Microsoft Enterprise Agreement Direct vs Indirect

Microsoft Enterprise Agreement: Direct vs Indirect

Executive Summary:

Microsoft Enterprise Agreements (EAs) provide large organizations with a streamlined method for licensing software and cloud services. Enterprises can engage directly with Microsoft or indirectly through a Licensing Solution Provider (LSP).

Each route has trade-offs. A direct EA gives you a closer relationship with Microsoft and full control, while an indirect EA leverages a partner’s expertise and support.

This advisory article examines the distinctions between Microsoft Enterprise Agreement Direct and Indirect, offering insights, examples, and practical guidance to assist IT sourcing and C-level leaders at global enterprises in selecting the most suitable approach for their specific needs.

Understanding the Enterprise Agreement Landscape

Microsoft’s Enterprise Agreement is a volume licensing contract designed for organizations with 500 or more users or devices, typically spanning a three-year term.

It covers a wide range of products (from Windows and Office to Azure and Microsoft 365) under one agreement, with built-in volume discounts and the ability to “true-up” annually for growth.

The EA simplifies license management and budgeting across the enterprise.

However, when entering an EA, enterprises face a strategic decision: to engage with Microsoft directly or work through an authorized partner. In direct markets, you can sign an EA straight with Microsoft.

In indirect scenarios, you purchase the EA through an LSP (reseller) who interfaces with Microsoft on your behalf.

Understanding the Microsoft Enterprise Agreement’s direct and indirect models is crucial, as they impact pricing, support, and the management of the relationship.

The Direct Enterprise Agreement Approach

Under a Direct EA, your organization signs the agreement directly with Microsoft (no reseller in the contracting process). Microsoft provides pricing, and you pay Microsoft directly for licenses and subscriptions.

Key characteristics of a direct EA include:

• Direct Relationship with Microsoft: You negotiate terms and pricing with Microsoft’s enterprise sales team. Communication lines are direct, which can speed up issue resolution and reduce miscommunication. Many enterprises value having Microsoft’s ear for support, escalations, and strategic planning.
• Greater Control and Autonomy: With no intermediary, you maintain full control over procurement and license management. Your internal team handles tasks like adding products, managing true-ups, and ensuring compliance. This autonomy means you can tailor the engagement closely to your needs and timelines, rather than working through a partner’s procedures.
• Internal Resource Requirements: The flip side of control is responsibility. A direct EA demands that you have strong in-house licensing expertise and capacity. Your team must understand Microsoft’s product terms, keep up with program rules, and manage the administrative load (tracking usage, processing annual true-ups, etc.). Enterprises often dedicate licensing specialists or a Software Asset Management (SAM) team for this purpose. Without an LSP’s assistance, the onus is on you to stay compliant and optimize your licenses.

Example: A multinational bank with a mature IT procurement department opted for a direct EA. They appreciated the faster communication with Microsoft’s account team and the ability to negotiate custom contract terms.

However, they invested in training a dedicated licensing manager to oversee the agreement.

When Direct Makes Sense: Organizations with significant licensing expertise, a desire for direct vendor engagement, and the need for large-scale negotiations (where they prefer to deal directly with the source) often opt for the direct route.

The Indirect Enterprise Agreement (LSP) Approach

In an Indirect EA, an authorized Microsoft partner – typically a Licensing Solution Provider – acts as an intermediary.

Your agreement may still ultimately be a Microsoft contract, but the LSP handles pricing, orders, and support on Microsoft’s behalf.

Characteristics of an indirect EA include:

• LSP Expertise and Services: A good LSP brings deep knowledge of Microsoft licensing programs. They handle various administrative tasks, including preparing and submitting contract paperwork, processing orders and annual true-ups, and generating usage reports. The LSP’s licensing specialists can advise on optimal license combinations and ensure you’re following Microsoft’s rules. This is especially valuable if your internal team is lean on licensing expertise.
• Outsourced Administration & Support: Rather than dealing directly with Microsoft for day-to-day needs, you’ll work with your LSP’s account manager. Top LSPs offer personalized customer service – for example, a dedicated account representative and support team who can answer questions, assist with portal issues, and escalate problems to Microsoft if needed. Many enterprises appreciate having a single point of contact at the LSP who understands their environment. An attentive partner can sometimes respond faster to routine matters than Microsoft’s channels.
• Potential Trade-offs: Because an extra party is involved, communication can be slower or more layered. You may have to wait for the LSP to relay questions or get approvals from Microsoft. Also, while the EA itself provides volume discounts, indirect agreements can introduce additional costs. LSPs are compensated via margins or fees – for example, the partner might add a small markup on license prices or charge for value-added services (especially if Microsoft’s built-in commission is low). Enterprises need to weigh the convenience and support an LSP provides against any additional cost or complexity it introduces.

