Microsoft EA Renewals
- Plan early – Start 12-18 months before renewal to assess needs.
- Review usage – Identify underutilized licenses to optimize costs.
- Negotiate pricing – Leverage benchmarks and alternative options.
- Consider CSP or third-party support – EA isn’t the only option.
Microsoft EA Renewals: A Guide for CIOs and Procurement
Microsoft’s Enterprise Agreement (EA) is a cornerstone licensing contract for large organizations, typically spanning three-year terms. As renewal approaches, CIOs and procurement leaders must navigate complex decisions to balance cost, compliance, and strategic needs.
This guide provides a structured approach to EA renewals – covering renewal strategies, pricing models, cost optimization, negotiation tactics, compliance considerations, and key contract terms – with real-world insights and expert recommendations for a successful renewal.
Renewal Strategies: Best Practices and Key Steps
Renewing an EA is not a routine administrative task – it’s an opportunity to realign your Microsoft licensing with business objectives. Proper planning and strategy are essential.
Key renewal best practices include:
- Start Planning Early: Begin renewal preparations 8–12 months before the EA expiration. Rushing at the last minute is a common pitfall that can lead to poor outcomes. Early planning gives you time to assess needs, avoid lapses in coverage, and leverage timing in negotiations. Microsoft itself suggests initiating the renewal process about a year in advance.
- Inventory and Usage Review: Conduct a thorough internal audit of your current deployments and licenses. Identify what software and cloud services you have versus what is being used. This “effective license position” analysis will spotlight unused licenses, under-utilized services, and areas of over- or under-licensing.
- Needs Assessment for the Next Term: Forecast your organization’s needs for the upcoming 3-year period. Consider planned growth or reductions in users, cloud migration plans, and new Microsoft products or services you intend to adopt. For example, if a business unit plans to shift to a different solution, you might decide not to renew certain Microsoft components for that unit.
- Stakeholder Alignment: Involve all relevant stakeholders – IT, procurement, finance, and business unit leaders – early in the process. Gather their requirements and ensure consensus on goals. A unified internal stance prevents last-minute disagreements and strengthens your position when negotiating with Microsoft.
- License Optimization (True-Down Before Renewal): Clean up your license counts before renewing. Remove or reassign unused licenses so you don’t carry “shelfware” into the next term. For instance, one company discovered that 20% of its licenses were sitting unused and avoided renewing those, directly reducing renewal costs. Similarly, if certain users can be moved to cheaper license editions, plan those changes now. This ensures you only renew what you need.
- Engage Microsoft or Your LSP Early: Open a dialogue with your Microsoft account representative or Licensing Solution Provider (LSP) 6–12 months before renewal. Share that you are entering renewal planning and requesting initial quotes or proposals. This signals Microsoft to start working on your deal (e.g., securing special discount approvals) early. It also gives you a baseline to identify gaps and areas to negotiate.
- Set Renewal Objectives and Benchmarks: Define clear goals for the renewal. For example, you might target a certain percentage cost reduction or require adding a new product within a specific budget limit. Research industry benchmarks, or deals similar organizations have gotten, if possible, to inform your expectations. Having concrete targets (e.g., “reduce total EA cost by 10%” or “cap Office 365 cost at $X per user”) will guide your negotiation strategy.
- Execute a Structured Renewal Process: Treat the renewal as a project. It often helps to follow a phased approach (planning, analysis, optimization, negotiation, etc.) similar to formal methodologies. For example, experts outline phases such as 1) environment assessment, 2) future demand planning, 3) optimization of current usage, 4) pre-negotiation strategy, 5) negotiations, and 6) contract execution. A structured plan ensures you cover all angles and are well-prepared.
- Finalize and Communicate: Once you negotiate new terms, thoroughly review the contract documents (quotes, terms, and any amendments) to ensure they reflect the agreed deal. Before signing, have legal/procurement teams check that pricing, discount percentages, and special conditions match what was promised. After signing, communicate the changes: inform IT teams about license adjustments or new services to deploy, and let end-users know about any new tools or benefits they can access. Update your internal tracking systems with the new agreement details for smooth management.
Following these steps transforms the renewal from a simple “checkbox exercise” into a strategic initiative. The result is an EA renewal that aligns with your business needs (with no unnecessary spending) and positions you well for the next term.
EA Pricing Models: Volume-Based Discounts and Recent Changes
Understanding how EA pricing works is crucial for budgeting and negotiations. Microsoft EAs use a tiered volume pricing model: the more licenses or users you commit, the lower the price per unit. Traditionally, there are four programmatic discount levels based on the number of users/devices licensed:
- Level A: 500 – 2,399 users/devices
- Level B: 2,400 – 5,999 users/devices
- Level C: 6,000 – 14,999 users/devices
- Level D: 15,000+ users/devices
Each tier offers progressively larger volume discounts, so bigger organizations get better unit pricing . For instance, a company with 3,000 seats falls in Level B and would expect deeper discounts than an 800-seat Level A company. Microsoft has advertised that large EAs can yield built-in savings up to ~45% off list prices due to volume pricing and package deals (actual discounts vary by product and negotiation).
