Microsoft EA Renewal Playbook: Preparing 12 Months Ahead

Microsoft EA Renewal Playbook: Preparing 12 Months Before Renewal

Every CIO and CTO knows that a Microsoft Enterprise Agreement (EA) renewal is more than a routine contract update, it’s a strategic opportunity to optimize costs and align licenses with actual needs. Start with the EA negotiation overview to frame your planning.

This playbook provides a step-by-step guide for the 12 months leading up to an EA renewal, focusing on early preparation, detailed usage analysis, and cutting “shelfware” (unused licenses) to eliminate waste and achieve a leaner, more cost-effective agreement.

Start Early: 12 Months Ahead for a No-Surprises Renewal

Begin planning for at least a year.

A common mistake is waiting until the last minute, which can lead to rushed decisions or simply rubber-stamping the status quo.

Starting 12 months before renewal gives your team time to thoroughly evaluate your current EA, avoid lapses in coverage, and build leverage for negotiations.

Microsoft itself often recommends initiating the renewal process about a year in advance – this allows for multiple rounds of internal reviews and bargaining without the pressure of an expiring contract looming.

By beginning early, you can set clear goals (e.g., “reduce total EA spend by 10%” or “eliminate all unused licenses”) and develop a roadmap for achieving them.

Treat the renewal as a project, not an administrative task.

Establish a cross-functional team (IT, procurement, finance, business unit leads) to manage the renewal process.

Define milestones: for example, complete a license usage audit by month 9, finalize needs forecast by month 6, start formal Microsoft discussions by month 6 or earlier, and aim to have negotiations largely wrapped up a month or two before the deadline.

This structured approach prevents last-minute scrambling and ensures every aspect – technical requirements, budget, and contract terms – gets proper attention.

Early planning also means you can time your negotiation strategically (for instance, avoiding Microsoft’s end-of-quarter rush when their sales teams are busiest).

Conduct a Detailed Usage Analysis

Inventory what you have and what’s used.

The first major task in your renewal prep is a comprehensive license usage audit.

Pull data from admin portals, Software Asset Management (SAM) tools, and usage reports to map out all the software and cloud services under your EA and how many users or devices actively use each.

This “effective license position” analysis will highlight mismatches – areas where you might be over-licensed (paying for more than you use) or under-licensed (using more than you bought, which poses compliance risks).

For example, you might find that you purchased 1,000 Visio licenses. Still, only 200 people launched the application in the last year, or you have 500 Azure AD Premium seats assigned, but only 300 users need those features.

Gather usage metrics not just for user-based services (like Office 365 apps, Windows 10/11, EMS security features, etc.) but also for server and cloud resources.

Check consumption of Azure credits, SQL Server cores, Windows Server instances – any element of the EA. The goal is to create a detailed spreadsheet or dashboard that tracks every license SKU, including the number owned versus those actively in use, and the last usage date or frequency, if available. For a detailed timeline, refer to the comprehensive timeline and checklist.

By around 9–10 months before renewal, refine this into specific findings, e.g. “Out of 800 Office 365 E5 licenses, only ~500 users regularly use E5-only features; 300 could potentially be downgraded to E3” or “We have 120 Windows Server licenses with Software Assurance, but only 100 servers deployed – 20 licenses are unutilized.”

Analyze usage patterns to identify inefficiencies.

Not all usage data will be straightforward. Look for trends: Are certain departments not using a particular software that was allocated to them? Did you deploy a product company-wide that only a subset finds valuable?

This analysis phase may require input from application owners or department heads to determine if low usage indicates that the software isn’t needed or if there’s an adoption issue.

The output of the usage analysis should be a list of opportunities to optimize – concrete candidates to remove, reduce, or change in your licensing lineup.

Read Microsoft EA Renewal Playbook: Leveraging Competitive Pressure for Better Deals.

Identify and Eliminate Shelfware (Unused Licenses)

“Shelfware” – the silent budget killer.