Example: A global manufacturing firm without a dedicated licensing department chose an indirect EA through a major LSP.

The partner managed their renewals, provided quarterly compliance reports, and coordinated licensing across regions.

The trade-off was an extra step for approvals – if the firm needed a rapid change, they had to involve the LSP.

When Indirect Makes Sense: Organizations that lack internal licensing resources or that prefer hands-on guidance find value in an indirect EA. It’s also advantageous if you want help navigating Microsoft’s programs or a partner to offload administrative burdens.

Pricing and Cost Implications

Cost is often the deciding factor in the debate over the Microsoft Enterprise Agreement Direct vs. Indirect.

Both models can ultimately provide enterprise discounts, but the pricing dynamics differ:

• Pricing in a Direct EA: Microsoft sets the pricing based on its volume licensing price lists and the negotiated discounts you have. Enterprise Agreements have tiered price levels (A, B, C, D) based on your user/device count; larger organizations receive more favorable baseline pricing. In a direct EA, you pay Microsoft at those agreed rates. There’s transparency: your Customer Price Sheet will list the exact unit costs locked in for the term. No reseller markup is added, as Microsoft bills you directly. This can make direct EAs cost-efficient, assuming you negotiate a strong discount upfront. (Microsoft’s sales team will often provide extra discounts or concessions for big commitments, but you’ll need to push for them during negotiations.)
• Pricing in an Indirect EA: With an LSP involved, pricing can become a bit more complex. In some cases – particularly in countries or segments where Microsoft sells via channel partners – the LSP receives a wholesale price from Microsoft and then sets the final price to you. The LSP’s margin might be the difference between Microsoft’s cost price and the price they quote you. This means there’s room (and need) to negotiate not just with Microsoft, but with the partner on their markup. Many enterprise customers insist on a “cost-plus” pricing structure with their LSP (for example, the partner agrees to charge a fixed percentage above Microsoft’s cost for the duration of the EA). In other scenarios, the EA pricing might effectively pass through Microsoft’s list price (with Microsoft paying the LSP a fee separately). Regardless, indirect customers should seek full pricing clarity to avoid hidden premiums.
• Additional Fees or Discounts: Historically, Microsoft paid LSPs a standard commission for EA deals, and some large customers would negotiate a portion of that back as a rebate or in exchange for additional services. Today’s reality: Microsoft has been reducing partner commissions on EAs, so some LSPs charge clients for enhanced services (especially on very large agreements). Be aware of any service fees for contract management or consulting that a partner might propose. On the other hand, a motivated LSP might use part of their margin to offer you a better price and win your business – creating a competitive bidding situation can be beneficial in indirect deals.
• Negotiation Strategy: Whether direct or indirect, enterprise buyers should leverage their volume. In direct EAs, negotiate with Microsoft for concessions (e.g., price protections, flexible payment terms, or extra discounts for bundling products). In indirect EAs, negotiate with both Microsoft (via the partner for overall discount levels) and the LSP (their cut and services). Always benchmark quotes – many enterprises ask multiple LSPs to propose EA pricing, even if the core Microsoft discounts are similar, to see who offers the best terms and support combination.

