Microsoft Enterprise Agreement True-Up: Cost Reduction and Negotiation Strategies

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1. Understanding the True-Up Process

A Microsoft EA True-Up is a yearly "checkpoint" where you reconcile any increases in software usage against the licences you initially purchased. In a typical three-year Enterprise Agreement, you perform a true-up before each anniversary — usually 30 days prior.

During this process, your ITAM team reports any additional licence needs: new employees added, new devices or servers deployed, or new Microsoft products introduced since the last count. If your organisation has used more licences than originally contracted, you must purchase the additional licences to remain compliant.

True-Up Element	How It Works	Key Implication
Timing	Annually, 30 days before each EA anniversary date.	Miss the deadline and you risk non-compliance. Mark dates 60–90 days early to allow proper preparation.
Scope	Covers all Microsoft products in the EA: Windows, Office/M365, server products (SQL, Exchange, SharePoint), Azure commitments, and any add-ons.	Every product category must be reviewed — not just the obvious ones. Server licensing is often where surprises hide.
Pricing	Additional licences are priced at the per-unit rate agreed at EA signing — locked for the full 3-year term.	Price protection shields you from Microsoft's list price increases during the term. But you still pay a lump sum for added licences.
Direction	In a standard EA, true-ups only go up. You can add licences but cannot reduce committed counts mid-term.	If your workforce shrinks, you're still paying for the original count until renewal. Consider an Enterprise Subscription Agreement (ESA) if you anticipate significant fluctuation.
Pro-Rating	Licences added via true-up are pro-rated for the remaining term. Adding 100 licences with 1 year left = 1 year of payment, not 3.	Deployment timing affects cost. Additions early in the term cost more (pro-rated across more remaining months) than additions near the end.

The true-up is a contractual obligation, not a negotiation event. Prices for any added licences are pre-negotiated in your EA — you won't haggle over cost at true-up time. The focus is entirely on accuracy: ensuring all new usage is accurately counted. By understanding this and preparing year-round, enterprises turn the true-up from a stressful annual scramble into a routine business practice. See Microsoft Contract Terms & Negotiation.

2. True-Up Cost Drivers and Budget Impact

Several factors drive costs during a true-up. Understanding them helps with budgeting and cost control:

Cost Driver	What Happens	How to Manage It
Organisational growth	New employees need Microsoft 365, Windows, and other licences. Each new hire = incremental cost.	Forecast hiring plans with HR. Budget for expected growth and include in financial planning before the anniversary.
Infrastructure expansion	New servers (physical or virtual) require SQL Server, Windows Server, or other product licences. Often deployed by IT ops without ITAM involvement.	Establish change management: every new server deployment triggers a licence impact review before provisioning.
New product deployments	Rolling out a Microsoft product not in the original EA — Power BI, Visio, Project, Copilot — creates new licensing requirements.	Evaluate whether new needs should be added to the EA or handled through a separate CSP subscription or alternative.
Mergers and acquisitions	Acquiring a company brings new users and systems. These must be brought under your EA or licensed separately.	Include M&A clauses in your EA. Negotiate the right to add acquired users at existing EA pricing.
Shadow IT / ungoverned deployments	Business units spin up resources (Azure VMs, SQL instances, Power Platform apps) without IT or ITAM awareness.	Implement Azure governance policies. Use SAM tools to detect unlicensed deployments before they become true-up surprises.

❌ Mismanaged (Reactive True-Up)

Unplanned costs hit finance by surprise. Overestimation leads to shelfware. Under-reporting creates compliance gaps that trigger audits. Microsoft's relationship deteriorates — trust erodes, negotiating leverage weakens.

✅ Optimised (Proactive True-Up)

Costs are anticipated and budgeted. Continual cleanup ensures you only buy what's needed. Strong compliance reduces audit risk. Microsoft sees you as a credible partner — renewal negotiations happen from a position of strength.

The cost of inaccuracy works both ways. Overestimating usage leads to paying for licences you don't need (wasting budget on shelfware). Underestimating or under-reporting is even worse — it creates a compliance gap that may result in audit penalties later. The goal is to report exactly what's needed. See Microsoft Licensing Trends 2025–2026.

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3. Ensuring Accurate Usage Tracking

Inaccurate usage data is a silent budget killer in true-ups. The foundation of a smooth true-up is an accurate inventory of your deployments and usage. Enterprises should invest in robust Software Asset Management (SAM) practices to track every licence entitlement and every installation or user consuming a licence.