Shelfware refers to software licenses that you’ve paid for but sit unused (like boxes gathering dust on a shelf). Industry research suggests that around 20% or more of enterprise software spend is wasted on shelfware.

In other words, a significant chunk of your EA budget could be tied up in licenses no one is using. Now is the time to find and eliminate that waste.

Every unused license that you identify is essentially pre-approved savings – if you don’t renew it, you stop that spending going forward.

Enterprises often discover a substantial gap between what they’ve purchased and what’s truly in use. For example, if you have 500 Microsoft 365 E5 subscriptions but only 300 active E5 users, those extra 200 licenses are pure shelfware.

At roughly $57 per user per month for M365 E5, those 200 unused licenses cost approximately $ 11,400 per year in wasted costs. By cutting them from the renewal, you immediately free up that budget. Use the benchmark pricing during preparation guide to assess cost.

Similarly, during its pre-renewal audit, one organization found that approximately 20% of its Office 365 licenses were unassigned or inactive. They avoided renewing those licenses and saved six figures annually, redirecting that money to other priorities.

Reassign or terminate dormant licenses.

As you pinpoint shelfware, take action before renewal. In some cases, it’s as simple as not including that quantity in the renewal order. If the EA is a subscription model (which many Microsoft agreements now are), you can typically “true-down” at renewal – meaning you can reduce license counts with no penalty at the end of the term.

Plan these turn-downs meticulously: list out exactly which products and how many licenses you will drop. In the months leading up to renewal, you may also consider re-harvesting licenses.

For instance, if certain users have left the company or stopped using a service, reassign those licenses to someone who needs them rather than purchasing new ones.

The mantra is: don’t carry unnecessary baggage into the next EA term. This cleanup not only cuts costs but also simplifies compliance and management.

Just be sure to verify that any license you remove is truly not providing value. Sometimes, shelfware can be hidden in places such as backup accounts, test environments, or small departments, so be sure to double-check with stakeholders if you are unsure.

Optimize License Levels and Editions (E3 vs. E5 and More)

Right-size each user’s licenses based on needs. Microsoft EAs often bundle “enterprise products” like Microsoft 365 in tiers (E1, E3, E5, for example).

A major cost optimization before renewal is to ensure each user is on the appropriate license edition, especially when considering the expensive top-tier plans.

Microsoft 365 E5 offers the fullest feature set (advanced security, analytics, phone system, etc.), but it comes at a premium price. After you’re prepared, proceed to negotiating pricing to secure savings.

Upgrading from E3 to E5 can raise per-user costs by ~50–70%. Indiscriminately giving E5 to all employees is a classic source of shelfware, as many users never utilize the extra features.

To make this concrete, consider the pricing differences and what you get:

Pricing varies by region and agreement; the following figures are provided for illustrative and approximate purposes.

The table above highlights that E5 costs approximately $23 more per user per month than E3 (about $57 vs $34). Over a year, that’s ~$276 more per user. If hundreds or thousands of users don’t need those E5-exclusive capabilities, that money is better saved.

Segment your users: for example, front-line workers or employees with basic usage can be perfectly fine on E3 (or even E1/F3 licenses), whereas a smaller group, such as senior staff or those in specific roles, might justify E5 due to its enhanced security and compliance tools.

Microsoft’s EA allows mixing and matching license types within the same agreement as long as you meet any minimum enterprise product requirements. Leverage that flexibility. A practical approach is:

• Identify roles or departments that truly need E5 (e.g., security team members, certain executives, or users of Power BI and phone system features).
• Keep the rest on E3 or other lower-cost plans. There’s no one-size-fits-all – tailor the license mix to usage patterns discovered in your analysis. If your data indicates that 300 E5 licenses are not being utilized to their full potential, consider downgrading them to E3 at renewal. This alone can slash costs dramatically while still providing all users with the tools they use.

Consider partial upgrades and add-ons instead of full-suite upgrades. Microsoft will push the full E5 upgrade during renewal discussions (“Why not step up to E5 for everything?”), But you can push back with a selective strategy.