Below is a comparison of key differences between direct and indirect EAs:

Operational and Global Considerations

For global enterprises, the direct vs indirect decision isn’t only about cost or control – it also impacts how you operate across multiple regions:

• Global Presence and Local Requirements: Microsoft classifies some countries as “direct markets” and others as “indirect markets.” In direct markets (e.g., the US, UK), Microsoft engages directly with customers. In indirect markets (often smaller or emerging countries), Microsoft sells via local partners/distributors. If your EA covers affiliates in many countries, you might end up with a hybrid approach: a central direct EA, but with certain geographies fulfilled by an LSP. An experienced global LSP can simplify this by providing local billing in-country, handling taxes and compliance, and consolidating reporting. Ensure that your licensing approach accounts for any local regulations – for example, some countries require software purchases to be made through a local entity. An LSP can bridge that gap if Microsoft itself doesn’t have a local office.
• Consistency vs Flexibility: A direct EA typically gives you one master agreement and a uniform set of terms globally (with Microsoft’s regional subsidiaries signing where needed). This can simplify governance – you have a single point of contact (Microsoft) for any issues. However, support from Microsoft might vary by region unless you have a global account management structure. With an indirect EA, you might appoint a primary LSP globally or a network of regional LSPs. One global LSP can offer consistent service levels and potentially aggregate your purchases for better discounts. Ensure that any partner you use has coverage in all your key markets (e.g., can they service the Asia-Pacific region as well as Europe?). If not, you may need multiple partners, which adds complexity.
• Multi-Currency and Billing: Enterprises operating in multiple currencies will need to consider how each model handles billing. Microsoft’s direct EAs often bill in a single currency (or a few currencies tied to regional enrollments), which might lead to exposure to exchange rates for some subsidiaries. An LSP might offer localized invoicing in different currencies, which could be more convenient for local offices to pay. Discuss this during negotiation: in a direct EA, you might negotiate price protections or use of regional pricing catalogs; in an indirect EA, ensure the LSP can align with your currency and invoicing preferences.
• Support and Escalation: If issues arise (for example, a critical Azure outage or a licensing audit question), consider how each model works to address them. In a direct model, you’ll go straight to Microsoft, which can be efficient for high-severity issues, especially if you have a Premier/Unified Support agreement. In an indirect model, your first call might be to the LSP, who then works with Microsoft to resolve it. Some enterprises find that a good partner will proactively escalate and advocate for Microsoft on their behalf, acting as an effective liaison. Others prefer to directly hold Microsoft accountable. Global IT leaders should define a clear escalation path with either Microsoft or the LSP to avoid finger-pointing in crises.

Actionable Takeaway: If you’re a global CIO, map out how each option would function in practice for your organization.

For a direct EA, plan for how your internal team will manage a worldwide deployment and engage Microsoft’s support across time zones.

For an indirect EA, set expectations with the partner: Do they provide 24/7 support? Can they handle software needs in all countries where you operate? The goal is to ensure that whichever route you choose, there are no blind spots in service delivery globally.

Choosing the Right Path for Your Organization

Selecting between a direct and indirect Microsoft EA is not a one-size-fits-all decision.

It requires aligning the model with your organization’s strategy, capabilities, and priorities. Consider the following decision factors:

• Internal Licensing Capabilities: Do you have a team that thoroughly understands Microsoft licensing and can dedicate time to managing the agreement? If yes, you might leverage that strength with a direct EA. If not, an LSP’s guidance can prevent costly mistakes and ease the administrative burden.
• Complexity of Your Environment: A very large or complex IT environment (multiple product lines, frequent changes, and many affiliates) may benefit from the process rigor and tooling that an LSP provides (e.g., systems to track licenses or predict true-up costs). Simpler, more stable environments could be managed in-house without much issue.
• Desire for Control vs. Outsourcing: Some organizations have a philosophy of owning vendor relationships directly – they want to negotiate with Microsoft to maintain control over the outcome. Others are comfortable outsourcing relationship management to a trusted partner. Gauge your leadership’s preference: for instance, does your CIO want direct engagement with Microsoft for strategic roadmaps, or are they happy delegating that to a reseller?
• Cost Transparency: If getting the absolute lowest cost is paramount, you may prefer the transparency of a direct EA’s pricing. On the other hand, a savvy LSP might help identify cost savings opportunities (e.g., finding unused licenses to eliminate at renewal). Ensure that whichever route you take, you will have clear insight into pricing and potential optimizations.
• Vendor Support and Innovation: Microsoft often gives its direct customers early insights into product roadmaps, preview programs, or executive briefings. A direct EA could mean a tighter partnership in terms of innovation. Meanwhile, a top-tier LSP might bring multi-vendor knowledge and comparative insights (since they work with many clients) – sometimes they’ll alert you to Microsoft program changes or alternative licensing models you weren’t aware of. Decide which type of insight is more valuable to your enterprise.