Pricing structure features:
- Price Lock During Term: When you sign a new EA, the pricing for those licenses is generally locked in for the 3-year term (with payments usually spread annually). This price protection means even if Microsoft raises global prices, your costs for existing EA licenses won’t increase mid-term. However, at renewal, this protection ends – pricing resets to the then-current price list unless you negotiate otherwise. This is why many organizations see cost jumps at renewal if Microsoft’s list prices rise in the interim or prior special discounts aren’t carried forward.
- Level-based Discounting: The EA level (A, B, C, D) is determined by your initial order quantity (e.g., number of qualified users/devices). Higher level = higher volume = larger built-in discount. For example, Level D (15k+ seats) might enjoy significantly lower unit costs than Level A. Note: These built-in discounts are “programmatic”; you can often negotiate additional discounts on top, especially for large deals or strategic products. However, Microsoft’s business desk must approve those case by case.
- Enterprise-wide Requirement: EAs typically require committing to license all “qualified” users or devices for certain products (like Windows or Office) to ensure broad coverage. In exchange, Microsoft grants discounted “platform” pricing for those enterprise products.
Changes in Recent Years: Microsoft has made notable adjustments to EA pricing and eligibility:
- Microsoft eliminated some automatic volume discounts for the smallest EA tier. A few years ago, Level A customers stopped receiving a pre-set discount off the list price, meaning smaller EAs might pay closer to retail rates. This was part of a 2018 pricing change where programmatic discounts for the lowest tiers were removed, pushing customers to negotiate discounts rather than relying on built-in cuts.
- The minimum size for an EA has increased. Historically, organizations with 250 seats could qualify, and then it became 500; now, Microsoft officially positions EAs for 500+ users. More importantly, Microsoft has signaled plans to phase out Level A (500-2,399 seat) EAs altogether in favor of its newer Microsoft Customer Agreement (MCA) model for those customers. Industry watchers report that Microsoft intends to raise the minimum EA size to 2,400 users (the current Level B threshold), meaning organizations below that would no longer be offered an EA at renewal. If this continues, those mid-size customers will be steered to MCA or Cloud Solution Provider (CSP) agreements instead. In preparation, Microsoft has already begun contacting some smaller EA customers (especially “cloud-only” EAs) to transition them to the new format.
- Cloud Service Pricing: As Microsoft’s cloud offerings (Azure, Microsoft 365, etc.) have matured, their pricing within an EA has also evolved. Cloud subscriptions under EA are often priced similarly to standalone subscriptions. Still, with benefits for committed spending – for example, Azure under an EA gives you a monetary commitment (prepaid credits) with usage discounts versus pay-as-you-go rates. Also, Microsoft may offer additional discounts or incentives for bundling cloud services at renewal (since moving customers to the cloud is a key goal).
- Price Increases and Currency Adjustments: Microsoft periodically announces price increases for certain products or regions. These will affect your renewal if they occur after your last EA signing. Also, renewal pricing could reflect those adjustments if your EA is priced in a foreign currency and that currency moved. It’s important to stay aware of Microsoft’s pricing announcements during your term and factor them into renewal planning.
Practical Takeaway: Thoroughly understand your organization’s pricing tier and how that influences cost. Suppose your user count is on the cusp of a higher tier.
In that case, it may be worth evaluating if consolidating licenses (or including more affiliates) to reach the next level makes financial sense due to the steeper discount. Conversely, if Microsoft is pushing you to a new agreement model (like MCA) due to size, be prepared: MCA/CSP typically don’t offer the same kind of upfront volume discounts and price protections as an EA. In such cases, you’ll need to negotiate hard on pricing or adjust your licensing strategy to maintain cost efficiency.
Cost Optimization: Reducing EA Costs and Maximizing Value
One of the biggest challenges at EA renewal is controlling costs. Over a multi-year EA, organizations often accumulate excess licenses or suboptimal bundles, leading to overspending.
Renewal time is your chance to optimize and trim the fat. Here are strategies to reduce EA costs and ensure you get maximum value from what you pay:
- Eliminate Shelfware (Unused Licenses): Identify licenses that are paid for but not being used. These include extra Office 365 seats, rarely-used Visio/Project licenses, or workloads migrated off Microsoft but still covered. Plan to true-down at renewal – i.e., do not renew those unused licenses. Many companies find double-digit percentage savings this way. For example, one enterprise discovered only ~600 of its 1,000 Visio licenses were actively used, so they renewed just 600 and saved the cost of 400 licenses. Another company realized it had given all employees a premium EMS E5 security suite, but most weren’t using its advanced features; at renewal, they right-sized by licensing only IT admins with E5 and downgrading the rest to E3, achieving significant savings while still meeting needs. Make it a rule: if a product or service hasn’t been utilized in the last year, scrutinize whether it’s needed going forward.
