. They handle administrative tasks including preparing and submitting contract paperwork, processing orders and annual true-ups, and generating usage reports. The LSP's licensing specialists can advise on optimal licence combinations and ensure compliance with Microsoft's rules.
Rather than dealing directly with Microsoft for day-to-day needs, you work with your LSP's account manager. Top LSPs offer personalised customer service—a dedicated account representative and support team who answer questions, assist with portal issues, and escalate problems to Microsoft when needed.
Because an extra party is involved, communication can be slower or more layered. You may have to wait for the LSP to relay questions or get approvals from Microsoft. Additionally, indirect agreements can introduce additional costs—LSPs are compensated via margins or fees, meaning the partner might add a markup on licence prices or charge for value-added services.
LSPs receive compensation through margins or commissions from Microsoft. Some large customers negotiate a portion of that commission back as a rebate. However, Microsoft has been reducing partner commissions on EAs, leading some LSPs to charge clients for enhanced services. Always negotiate the LSP's margin explicitly and compare against a direct Microsoft quote.
Organisations that lack internal licensing resources or prefer hands-on guidance. A global manufacturing firm without a dedicated licensing department chose an indirect EA through a major LSP. The partner managed their renewals, provided quarterly compliance reports, and coordinated licensing across regions—though the trade-off was an extra step for approvals when rapid changes were needed.
Explore our comprehensive library of Microsoft licensing guides, strategies, and expert analysis.
Cost is often the deciding factor. Both models can provide enterprise discounts, but the pricing dynamics differ significantly.
Microsoft sets pricing based on its volume licensing price lists and negotiated discounts. Enterprise Agreements have tiered price levels (A, B, C, D) based on user/device count—larger organisations receive more favourable baseline pricing. You pay Microsoft at those agreed rates with no reseller markup. This makes direct EAs cost-transparent, assuming you negotiate a strong discount upfront.
With an LSP involved, pricing becomes more complex. The LSP receives a wholesale price from Microsoft and sets the final price to you. The LSP's margin is the difference between Microsoft's cost and their quote. Many enterprise customers insist on a "cost-plus" pricing structure (e.g., the partner charges a fixed percentage above Microsoft's cost for the EA duration).
Some LSPs charge for enhanced contract management or consulting services. Conversely, a motivated LSP might use part of their margin to offer better pricing and win your business. Creating a competitive bidding situation can be beneficial in indirect deals.
| Aspect | Direct EA | Indirect EA |
|---|---|---|
| Contract Relationship | Direct contract with Microsoft | Agreement facilitated by LSP intermediary |
| Pricing & Discounts | Microsoft-set volume discounts; no reseller markup | LSP may add margin; need to negotiate partner fees |
| Billing | Billed by Microsoft (often single currency) | Billed by LSP (may offer local currency in regions) |
| Licence Management | Managed in-house (procurement/SAM handles adds & true-ups) | LSP assists with tracking, orders, true-ups on your behalf |
| Support | Direct communication with Microsoft account reps; faster escalation | Day-to-day via LSP account manager; adds a layer for escalations |
| Ideal For | Large enterprises with strong internal licensing capability | Organisations needing expert guidance or multi-region coordination |
Whether direct or indirect, leverage your volume. In direct EAs, negotiate for price protections, flexible payment terms, or extra discounts for bundling products. In indirect EAs, negotiate with both Microsoft (via the partner for overall discount levels) and the LSP (their cut and services). Always benchmark quotes—many enterprises ask multiple LSPs to propose EA pricing to see who offers the best terms and support combination. For more on Microsoft negotiation, see Microsoft Contract Terms & Negotiation.
Microsoft classifies some countries as "direct markets" and others as "indirect markets." In direct markets (e.g., US, UK), Microsoft engages directly with customers. In indirect markets (often smaller or emerging countries), Microsoft sells via local partners. If your EA covers affiliates in many countries, you might end up with a hybrid approach: a central direct EA with certain geographies fulfilled by an LSP.
A direct EA typically gives one master agreement and uniform terms globally. However, support from Microsoft might vary by region unless you have a global account management structure. With an indirect EA, you might appoint one global LSP or a network of regional LSPs. One global LSP can offer consistent service levels and potentially aggregate purchases for better discounts.
Enterprises operating in multiple currencies must consider billing. Microsoft's direct EAs often bill in a single currency, which may create exchange rate exposure. An LSP might offer localised invoicing in different currencies—more convenient for local offices.
If critical issues arise (Azure outage, licensing audit question), consider how each model works. In a direct model, you go straight to Microsoft—efficient for high-severity issues, especially with Unified Support. In an indirect model, your first call is to the LSP, who works with Microsoft to resolve it.
If you are a global CIO, map out how each option would function in practice. For a direct EA, plan how your internal team will manage worldwide deployment and engage Microsoft's support across time zones. For an indirect EA, set expectations: Does the LSP provide 24/7 support? Can they handle software needs in all countries where you operate? Ensure no blind spots in service delivery globally.
Selecting between direct and indirect is not a one-size-fits-all decision. Consider these decision factors:
Do you have a team that thoroughly understands Microsoft licensing and can dedicate time to managing the agreement? If yes, leverage that strength with a direct EA. If not, an LSP's guidance can prevent costly mistakes. See also: Microsoft Software Asset Management.
A very large or complex IT environment (multiple product lines, frequent changes, many affiliates) may benefit from the process rigour and tooling an LSP provides. Simpler, more stable environments can be managed in-house without issue.
Some organisations want to own vendor relationships directly for strategic roadmaps. Others are comfortable delegating relationship management. Gauge your leadership's preference.
If absolute lowest cost is paramount, you may prefer direct EA pricing transparency. However, a savvy LSP might help identify cost savings opportunities (finding unused licences to eliminate at renewal).
Some enterprises employ a hybrid: negotiating directly with Microsoft on major points but transacting through an LSP for convenience, or signing a direct EA while hiring independent advisors for internal support. There is no universal "best" choice—only the best fit for your organisation.
For a comparison with other Microsoft licensing models, see our guides on Microsoft EA vs MPSA and Microsoft CSP vs EA.
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