Maintain Continuous Inventory

Track PCs running Windows Enterprise, users assigned M365 subscriptions, SQL Server cores, Azure consumption. Use SAM tools to automate discovery. Update records when employees join, leave, or change roles.

Run Quarterly Internal Audits

Reconcile what's deployed with what's recorded. Investigate discrepancies early — not during the annual scramble. Catch unrecorded usage (a dev team installing Visual Studio without informing IT).

Cleanse Data Before Counting

Remove departed employees, decommissioned servers, and inactive accounts. 50 contractor accounts left active in AD = 50 unnecessary M365 seats at true-up. Clean before you count.

Monitor Entitlements vs Actual Usage

Track licence assignments AND actual usage. M365 admin portals show active use. If a user hasn't logged into a licensed service in 6 months, reallocate that licence before buying new ones.

Verify unusual spikes with business units. If a department requests 100 new Visio users, confirm whether all 100 are still active or if some were temporary. Counts become inflated from outdated records — people who've left, servers decommissioned, projects ended. By cleansing data and monitoring actual usage, your true-up report reflects reality rather than an overestimation. Good data hygiene translates directly into cost savings.

4. Optimising and Reducing True-Up Costs

A true-up doesn't have to mean a spike in spending. With smart planning, you can significantly reduce the cost impact:

Strategy	What to Do	Expected Impact
Clean up before you count	Identify and reclaim unused licences, dormant accounts, and redundant deployments before finalising your true-up numbers. True-up internally before trueing-up with Microsoft.	Can eliminate 10–20% of would-be true-up additions — saving tens or hundreds of thousands.
Reharvest and reallocate	Reassign unused subscriptions to teams with new needs rather than purchasing additional licences. Example: M365 seats from a completed project → new department.	Reduces incremental licence purchases. Every reallocated licence = one fewer true-up purchase.
Evaluate alternatives for new needs	New requirements (Power BI, Copilot, Visio) may be better served through CSP subscriptions outside the EA, especially if temporary or highly variable.	Avoids permanent EA commitments for short-term needs. CSP offers monthly flexibility at slightly higher per-unit cost.
Align deployment timing	If possible, time large deployments to coincide with the EA renewal rather than mid-term. Additions near the end of the term are pro-rated for fewer remaining months.	Deploying in month 10 vs month 1 can reduce true-up cost by 60%+ for those specific licences.
Track trends for renewal planning	Monitor licence usage trends across true-ups. Consistently underused products should be reduced or eliminated at renewal. Growing products warrant negotiating better volume discounts.	Prevents overspending in the next cycle. True-up data becomes negotiation ammunition.

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5. Negotiation and Renewal Strategies

While the true-up itself isn't a negotiation point, the data you gather from it is invaluable for negotiating your EA renewal. Microsoft's sales teams typically target a 10–20% higher spend at renewal. With proper preparation, you can push back.

Negotiation Tactic	How to Execute	Why It Works
Leverage true-up data	Analyse all true-up reports from the current term. Identify over-licensing, under-utilisation, and growth patterns. Use this as your factual baseline.	Data-driven negotiations signal to Microsoft you've done your homework. Usage evidence strengthens cost reduction arguments.
Reduce unnecessary quantities	If only 800 of 1,000 M365 E5 licences are actively used, plan to renew for 800. Present hard usage evidence to justify the reduction.	Microsoft may resist or try to upsell, but documented under-utilisation is difficult to argue against. You control the narrative.
Negotiate early — start 9–12 months out	Engage with Microsoft well before the expiry deadline. Present your requirements clearly. Define what a "good deal" looks like before discussions begin.	Early engagement gives you time to explore alternatives (CSP, MCA, competing platforms) and avoid the pressure of last-minute decisions.
Explore contract alternatives	Consider whether the EA is still the right vehicle. Microsoft Customer Agreement (MCA), CSP subscriptions, or hybrid approaches may better fit your current strategy.	Demonstrating willingness to explore alternatives creates competitive pressure. Microsoft is more flexible when they know you have options.
Address future scenarios contractually	If you anticipate M&A, divestitures, or major workforce changes, negotiate clauses that handle these: volume discount on acquired users, licence transfer rights, flexible reduction terms.	Covering these scenarios upfront prevents paying inflated costs for situations "not in the contract." See MCA Explained.
Align timing with Microsoft's fiscal calendar	Microsoft's fiscal year ends June 30. Quarter-ends create quota pressure. Use this timing for final concessions — but don't let it rush your decision.	Sales teams are measurably more flexible near fiscal deadlines. A credible threat to delay can unlock additional discounts.