- Right-Size License Types and Quantities: Beyond dropping unused licenses, ensure the license mix matches actual usage profiles. This can mean shifting users to lower-cost editions if appropriate (e.g., not everyone needs Office 365 E5 or Windows E5 if E3 suffices), or reducing quantities to the exact number required rather than over-provisioning “just in case.” Right-sizing often requires usage analysis – e.g., tracking how many users truly use Power BI Pro or how many devices need Windows Enterprise – but pays off in avoided excess. The EA renewal is the best time to reallocate and adjust license types because you can make clean changes for the next term (whereas, in the mid-term, you’re more locked in). Ensure any downsizing is done in compliance with licensing rules, of course, but remember you can always add licenses mid-term if needed (via True-Up), whereas removing them mid-term is impossible. So it’s safer to start lean and add later than overbuy upfront.
- Leverage Azure Credits and Hybrid Benefits: If your EA includes Azure or other cloud services, fully utilize any committed cloud spend or credits so they don’t go to waste. Many EAs have a monetary Azure commitment (essentially pre-paid Azure credits) – track your consumption to ensure you use what you’ve paid for. If you consistently under-consume Azure in your EA, consider reducing the committed amount at renewal to avoid overpaying. Conversely, negotiating a higher upfront commitment can earn larger discounts on Azure rates if you plan significant Azure usage. Microsoft provides better pricing for committing to Azure spend (like an enterprise Azure plan) versus pay-as-you-go.Additionally, take advantage of Azure Hybrid Benefit (AHB) where possible. This benefit lets you apply existing on-prem licenses (Windows Server, SQL Server with Software Assurance) to cover Azure VM costs, drastically reducing Azure charges. Ensuring you properly use AHB can cut cloud bills by 30-50% for those workloads. In short, optimize your cloud resources: right-size VM instances, eliminate idle resources, and use Microsoft’s cost management tools or Azure Advisor to identify savings. Cloud cost control directly impacts your EA spending..
- Cut Redundant or Overlapping Services: Large organizations sometimes pay for overlapping capabilities. For example, you might have a third-party security product that provides similar features to something in your Microsoft 365 E5 bundle or multiple analytics tools where Microsoft Power BI could suffice. Assess your software portfolio for opportunities to consolidate on Microsoft (or vice versa) to eliminate duplicates. If you’ve upgraded to Microsoft 365, which includes Teams for communication, you should have long-retired separate conferencing or collaboration subscriptions. Similarly, ensure you’re not double-paying for Windows or SQL Server licenses in the cloud if those are covered by your on-prem agreements (use the hybrid use benefit instead). Streamlining services not only saves licensing costs but also simplifies compliance.
- Utilize Software Assurance (SA) Benefits or Consider Dropping SA: Software Assurance adds 25%+ to license costs annually, but it brings benefits like version upgrades, training vouchers, planning services, extended support, and license mobility. Review whether you fully utilize SA benefits – if yes, they can offset other costs (e.g., using SA training days instead of paying external trainers). If not, you might be wasting money on SA. At renewal, you could choose to renew certain licenses without SA (or let SA lapse) if you determine the benefits aren’t needed for those products. Be careful: dropping SA means losing rights like new version upgrades and license mobility. For instance, without SA, you cannot freely move Windows/SQL Servers to the cloud or between hosts (breaking compliance), and you lose access to upgrade to new versions. A balanced approach is to keep SA on products where you need the benefits (or where it’s required for cloud/hybrid use), and possibly not renew SA on stable, legacy products that you don’t plan to upgrade or move. This can reduce costs but weigh the risk of future needs.
- Consider Alternate Licensing for Certain Segments: Not all parts of your organization must be under the EA if it’s not cost-effective. For example, development/test environments might use Visual Studio subscriptions (which include some Azure credits) instead of full EA licenses. Smaller acquired companies or subsidiaries could be put on CSP agreements or Microsoft 365 Business plans if an enterprise EA SKU is overkill for them. During renewal, identify if a portion of your estate could be licensed more cheaply via a different program. Microsoft’s CSP (Cloud Solution Provider) program can sometimes offer flexibility and monthly billing that suit a small division better than the 3-year EA commitment. Just be mindful that moving licenses out of the EA could reduce your volume tier and, thus, your discounts on the remaining EA licenses. It’s a financial optimization puzzle to solve.
In summary, drive a leaner, more value-focused renewal. Every license on your new EA should have a purpose and an active user – if not, it doesn’t belong there. By right-sizing and cleaning the house, you save money, tighten compliance (fewer unused licenses means less audit risk) , and get more clarity on what you’re paying for. Coupled with a strong negotiation (next section), cost optimization efforts can significantly lower your EA TCO for the next cycle.