For example, suppose you need a few E5 features, such as advanced threat protection. In that case, you might add Microsoft Defender for Endpoint or other add-on licenses à la carte for specific users rather than upgrading everyone to E5.

Often, Microsoft offers add-on SKUs (or even promotional bundles) that can be more cost-effective for filling a specific capability gap. The key is to avoid paying for capabilities that aren’t used: either drop them or purchase them in a more targeted way.

By renewing with the right mix of E3, E5, and add-ons, you ensure you’re not overspending on premium products for users who don’t benefit from them.

Forecast Future Needs and Budget Impact

Align your renewal with business changes and growth.

Preparing 12 months out isn’t only about looking backward at usage – it’s also about looking forward. Work with your business units to understand what’s coming in the next EA term (typically the next 3 years).

Are you planning a significant hiring increase or a reduction in the workforce? Are there any acquisitions or divestitures on the horizon that could impact user counts?

Are there new projects that will require additional Microsoft products (e.g., rolling out Power BI to a new department or migrating on-premise servers to Azure)? Conversely, are there plans to drop certain Microsoft technologies in favor of something else?

For instance, if one division is transitioning to a third-party CRM, you may reduce the number of Dynamics 365 licenses. Alternatively, if you plan to shift some workloads to AWS, you may forecast lower Azure consumption through the EA.

By 9–6 months before renewal, you should develop a forecast of license needs for the next term. This includes a projected user count for each major product or suite, as well as any new products to be added or existing ones to be removed. Don’t forget to read our practical tips for early preparation for quick wins.

Tie this to your usage analysis: if you identified shelfware to cut, does any of it need re-allocation for new users, or will it simply vanish?

If you found you’re under-licensed somewhere (e.g., a department using more SQL Server instances than you have licenses for), plan to address that – either true-up before renewal or include the proper count in the renewal.

It’s much better to budget for growth or necessary compliance fixes now than to be surprised later.

Quantify the budget implications. When you combine the usage cleanup and the future needs, you’ll have a new “proposed” EA configuration.

Calculate the cost of this proposed package using Microsoft’s pricing (or your current price levels). Often, the savings from dropping unused licenses can offset the cost of new additions.

For example, if you cut $200k of shelfware and you need $150k worth of new licenses for a project, you’ve essentially funded the new project and still saved $50k.

Present these findings to finance and executives around 6 months before renewal to ensure everyone is on board with the plan: “Here’s what we intend to renew, here’s what we’re cutting, here’s what we’re adding, and the net effect on our budget is X.”

If the preliminary numbers show a budget overrun, you still have time to adjust (either find more savings or secure more budget) well before you’re locked into a deal.

Engage Stakeholders and Microsoft Early

Build internal consensus and strategy. In the year before renewal, especially once you have the data in hand, it’s critical to align all internal stakeholders.

This includes CIO/CTO, IT managers, procurement, finance, and leaders of any major business unit who are interested in Microsoft services.

Ensure everyone agrees on the direction: which services are essential, where to cut back, and what the budget target is.

Internal alignment prevents last-minute derailments (e.g., a VP saying, “You can’t cut those Power BI licenses” a week before signing). It also strengthens your negotiating stance – you present a united front to Microsoft with clear requirements.

Document your objectives: for instance, “We will renew only 800 of our 1000 Visio licenses because 200 are unused. We aim for a minimum discount of 15% on Office 365 licenses.

We plan to possibly add Azure credits, but only if within budget,” etc. Having these points agreed upon internally provides a checklist to follow in negotiations.

Open a dialogue with Microsoft (or your reseller) well in advance.

Approximately 6–9 months before the EA expiration, notify Microsoft that your renewal planning is underway. This might feel early, but it works to your benefit.

By signaling intent early, you get on Microsoft’s radar for special attention and avoid the end-of-year crunch when many renewals pile up. You don’t need to share all your cards right away, but you can request initial quotes or information.