Real-World Impact: Financial Services Firm

A financial services firm with 8,500 Microsoft 365 E3/E5 licences analysed three years of true-up data before their EA renewal. The analysis revealed 1,200 unused M365 seats (employees who had left but whose licences were never reclaimed), 450 users on E5 who only needed E3 features, and $2.1M in Azure commitment that consistently went 30% under-utilised. Armed with this data, the firm negotiated a right-sized renewal: reduced to 7,300 M365 seats (mixed E3/E5), a conservative Azure commitment with carryover provisions, and a price cap clause for future true-ups. Result: $4.2M savings over the 3-year renewal term — a 22% reduction versus Microsoft's initial proposal.

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6. Avoiding Common True-Up Pitfalls

Pitfall	What Goes Wrong	How to Avoid It
Last-minute rush	Treating the true-up as a one-time year-end task leads to data errors, missed usage, and overestimation. Panic purchasing at inflated quantities.	Treat true-up as a year-round process. Keep a running tally of licence changes. Start formal preparation 60–90 days before the deadline.
Estimated rather than actual data	Relying on rough estimates ("last year plus 10%") instead of real data. Can be wildly inaccurate — leading to overspend or compliance gaps.	Always base the true-up on actual discovery tool data, usage logs, and verified headcount figures. Never guess.
Ignoring dormant licences	Focusing only on new needs while paying for shelfware. Departed employees, decommissioned servers, and idle accounts continue consuming budget.	Review current licences for activity. Reassign unused licences to fill new needs instead of buying more. Plan to terminate dormant licences at renewal.
Surprising finance leadership	IT calculates the true-up quietly, then drops a 6–7 figure purchase request on finance at the last minute. Creates internal friction and rushed approvals.	Keep finance and executives informed well in advance. Include true-up forecasts in budgeting cycles. No one likes surprises.
Missing contractual details	Overlooking deadlines, reduction eligibility windows, or true-up order procedures. Missing a window to adjust subscription counts wastes money.	Know your contract thoroughly. Mark key dates. Understand which products are fixed vs flexible. Involve your reseller for clarity on terms.
Failing to use true-up data strategically	Completing the true-up and filing it away without analysis. Missing the opportunity to use three years of data as negotiation leverage at renewal.	Treat each true-up as intelligence gathering. Analyse trends. Use the data to build a fact-based renewal negotiation strategy.

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7. Recommendations and Checklist

💡 7 Expert Recommendations

1. Establish year-round licence management. Implement an ongoing SAM programme with clear ownership — a dedicated IT asset manager who continuously tracks deployments and usage.
2. Right-size initial EA commitments. Avoid over-purchasing "just in case." It's cheaper to add licences via true-up (at locked pricing) than to be stuck with hundreds of unused licences for three years.
3. Forecast changes and budget early. Integrate licence planning into business planning. If you expect to hire 200 people or launch a new project, forecast and inform finance and Microsoft early.
4. Optimise before you true-up. Scrub inactive accounts, decommission unused VMs, reclaim dormant licences. Every licence cleaned up is one fewer to purchase.
5. Leverage renewal as a reset. Use the EA renewal to realign with current needs. Plan your ideal next agreement based on three years of true-up data, then negotiate using that plan.
6. Engage independent expertise. A third-party Microsoft licensing adviser can provide unbiased assessment, identify optimisation opportunities, and bolster your negotiation with industry benchmarks.
7. Maintain a data-driven vendor relationship. Share usage trends professionally. Build credibility through responsible management. Come renewal, negotiate from strength — armed with facts and a track record.

Kick off true-up planning early. Mark your calendar 60–90 days before the EA anniversary. Assemble a task force: ITAM manager, SAM tool administrator, finance/procurement representative. Set a timeline with milestones.
Gather and verify usage data. Pull reports from SAM tools, Active Directory, M365 admin portals, Azure portal, and server inventories. Cross-verify with HR (headcount), IT ops (server counts), and department leaders. Establish a single source of truth.
Reconcile and clean licence records. Compare usage data against entitlements. Investigate discrepancies. Remove inactive accounts, decommission unused resources, reassign dormant licences. Document all changes for audit trail.
Calculate true-up needs and get approvals. Determine net new licences required by product. Calculate cost using EA pricing. Secure budget approval from finance. Communicate needs to your Microsoft reseller for formal quote preparation.
Execute and plan next steps. Submit the official true-up order by the deadline. Verify processing. Update internal records. Hold a post-true-up review: what did you learn? How can you avoid similar additions next year? Feed insights into renewal planning.