Negotiation Tactics: Securing Better Terms with Microsoft
Renewal time is negotiation time. An EA renewal effectively negotiates a brand-new contract, giving you a prime opportunity to improve terms. Microsoft expects customers to negotiate – failing to do so leaves money on the table.
Here are tactics and considerations to negotiate the best deal:
- Don’t Wait – Start Early and Leverage Time: Engage in pre-renewal discussions well before your EA expiration. Starting negotiations 6-12 months in advance allows you to work through proposals and counter-proposalsmethodically. It also allows you to time your deal optimally, such as Microsoft’s fiscal year-end. Microsoft’s fiscal year ends June 30, and both end-of-quarter and end-of-year are when sales teams are eager to close deals to hit quotas. By initiating talks early, you can pace them such that the final approvals and signing happen when Microsoft is most motivated to give concessions (e.g., in Q4 of their fiscal year, when they may throw in extra discounts or credits to win your renewal). Avoid last-minute negotiations – if you go to Microsoft a few weeks before expiration, you lose leverage and may be forced to accept whatever is on the table.
- Present a Unified Front: Microsoft sales reps often employ a “divide and conquer” approach – engaging different stakeholders (IT vs finance, etc.) to gather information or create pressure. Counter this by making sure your team is aligned internally. Define clear roles: who leads commercial discussions, handles technical scope, etc. All internal stakeholders should support the agreed negotiation strategy and not undermine it. For example, ensure no one on your side indicates a willingness to sign “as-is” if your strategy is to push for a better deal. A cohesive message strengthens your negotiating position.
- Use Data as Leverage: Include detailed data on your current usage, license consumption, and projections. Demonstrate that you know exactly what you have and what you need. This prevents overselling and allows you to push back on unnecessary items. If Microsoft’s initial quote includes, say, 1,000 Windows Server licenses, but your audit shows you only use 800, you have evidence to demand the removal of the excess. Showing the under-utilization of certain products can also justify requests for price reductions or flexibility. Additionally, research prevailing discount levels – if you know similar companies got a 20% discount on a certain product, use that as a benchmark in discussions (without revealing names).
- Leverage Microsoft’s Strategic Interests: Align your requests with what Microsoft cares about. Currently, Microsoft’s priority is cloud adoption and subscription services. If you plan to increase Azure usage or roll out more Microsoft 365 services, use that as a bargaining chip. Emphasize your commitment to Microsoft’s cloud: “We’re evaluating moving our legacy ERP to Azure” or “We intend to upgrade to Teams Phone for all employees.” This positions you to ask for incentives in return, such as Azure credits, an extra discount on Azure consumption, or a favorable deal on the Microsoft 365 E5 licenses needed for Teams Voice. Microsoft often provides better pricing if it knows it can lock in a larger share of your IT roadmap. Conversely, suppose there are Microsoft products you might drop or replace. In that case, you can (tactfully) use that as leverage too – e.g., suggesting that you move some workloads to AWS or switch some users to Google Workspace, which can encourage Microsoft to offer concessions to keep that business.
- Bundle and Broaden the Deal Scope: One tactic is to bundle new products or expansions into the renewal to get a better overall deal. If you’re considering adopting a Microsoft product you don’t currently have (Dynamics 365, Power BI, Security add-ons, etc.), negotiating it as part of your EA renewal can yield introductory discounts or favorable terms for that product. Microsoft loves to showcase customers increasing their cloud footprint, so they may be willing to be flexible on price if you add, for example, Dynamics 365 licenses bundled with your renewal instead of buying it later. Bundling can also mean consolidating separate contracts into the EA (like folding in a standalone Azure agreement), which gives Microsoft a larger single deal to win – often leading to improved discounts across the board. Be strategic: only add what aligns with your needs, but if you know you’ll buy it eventually, doing so within the EA negotiation might secure a better price.
- Negotiate Discounts and Concessions Aggressively: Microsoft’s first offer is rarely the best. Prepare to counteroffer – multiple times if needed. Common areas to negotiate:
- Discount Percentages: Scrutinize the discount on each major line item. If they offer (for example) a 15% off list for Office 365, push higher by citing your volume or competitive offers. Use any benchmarks you have. Customers are expected to ask for better pricing; Microsoft’s sales teams have some flexibility, and anything beyond their limit goes to Microsoft’s internal “business desk” for approval. Justify to help your rep advocate internally (e.g., budget constraints, competitor pricing, a long history as a loyal customer, etc.).
- Price Caps or Fixed Pricing: You can negotiate to cap price increases for additional quantities or True-Ups. For instance, request that if you add more users during the term, they get the same unit price as the initial users (or a fixed discount level). This prevents the scenario of paying more later if your headcount grows. You could also negotiate rate locks for renewal options – e.g., if you agree to a certain growth, Microsoft agrees to hold pricing steady.