Often, Microsoft will provide a preliminary renewal quote or proposal if you request it 3–6 months in advance; treat this as a starting point, not an endpoint.

Early engagement can also unlock incentive programs: sometimes Microsoft offers “early renewal” discounts or promotions if you’re willing to sign a bit ahead of time (just be sure any early renewal is prorated so you don’t pay double).

When speaking with Microsoft, also inquire about any upcoming changes that may affect you, such as announced price increases, new product packages, or changes to EA programs (like the introduction of a new type of agreement or adjustments to their pricing structure in the next year). Knowing this in advance helps you prepare.

Meanwhile, if you’re working with a Licensing Solution Provider (LSP) or reseller, they can help by pricing out different scenarios (like “what if we drop Product X, how does our discount level change?”).

Don’t hesitate to explore alternative licensing models now: for instance, get a quote for moving some services to the Cloud Solution Provider (CSP) program or compare what a Microsoft Customer Agreement (MCA) would look like.

In many cases, for large enterprises, the EA remains the most cost-effective option. However, exploring alternatives gives you negotiation leverage and ensures you’re choosing the best fit rather than renewing by inertia.

Use the time to negotiate methodically.

Since you started early, you can negotiate in phases rather than a frantic last-week haggle. Aim to have substantive negotiation rounds in the 3–4 months before expiration.

Come armed with your data: “We only plan to renew 800 seats, not 1000; here’s why.” Push back on the initial quote: if Microsoft’s first offer is, say, 10% higher than your current spend, systematically challenge each area of increase.

Perhaps they assumed you’d upgrade to more expensive licenses – you can remove those. Or maybe list prices went up – negotiate a discount to offset that. Because you have internal approval on what you need and a budget, you can confidently say “no” to extras and upsells that don’t align.

And since you’re not up against the clock, you can hold out for better terms (escalating to higher Microsoft management if needed) without fear of coverage lapse.

By the final 1–2 months, all major points should be settled, and you can focus on completing the paperwork and ensuring the contract accurately reflects the deal.

Recommendations

• Kick off renewal planning 12 months in advance: Start early to allow sufficient time for thorough analysis, stakeholder input, and multiple rounds of negotiations. Early preparation prevents costly last-minute compromises.
• Audit current license usage in detail: Inventory all software and cloud services under your EA and measure actual usage. Identify any inactive or under-utilized licenses well before renewal.
• Eliminate shelfware licenses: Plan to remove or reassign every license that isn’t actively used. Do not renew subscriptions that your data indicates are dormant – canceling each unused license immediately reduces costs.
• Right-size user licenses (E3 vs E5, etc.): Analyze who truly needs premium editions. Downgrade users to less expensive licenses if they don’t use advanced features. This targeted licensing can save huge sums without impacting productivity.
• Forecast and align with future needs: Collaborate with business units to project headcount changes and identify new initiatives for the upcoming term. Adjust your renewal quantities up or down to match planned needs, avoiding over-buying “just in case.”
• Engage Microsoft (and partners) early: Inform your Microsoft representative or LSP at least six months in advance that you’re in renewal mode. Solicit initial quotes and Microsoft’s input on any new programs or offers. Early engagement puts you in control of the timeline.
• Set a clear negotiation strategy: Determine your target outcome (budget limits, discount targets, and products to add or drop) and obtain internal consensus. Use industry benchmarks and your usage data to justify asks. Never accept the first quote – counter with data-driven proposals.
• Leverage timing and incentives: Whenever possible, negotiate on your schedule (well before the deadline). Use Microsoft’s quarter/year-end to seek extra discounts, but don’t let their timing rush you. If a price increase is coming, consider renewing a bit early to lock current rates (with appropriate credits for any overlapping term).
• Review and finalize contract details: Before signing, ensure the EA paperwork aligns with the negotiated terms – specifically, verify the correct product counts, prices, and any special terms (such as the flexibility to reduce counts annually, if applicable). A well-documented agreement with favorable terms locks in your savings for the full term.
• Consider alternative licensing options if they align with your needs: As a sanity check, compare EA costs to other options (CSP, MCA, third-party support, etc.), especially if your organization’s size or requirements have changed. While EAs are typically best suited for large enterprises, being open to alternatives can provide leverage and sometimes result in additional savings. Avoid errors by reviewing the mistakes to avoid during preparation.