Ultimately, there is no universal “best” choice – there is only the best fit for your organization.

Some enterprises even employ a hybrid approach: negotiating directly with Microsoft on major points but still transacting through an LSP for convenience, or signing a direct EA but hiring a third-party advisor to provide internal assistance.

What matters is that you enter into the agreement structure that will set you up for success over the next three years and beyond.

Recommendations

Based on our analysis, here are practical tips for enterprise IT and sourcing leaders when navigating Microsoft Enterprise Agreement direct vs indirect options:

• 1. Evaluate Multiple Options: Don’t assume you must stick with the status quo. Even if you’ve always bought through a reseller, consider getting a direct proposal from Microsoft (or vice versa) to compare. A competitive evaluation can reveal better discounts or services.
• 2. Invest in Licensing Expertise: If you lean towards a direct EA, ensure you have certified Microsoft licensing experts on staff or engage independent consultants. Their knowledge will pay off in avoiding compliance pitfalls and optimizing your license usage.
• 3. Negotiate Partner Terms: If using an LSP, treat the partner selection like any vendor contract. Negotiate not only the Microsoft product discounts but also the partner’s value-added services. For example, require quarterly optimization reviews, faster response times in SLAs, or a cap on any management fees. Everything should be in writing.
• 4. Insist on Transparency: Whether direct or indirect, ask for full pricing breakdowns. For indirect deals, this means knowing the baseline Microsoft prices and the partner’s margins or fees. For direct deals, understand how your pricing was determined (e.g., the discount level and any special concessions). This transparency makes it easier to defend the deal internally and during future renewals.
• 5. Leverage Renewal Timeframes: The best opportunity to improve your arrangement is at renewal. If you’re on an indirect EA and are not fully satisfied, use the renewal to shop around other LSPs or explore going direct. Microsoft and partners are most flexible when a contract is up for grabs. Plan 6-12 months before renewal to strategize your move.
• 6. Check Global Support Capabilities: For global enterprises, verify that your chosen route covers all regions. Direct customers should confirm that Microsoft will provide account management in your major theaters (Americas, EMEA, APAC). Indirect customers should choose an LSP with an international footprint or strong alliances to ensure their worldwide operations are serviced seamlessly.
• 7. Monitor and Optimize Continuously: Don’t “set and forget” your Enterprise Agreement. If direct, schedule regular internal audits of license usage and engage Microsoft if you need to adjust (or to take advantage of new programs like Azure savings plans). If indirect, hold your LSP accountable for proactive advice – they should alert you to unused licenses, upcoming changes, or new offers that could result in cost savings.
• 8. Stay Informed on Microsoft’s Strategy: Microsoft’s licensing programs evolve. Recently, for example, Microsoft has been encouraging some mid-sized customers towards its CSP or MCA-E (Microsoft Customer Agreement) models. Keep an eye on these shifts – they might influence whether a direct EA is even offered for your size, or whether a partner-led model could unlock a new flexible option. Being aware of the latest Microsoft licensing roadmap will help you make informed strategic choices.
• 9. Use External Benchmarks: Consider using industry benchmarks or advisors (like Gartner or licensing specialists) to assess if your deal (direct or through LSP) is in line with what similar organizations are getting. This external perspective can strengthen your negotiating position with either Microsoft or the reseller.
• 10. Prepare an Exit Strategy: If things don’t go well – for instance, your LSP underperforms, or Microsoft’s direct service isn’t meeting expectations – know your options. You can change LSP mid-term through a formal process if needed, or at least switch at renewal. And if you’re direct but want more help, you can bring in a partner at any time for support without changing the contract. Having a backup plan ensures you’re not stuck with a subpar situation.