- Billing and Payment Terms: While list pricing is usually the same whether you pay annually or upfront, you might negotiate an incentive for upfront payment (if you can prepay). In some cases, customers have gotten an extra percentage point or two off in exchange for paying 3 years at once because it helps Microsoft book revenue faster. At a minimum, ensure the payment timing aligns with your cash flow preferences (Microsoft is usually fine with annual payments, which is the default).
- Flexible True-Up/True-Down: Normally, you can only increase license counts annually (True-Up) and can’t reduce until renewal. If you expect significant fluctuation, try to negotiate provisions for partial adjustments or an earlier checkpoint. Microsoft is reluctant on true-down flexibility, but large customers have occasionally negotiated the ability to reduce a certain percentage of licenses mid-term or convert them to cloud subscriptions if needed (especially during events like economic downturns). Even if you can’t drop licenses mid-term, you might negotiate an option to transition some on-prem licenses to cloud services without penalty, preserving spend but adding flexibility.
- Exploit Competitor and Alternative Leverage: Even if you are a “Microsoft shop,” letting Microsoft know you have options creates leverage. Mention that you are also considering alternatives for certain workloads (AWS or Google for cloud, Zoom for meetings, etc.). If Microsoft believes part of your spending is at risk to a competitor, they will often sharpen their pencil on price or throw in extras to sway the decisionrates. For example, showing an AWS cost comparison for similar infrastructure might push Microsoft to offer a bigger Azure credit or discount to compete. Be credible – focus on areas where alternatives are realistic – but you don’t have to leave Microsoft to gain this negotiating benefit.
- Mind the Timing of Commitments: Microsoft reps have quarterly and annual targets. There’s often a spike in generosity as the end of Q4 (June) nears and sometimes at the end of Q2 (December). If you’ve done the work early, you can choose to finalize the deal at a time when Microsoft is under pressure to close. In practical terms, this could mean not signing your renewal in April but waiting until late June if your EA expires in July – thereby negotiating in late May/June. Microsoft may come back with a “last call” improvement as the deadline looms. However, be careful not to push timing so far that you risk missing the renewal deadline (which could cause a lapse in coverage). Always leave a bit of a buffer to get the paperwork done.
- Engage the Right People: Your primary interface will be Microsoft’s account manager and perhaps a specialist or technical salesperson. But remember, final pricing and terms often need approval from Microsoft’s Business Desk (a corporate pricing approver). If negotiations stall at the rep level, it can help to request a meeting with a Microsoft sales manager or bring in an executive sponsor from your side to escalate key asks. When Microsoft sees high-level management involved, they know the deal is important and might be more willing to approve exceptions. Also, if you buy through a reseller (LSP), ensure they actively advocate for you. Sometimes, having multiple resellers bid (if possible in your region) can create competition, resulting in a better offer.
- Document Every Concession: During negotiation, if Microsoft verbally agrees to a concession (like extra training days or a special break on pricing for a certain component), get it in writing (email at least) and ensure it’s reflected in the final contract or an amendment. People change roles, and memories fade – you need the legal document to capture all promises. Before signing, double-check that your negotiated discounts appear correctly on the order and that any special conditions (e.g., extended timelines for a migration or a custom usage right) are appended as an agreement amendment.
Expert tip: Negotiation is about price, terms, and relationships. Be professional and factual but firm about your requirements. Microsoft values long-term partnerships, so if you can articulate a win-win—e.g., “We’ll commit to adopting X cloud product if you can accommodate Y in pricing”—you often get further than a purely adversarial stance.
At the same time, don’t hesitate to say “no” and push back on offers that don’t meet your goals; Microsoft negotiators expect pushback and will rarely walk away from a renewal negotiation with a willing customer. In the end, the best agreements are those where both you and Microsoft feel your needs are addressed – you get a cost-effective, flexible deal, and they retain a satisfied customer.
Read how to renew your Microsoft EA.
Compliance Considerations: Managing Risks and Microsoft’s Enforcement
Ensuring compliance with Microsoft’s licensing rules is critical to EA renewals. Nothing derails a renewal (or blows up your budget) faster than discovering a massive license shortfall or facing an unexpected audit. CIOs and procurement managers should proactively address compliance in the renewal process:
- Perform an Internal License Audit Pre-Renewal: Before you enter negotiations, thoroughly assess your license usage vs. entitlements. Reconcile what you’ve deployed against what you’re licensed for. This internal audit flags any compliance gaps (e.g., usage exceeding licenses) so you can address them (by purchasing additional licenses or adjusting deployments) before Microsoft audits you. Many organizations conduct this inventory 3–6 months before renewal as a best practice. It guides what you need to renew and avoids panic if Microsoft were to initiate a compliance review – since you’ve already self-corrected. In short, know your compliance position better than Microsoft does.