Frequently Asked Questions

A true-up is an annual reconciliation event under a Microsoft Enterprise Agreement. Each year (typically 30 days before your agreement anniversary), your organisation reviews its Microsoft product usage and "trues up" any increases by purchasing additional licences for anything beyond the initial allotment. It's when you report and pay for any extra licences needed due to growth or new deployments during that year. The prices are locked at the rate agreed when you signed the EA.

Generally, no. During a traditional Enterprise Agreement, you cannot reduce committed licence counts mid-term (sometimes called a "true-down"). If you purchased 1,000 licences and usage drops to 900, you still pay for 1,000 until the term ends. The exception is an Enterprise Subscription Agreement (ESA), which allows downsizing at each anniversary. At renewal, you can reduce quantities — but you must plan ahead and notify Microsoft within the required timeframe (usually 30–60 days before contract end). See Microsoft Enterprise Agreement Guide.

True-up licences are priced at the same per-unit rate negotiated when you signed (or last renewed) the EA. This price is locked for the full 3-year term, protecting you from Microsoft's list price increases. However, the payment is typically due as a lump sum for the remaining term. If you add 100 licences with one year left, you pay for one year. If you add them with two years left, you pay for two years. This makes deployment timing a genuine cost lever.

Missing the true-up deadline creates a compliance gap — you're using licences you haven't reported or paid for. This can trigger Microsoft's audit rights under the EA and may result in back-payments at less favourable rates. At minimum, it damages your relationship with Microsoft and weakens your negotiating position. Always file on time. If you're running late, communicate proactively with your Microsoft reseller to request a brief extension rather than going silent.

Treat the true-up as a year-round process, not an annual event. Maintain continuous licence tracking through SAM tools. Run quarterly internal audits to catch new deployments early. Integrate licence forecasting into business planning (especially hiring, M&A, and IT projects). Keep finance informed throughout the year so true-up costs are budgeted, not surprising. See Microsoft Contract Terms & Negotiation.

Absolutely — this is one of the most underutilised strategies in Microsoft licensing. Three years of true-up data provides a factual picture of how your Microsoft usage has evolved: which products grew, which were under-utilised, where you overspent, and where you achieved value. This data is the foundation of a strong renewal negotiation. Use it to justify quantity reductions, challenge Microsoft's uplift assumptions, and negotiate better terms for growing products. Start analysing true-up trends at least 9–12 months before renewal. See Microsoft Licensing Trends 2025–2026.

Server products (SQL Server, Windows Server) are the most commonly missed because they're often deployed by infrastructure teams without ITAM involvement. Other frequent gaps include: Power Platform licences (Power BI, Power Apps) that users self-provision, Azure consumption that exceeds committed amounts, Visual Studio licences installed by development teams, and M365 seats assigned to contractors, temporary staff, or service accounts that aren't tracked in HR systems. Establish change management processes that require licence impact review for any new deployment.

The true-up is not the right time to switch licensing models — it's primarily a compliance reconciliation. However, you can add new products or product editions at true-up. Major model changes (e.g., switching from EA to CSP, or from E3 to E5 for a subset of users) are best addressed at renewal. If you need to make a mid-term adjustment, discuss options with your Microsoft reseller — some changes can be accommodated, but they typically require a formal amendment rather than a standard true-up order. See Understanding MPSA and Other Licensing Programs.

Azure under an EA typically involves a pre-committed annual monetary commitment. You draw down against this commitment as you use Azure services. If you exceed the commitment, you pay overage at the rate specified in your EA. At true-up, you reconcile any overage and may choose to increase your commitment for the coming year. Unlike seat-based licences, Azure consumption is usage-based — so tracking actual consumption against commitment is critical. Under-commitment means higher overage rates; over-commitment means paying for unused capacity. Conservative initial commitments with the ability to increase are generally safest.

A true-up is a self-reported annual reconciliation — your organisation counts its own usage and reports additions. It's a contractual obligation, not an adversarial process. A Microsoft audit (formally called a "software asset management review" or "licence verification") is an external review initiated by Microsoft to verify that your reported usage matches actual deployments. If you manage true-ups diligently, audits become routine checks rather than compliance crises. Poorly managed true-ups — or missed ones — significantly increase the risk of a formal audit with potentially punitive outcomes.

Fredrik Filipsson

Co-Founder @ Redress Compliance

20+ years in enterprise software licensing. Former IBM, SAP, and Oracle. 11 years as an independent consultant advising hundreds of Fortune 500 companies on Oracle, Microsoft, SAP, IBM, and Salesforce licensing, contract negotiations, and cost optimisation.

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