Checklist: 5 Actions to Take

If you are planning your next Microsoft Enterprise Agreement, use this step-by-step checklist to drive your decision-making:

1. Assess Internal Capabilities: Take stock of your team’s licensing knowledge and bandwidth. Do an honest evaluation of whether you can manage an EA in-house or need external help. Also, review past EA management – were there compliance issues or surprises? This will indicate if additional support is necessary.
2. Gather Requirements and Priorities: Consult stakeholders in IT, finance, and procurement. Determine what matters most – e.g., lowest cost, high-touch support, global consistency, flexibility to scale, etc. Also, consider any upcoming changes (such as growth or cloud migration plans) that may affect your licensing needs. This forms the criteria for choosing direct vs indirect.
3. Engage with Microsoft and Partners: Open parallel discussions to explore both avenues. For a direct route, contact your Microsoft account representative to discuss a direct EA quote or the possibility of an MCA-E (if available). For an indirect route, solicit proposals from a couple of top LSPs. Provide all parties with the same requirements so you can compare fairly.
4. Compare Proposals and Services: Evaluate the Microsoft vs LSP options side by side. Examine the pricing over 3 years, including discount percentages and any additional extras (e.g., training days, support hours, workshops). Additionally, consider the intangible aspects: did the Microsoft team provide sufficient support and expertise? Did the LSPs demonstrate strong knowledge and offer valuable services? Use a scorecard if needed to rate each option against your priorities from step 2.
5. Select the Model and Finalize Strategy: Choose the path that best aligns with your enterprise’s needs. If going direct, prepare your team by assigning clear ownership for license management and perhaps engage a licensing consultant to assist initially. If going with an LSP, formally document the service expectations in the contract. Finally, communicate the decision to all internal stakeholders and ensure that everyone is aware of how the EA will be managed throughout its duration. With the decision made, you can confidently move into EA negotiations knowing you’ve picked the right approach.

FAQs

Q: What is the core difference between a Direct and an Indirect Microsoft Enterprise Agreement?
A: In a Direct EA, your company contracts directly with Microsoft for your enterprise license agreement – Microsoft handles pricing and billing, and you work with Microsoft’s sales/support teams. In an Indirect EA, you go through a Microsoft Licensing Solution Provider (reseller). The LSP manages the sales process, provides support, and invoices you, acting as an intermediary between you and Microsoft.

Q: Is a Direct EA cheaper than an Indirect EA?
A: Not necessarily. A direct EA removes any reseller markup – you pay Microsoft’s negotiated price. Indirect EAs can involve a partner margin or fees. However, a good LSP can help optimize your licenses and identify savings that a direct arrangement might overlook. It depends on how well you negotiate in each scenario. To ensure cost-effectiveness in an indirect EA, negotiate the partner’s margin (or use a cost-plus model) and compare it against a direct quote from Microsoft. In short, direct EAs can be very cost-transparent, but an indirect EA can be just as cost-effective if managed shrewdly.

Q: Can we still use a Licensing Partner if we choose a Direct EA?
A: Yes. Even in a “direct” EA, Microsoft typically assigns an authorized LSP to handle administrative tasks (you usually select a partner during contracting, even though they won’t set the price). You can also separately hire a partner or consultant to help with license management or provide advice, without them being the seller of record. This means going direct doesn’t completely exclude partner involvement – you can have the best of both worlds by signing directly with Microsoft and leveraging an advisor for ongoing support if needed.

Q: What factors should a global enterprise consider in this decision?
A: Global enterprises should look at the availability of support across regions (will Microsoft provide consistent global account management, or does a particular LSP have offices and support teams worldwide for on-site assistance?), multi-currency billing needs, and any country-specific constraints. For example, if you operate in countries where Microsoft uses distributors, an indirect model with a global LSP might simplify local procurement. Also, consider how a direct versus indirect model aligns with your global IT operating model. If you have a centralized IT procurement, a direct EA could be a good fit. If procurement is decentralized by region, a strong regional LSP might add value in coordinating those pieces under one EA.

Q: Can we change our approach later if we choose the wrong model?
A: It’s possible, but timing matters. If you are in an Enterprise Agreement term (typically 3 years), you generally remain with the structure until the agreement is renewed. However, you do have flexibility: if you’re unhappy with your LSP in an indirect EA, you can change your LSP during the EA term through a formal “Change of Channel Partner” process with Microsoft. It requires some paperwork and coordination, but it’s doable. On the other hand, if you went directly and find you need more help, you could engage an LSP as a support partner at any time, or even choose to renew through an LSP when your EA expires. And as Microsoft introduces new licensing programs (like the MCA-E direct model), you might have alternatives to switch into at renewal. The key is to revisit the decision at every renewal cycle to ensure the model continues to fit your enterprise’s needs.

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