FAQs

Q1: How far in advance should we start preparing for a Microsoft EA renewal?
A: Ideally, start about 12 months before your EA expiration. In practice, at least 6–9 months is the minimum for a smooth process. Starting one year out allows you to thoroughly audit usage, consult with stakeholders, and engage in multiple rounds of negotiation. Enterprises that start early can drive better bargains and avoid the panic of an impending deadline.

Q2: What’s the best way to identify unused licenses (“shelfware”) in our environment?
A: Use a combination of usage reporting tools and manual checks. Pull reports from the Microsoft 365 admin center, Azure portal, and any software asset management tools to see active users and consumed services. Look for telltale signs: licenses assigned to former employees, products that have zero or very low login counts, or services deployed but not used in months. Engage your SAM team if you have one. The output should be a list of licenses that can be safely removed or reduced – those are your shelfware targets.

Q3: How does eliminating shelfware save money if we’ve already paid for those licenses?
A: The savings come at renewal time. While you may have sunk costs on unused licenses during the last term, by identifying them before renewal, you ensure you don’t buy them again for the next term. For instance, if you currently pay for 1000 Office 365 seats but only 800 are used, you would renew only 800 next time, meaning you stop paying for 200 extra seats going forward. That translates to immediate cost reduction on your renewal quote (and over the 3-year EA, it’s a significant avoidance of expense). Additionally, cleaning up shelfware can sometimes help postpone or reduce a true-up cost if it is caught early.

Q4: We’re considering upgrading many users to Microsoft 365 E5. How should we approach this during the renewal process?
A: Cautiously and strategically. Microsoft 365 E5 is a powerful but expensive option. First, determine exactly which users or use cases truly need the E5 features (advanced security, telephony, analytics, etc.). It’s often a minority of users. For others, E3 with perhaps one or two add-ons can suffice. Instead of an all-or-nothing E5 upgrade, consider a mix-and-match approach: renew mostly E3 licenses and only upgrade key users to E5. You can also pilot E5 with a small group or seek a discounted promo for the first year rather than committing everyone upfront. In negotiations, Microsoft may offer promo pricing for E5 – just ensure you understand what the price will be after the promo period. The bottom line: adopt E5, which delivers clear value, not as a blanket move.

Q5: What if Microsoft’s renewal quote comes in much higher than our current spend?
A: It’s common to see an initial quote that’s higher (sometimes 20%+ more) due to added products or list price increases. Don’t panic – and don’t accept it at face value. Break down the quote line by line. Identify why it’s higher: Are there new licenses included that you didn’t ask for? Has Microsoft raised prices, or did your usage grow? Then, address each factor: remove or decline any unnecessary additions, negotiate discounts to offset price hikes, and use your usage analysis to counter-propose lower quantities if you plan to cut shelfware. It’s critical to push back – often, Microsoft has room to improve the offer, especially if they fear you’ll walk away or cut down the scope. Prepare a counteroffer and be willing to go back and forth. With data and benchmarks on your side, you can typically reduce the cost significantly from the initial quote.

Q6: Should we consider moving to a Cloud Solution Provider (CSP) program or Microsoft Customer Agreement instead of renewing the EA?
A: It depends on your organization’s size and flexibility needs. Generally, for large enterprises (with several hundred seats or more), an EA still offers the best volume discounts and price protections. CSP is a month-to-month subscription model offered through a partner, providing more flexibility (you can scale licenses up or down at any time). However, the per-unit pricing is usually higher, and discounts are minimal for large numbers. If you expect a major downsizing or require extreme flexibility, CSP could be considered; however, most large companies find the EA to be more cost-effective over three years. Microsoft’s new MCA (Microsoft Customer Agreement) is another framework they’re introducing; it can make sense for mid-sized orgs and is more cloud-centric, but it may lack some negotiated discounts. As part of your renewal prep, it doesn’t hurt to get a CSP quote for comparison. In most cases, you’ll use that as leverage but still renew the EA – unless your user count drops below the EA minimums (500 users) or you have a special scenario that makes EA less suitable.