- Understand True-Up Obligations: During the EA term, you are contractually required to report and pay for any annual usage increases (the True-Up). Ensure that over the last 3 years, you have been doing your true-ups accurately. You could carry a compliance debt into the renewal if something were missed (e.g., additional users added but not reported). The true-up process requires submitting any changes 30 days before each anniversary. Double-check that all new deployments (servers, CALs, Office 365 seats, etc.) were accounted for. If not, expect Microsoft to catch that at renewal – possibly resulting in a retroactive charge. By proactively including any needed “catch-up” licenses in your renewal quote, you take control of the situation rather than waiting for Microsoft to bill you later (which could even come at non-discounted rates if done outside the EA).
- Common Compliance Gaps to Check: Microsoft licensing is complex, and certain areas often lead to unintentional non-compliance:
- Server and Infrastructure Licensing: Verify that server products (like Windows Server and SQL Server) are correctly licensed for how they’re used. Check VM hosts for proper coverage (e.g., all physical cores licensed if using a per-core model). Ensure any secondaries for failover are licensed per Microsoft’s rules. If you use virtualization heavily, ensure you have Software Assurance if needed for mobility or DR scenarios.
- Client Access Licenses (CALs): CALs for Windows Server, SQL, Exchange, etc., are easily overlooked. Audit if every user/device accessing those services has the appropriate CAL. Microsoft often finds CAL deficits during audits.
- Office 365 / Microsoft 365 Usage: Ensure the number of users with access matches the licenses you have. If you allowed extra users (beyond your purchased count) to use the services, you need to true up. Also, confirm users are assigned to the correct license plans (e.g., a user using Office 365 E5 features should have an E5 license, not E3).
- SQL Server Editions and Options: Deploying a higher edition feature (e.g., using an Enterprise Edition feature on a Standard Edition license) is a compliance violation. Make sure deployments align with the edition and version you’re licensed for.
- Geographical and Affiliate Use: If your EA covers only certain regions or affiliates, ensure licenses aren’t used elsewhere informally without proper transfer or extension. License transfer and country restrictions are often buried in terms but can be important.
- Microsoft’s Audit and Enforcement Tactics: Microsoft maintains contractual audit rights in the EA’s terms (usually via the MBSA – Microsoft Business and Services Agreement). In recent years, Microsoft has become more aggressive in enforcing compliance, especially as they push cloud adoption. Companies have observed an uptick in formal and “informal” audits disguised as Software Asset Management engagements. These SAM reviews are where Microsoft (or a partner) offers to help you assess your licenses – inevitably finding gaps that you must purchase to resolve. Be aware that if you decline to renew and remain on legacy products, you might increase your audit risk, as Microsoft knows you’re out of contract and might scrutinize your environment. Always assume that any significant licensing shortfall will come to light eventually – it’s better to discover and resolve it on your terms than Microsoft’s. If Microsoft does initiate an audit, engage your experts, carefully manage scope, and negotiate any findings – but ideally, avoid getting to that point by staying compliant.
- Compliance Risks of Not Renewing vs Renewing: Oddly, renewing your EA can help you stay compliant because it typically includes maintaining Software Assurance on your licenses. Remember that certain usage rights immediately end if you choose not to renew. For example, if you had perpetual licenses with SA and you don’t renew SA, you lose rights like new version upgrades and license mobility into the cloud or across servers. Microsoft cautions that many organizations rely on these SA-only benefits for compliance – e.g., running virtual machines in Azure Hybrid Benefit or reassigning licenses frequently. If you let SA lapse, those VMs could suddenly be non-compliant. Thus, part of compliance planning is deciding which licenses must be kept under SA to preserve your compliant use of the software. On the flip side, if you are moving fully to subscriptions (like Microsoft 365 or Azure), you may no longer need SA on some on-prem licenses. The key is to map out what rights you need for your IT environment to remain compliant and ensure your renewal (or alternate licensing after EA) covers those rights.
- Document and Communicate Changes: To maintain compliance continuously, it’s wise to implement internal controls. For instance, document your entitlements (what you purchased, the quantities, and allowed usage) when the new EA starts. Maintain a central record (the Microsoft License Statement, renewal orders, etc.) that can be referenced. If IT deploys new servers or adds users, have a process to track that and procure licenses as needed rather than waiting for true-up time. Regular (quarterly or biannual) internal reviews of license positions can catch issues early. Also, communicate the “do’s and don’ts” to technical teams – e.g., if they spin up an extra SQL Server instance, they need to inform procurement to license it. A culture of license compliance can save a lot of pain.
In essence, proactive compliance management is your best defense. Microsoft’s enforcement is real – they will enforce the contract if needed, and non-compliance could mean purchasing unbudgeted licenses at full price or even back-paying fees.