Q7: How can we leverage our software usage data during negotiations with Microsoft?
A: Your data is a powerful bargaining chip. Showing Microsoft that you know your exact deployment and needs makes it clear you won’t pay for the excess. For example, you can say, “We are renewing 800 seats of Product X instead of 1,000 because we have data showing only 782 active users. We expect you to price the 800 competitively.” It also helps in asking for discounts: “We see you quoted 20% more Azure consumption than we used last year – we’re not going to commit to that. Let’s base it on our real usage and also apply a discount to keep it within budget.” By demonstrating that you’ve done your homework, you pressure Microsoft to come back with a leaner, sharper offer rather than padding the deal with things you don’t need. Essentially, data-driven negotiations shift the conversation from Microsoft trying to sell you “more, just in case” to a focus on “what we require at a fair price.”

Q8: What if we discover we’re under-licensed (over-using) in some area during our audit?
A: Discovering that you have more usage than licenses (e.g., 110% usage of a product) is a compliance red flag, but the renewal time is an opportunity to address it constructively. You have two main options: true-up now or absorb it in the renewal. If the gap is significant and the contract requires an official true-up at year’s end, you should report it and pay for the overuse for the remainder of the term to stay compliant. However, if you’re close to renewal, you might simply incorporate the correct higher quantity into your renewal order (essentially, you’ll be paying for it going forward). Microsoft sales teams are usually amenable to focusing on future purchases rather than penalizing past overuse, especially if you’re increasing your spending with the renewal. The key is not to ignore it – address it openly, get the licensing back in alignment, and use renewal as the clean slate. You can also use this as leverage to negotiate a better price on those additional licenses since you’re bringing more into the agreement.

Q9: How do early planning and internal alignment help get a better deal?
A: Early planning and getting everyone on the same page internally give you negotiation strength in a few ways. First, you have the time to thoroughly vet what you need and don’t need, so you’re less likely to overbuy. Second, with internal consensus, Microsoft can’t easily divide and conquer (e.g., going around you to an executive with a glossy upsell) because that executive is already part of your planning and is familiar with the plan. Third, starting early means you can shop around for alternatives or simply create the credible impression that you could switch solutions if Microsoft doesn’t cooperate on price. When Microsoft’s team sees that you are well-prepared, started early, and have clear requirements, they know you mean business. It often results in them giving a more competitive offer to close the deal efficiently. In contrast, last-minute renewals tend to favor Microsoft, as customers in a rush have little choice but to accept whatever is offered.

Q10: After the renewal is signed, what should we do to prepare for the next cycle?
A: Don’t file the contract away and forget it. Carry forward the discipline you established in this renewal. This involves continuously monitoring license assignment and usage throughout the EA term, possibly conducting semi-annual internal reviews to identify any new shelfware that may be emerging. Ensure that any changes (new hires, project launches, or project cancellations) are reflected in your license allocations promptly, so you don’t build up a stock of unused licenses. Also, track any Microsoft announcements or product changes during the term, as these can present opportunities or changes you’ll need to consider next time. Essentially, maintain an ongoing mindset of optimization. By the time you’re 12 months from the next renewal, you should already have a pretty clear picture of your environment. This makes the next renewal even smoother and helps you continually get the most value out of your Microsoft investments.

Read about our Microsoft EA Negotiation Service.

Do you want to know more about our Microsoft Optimization Services?

Please enable JavaScript in your browser to complete this form.

Name *

First

Last

Email *

Company

Message *

Submit