But if you go into your renewal with a clean bill of health and a clear plan (and include any needed fixes as part of the new agreement), you can turn compliance into just another routine checkpoint rather than a fire drill.
Key Contract Terms: Renewal Clauses, Flexibility, and Pitfalls to Watch
Enterprise Agreements are complex contracts. Understanding key terms and potential pitfalls in your EA and renewal documents will help you avoid surprises and ensure you get favorable terms.
Here are the contract elements CIOs and procurement should be mindful of during renewals:
- EA Term and Renewal Mechanics: A standard EA runs for 3 years. Ultimately, it doesn’t automatically roll over – you can sign a new agreement (renew) or not. An EA renewal is a brand-new EA brand new rather than a simple extension. This means all terms (pricing, discounts, conditions) can be re-negotiated. Microsoft usually sends a “Renewal Order” or paperwork to execute the renewal. If you do nothing, the EA will expire, and for perpetual licenses, you retain rights to the versions you had (without SA), while subscription services would shut off. Some EA contracts include a “renewal option” clause indicating you can elect to renew for another term, but it still requires signing the new agreement. Always confirm with Microsoft your intent to renew or not at least 30 days before expiration to avoid any lapse or confusion.
- Price Increases and Benchmark Clause: When you renew, your pricing is reset to current Microsoft prices. If, over the last term, Microsoft raised prices for certain products (or introduced new editions), you might see higher costs. Likewise, any special discount you enjoyed previously does not carry over by default. You must renegotiate any discounts again. A big pitfall is assuming your old pricing will simply continue – when in fact, without negotiation, you’ll likely get a quote at higher rates (even if your usage stays the same). To combat this, negotiate for price protection in the new term. Some customers secure a price hold or cap for year-over-year increases within the new EA, especially for subscriptions. If Microsoft is quoting significantly higher, use competitive bids or your history to push back (e.g., “We need the Office price to remain at $X per user as it was last year”). Ensure any agreed discount % is clearly stated in the contract or price sheet for all term years.
- Contractual Discounts and Unit Pricing: Your EA will include a Customer Price Sheet listing the unit prices and any applied discounts. Scrutinize this sheet. Check that volume tier discounts (Level A/B/C/D) are correctly applied. If you negotiated additional discounts, make sure they appear. Microsoft sometimes offers step-up discounts (e.g., a larger discount if you commit to growth or if certain conditions are met) – if so, the terms to earn those should be explicitly documented. Renewal Discounting is an area to watch: Microsoft has been known to reduce long-standing discounts on some renewals if not challenged. If you had a 30% discount last time, don’t assume you’ll get 30% again unless you fight for it.
- Enterprise Subscription vs Perpetual EA: At renewal, you can switch your EA to an Enterprise Subscription Agreement (EAS) instead of a perpetual EA. An EAS means you do not keep licenses at the end – it’s a pure subscription for the term, but in exchange, you have more flexibility to reduce counts at each anniversary or not renew without owning anything. The key trade-off is flexibility vs. ownership. A normal EA (perpetual licenses + SA) might be better if your organization is stable or growing, as you’ll own licenses after 3 years. If you expect declines or want to shift entirely to cloud subscriptions, an EAS could save money because you’re not buying perpetual rights you don’t need. Remember: In an EAS, if you drop licenses, you must do it at the annual True-Up/True-Down window; you can’t adjust month-to-month as with some cloud plans. Microsoft will often allow a mix – e.g., you might renew your desktop products on a standard EA and do an EAS for a specific product like developer tools where you want the flexibility to drop later. Consider your needs and ask Microsoft to present both EA and EAS pricing for comparison.
- Cloud Solution Provider (CSP) Option: Another renewal path is moving certain workloads to a CSP agreement instead of the EA. CSP is a completely different licensing program (purchased via a partner, with monthly billing). It offers high flexibility (add/remove licenses month to month) and can be good for smaller segments or pure cloud services. However, CSP lacks the centralized enterprise-level agreement benefits – typically no upfront volume discount (pricing is often at list or close to it for M365/Azure under CSP), and support is provided by the partner rather than Microsoft. It’s worth evaluating if CSP makes sense for parts of your estate during EA renewal. For example, if you have 200 seasonal workers that only need Office for 6 months, putting them on CSP licenses might be cheaper than including them in a 3-year EA commitment. Microsoft sometimes encourages shifting to CSP/MCA for sub-500 seat groups as part of the EA changes. Just weigh the pros/cons carefully. Many large enterprises maintain an EA for core licensing and use CSP tactically for fringe cases or very dynamic needs. The renewal is a good time to carve out those if appropriate (and possibly negotiate with your EA reseller to be your CSP provider for simplicity).
- Payment Terms and Renewal Flexibility: Microsoft EAs traditionally allow annual payment with no interest – you pay one-third of the total each year (this is standard and should be in the contract). If you prefer to pre-pay the entire 3-year amount, you can, but ensure it’s reflected. Some customers negotiate custom payment schedules (e.g., front-loaded or back-loaded payments) to align with budgets – Microsoft is often open to reasonable requests here, as long as the total is fixed. Also, clarify the renewal term options. Does the contract allow a short-term extension if needed? (Sometimes, if negotiations are delayed, Microsoft can issue a 1–3 month bridge.) Do you have an option to renew for another full term under the same conditions? Typically, no – each renewal is a new negotiation – but some public sector EAs have clauses for renewal options at preset terms. Knowing this helps you plan long-term.
- True-Up and True-Down Terms: Your EA agreement will outline how the annual True-Up works – typically, you report increases 30 days before the anniversary and then get billed after the anniversary. What’s important at renewal is how the final True-Up of the expiring term is handled. Usually, you’ll do a final True-Up for Year 3 just before renewing. If you are reducing licenses at renewal, Microsoft might allow you to offset some additions with reductions informally (e.g., you added 100 users mid-year but plan to drop 100 at renewal so that you might avoid a charge). Officially, you must pay for all increases and only drop at renewal, but in practice, discuss this with your rep. Sometimes, they can be lenient if it’s all part of the renewal deal (especially if you’re migrating products). Also, if you move to an EAS from EA, ask how True-Up/True-Down is handled annually (since you can decrease, make sure the contract language supports that flexibility).
- Software Assurance Continuation: If you renew an EA with perpetual licenses, essentially, you’re renewing the Software Assurance on those. The new contract should clearly state that SA is continued without lapse, so you maintain upgrade rights and other benefits. If there is any break in coverage, you normally lose SA benefits. Thus, ensure the renewal starts exactly when the old one ends (to avoid a gap). Additionally, if you decide not to renew certain products’ SA, be aware of “expired SA” provisions. Without SA, you might lose things like the right to run prior versions, the Home Use Program for Office, or the ability to add new licenses of that product under the old terms. Plan for those changes – for example, if you drop SA on Windows, you can no longer use new versions beyond what’s released up to the end of your old SA period.
- Contract Amendments and Special Terms: Throughout an EA, you might have negotiated special terms (via contract amendments) – such as exceptions to standard product use rights, special pricing protections, a cap on support costs, etc. Do not assume these automatically roll into the renewal. Each EA is a fresh contract, so you need to renegotiate or explicitly carry forward any special clauses. For instance, if you had an amendment allowing unlimited virtualization for a specific project, you’ll likely need a new amendment in the renewed EA to continue that. Keep a list of non-standard terms from your previous deal and bring them up during renewal negotiations. Microsoft may agree to reissue those amendments, or they might push back if that program has ended. Getting this sorted is vital to avoid losing an entitlement you rely on.
- Pitfalls to Avoid: Based on experience, here are common mistakes in EA renewals:
- Renewing As-Is: Simply rubber-stamping the same products and quantities for another 3 years without analysis is costly. It guarantees you carry forward inefficiencies and shelfware. Always review and justify each line item.
- Ignoring Contract Details: Focusing on price and overlooking terms is easy. Watch out for things like contractual commitments (did you promise to deploy a certain product to all users to get a discount?), or changes in product terms that Microsoft makes. Read the Notes and Product Terms for any new limitations that didn’t exist before.
- Not Locking In Negotiated Terms: Verbal assurances mean nothing if not in writing. Ensure any negotiated flexibility (say, a right to swap some licenses for equivalent value during the term) is documented. If you negotiated a special price for a future True-Up, get that in the contract or an official email.
- Overcommitting to Unused Services: Sometimes, in the heat of negotiation, companies agree to add shiny new Microsoft services (because of a good bundle price) but never deploy them. This results in wasted spending and can hurt credibility in the next renewal (“You bought 1000 Power BI and only used 100”). Don’t commit just because it’s cheap – commit because you plan to use it. If you add new services, ensure a rollout plan and user adoption program internally so the investment pays off.
- Forgetting to Update Internal Compliance Post-Renewal: Some think the job’s done after signing. However, ensure your IT and asset management teams update license assignments and repositories to reflect the new agreement. Remove permissions for any software you dropped (so it’s not used illegally), and enable new rights you gained. Also, schedule your next internal audit cycle to keep things on track.
In summary, treat the contract as carefully as the pricing. A contract clause that limits flexibility or imposes unexpected costs later can undermine a well-negotiated price. Conversely, a strong clause (like a price cap or transfer rights) that you secure can save you money and headaches. If you lack expertise in licensing legalese, involve counsel or a licensing expert to review the paperwork.
Don’t hesitate to ask Microsoft for clarifications or adjustments – the time to fix contract language is before signing, not after. By being detail-oriented and aware of pitfalls, you can enter the new EA term confident that there are no hidden traps and you have the flexibility to manage your licenses efficiently.
Read our MS EA Renewal FAQ.
