Microsoft Enterprise Agreement vs MPSA for Large Enterprises

Microsoft Enterprise Agreement vs MPSA

Microsoft Enterprise Agreement vs MPSA is a comparison of two distinct Microsoft volume licensing models for enterprises.

The Enterprise Agreement (EA) is a traditional 3-year contract with organization-wide commitments and volume discounts. At the same time, the Microsoft Products & Services Agreement (MPSA) offers a flexible, pay-as-you-go approach with no company-wide commitment.

This advisory outlines the key differences, benefits, and drawbacks of each, helping IT leaders choose the right fit for their enterprise licensing strategy.

Understanding the Microsoft Enterprise Agreement (EA)

The Enterprise Agreement is Microsoft’s flagship licensing contract for large organizations (typically 500+ users or devices).

It locks in a three-year term where the company agrees to license core products enterprise-wide.

In return, Microsoft provides predictable pricing and significant volume discounts. EA customers benefit from:

• Enterprise-Wide Coverage: You standardize licensing for key products (like Windows, Office, or Microsoft 365) across all qualified users. This all-in commitment simplifies compliance but requires covering every user/device in scope.
• Volume Discounts & Price Protection: Pricing tiers are based on quantity (Level A, B, etc.), and larger enrollments get better per-unit prices. Rates are generally fixed for the term, shielding you from list price increases.
• Spread Payments & True-Ups: Costs are paid annually over the 3-year term, aiding budget planning. If your usage grows, you can add licenses mid-term and report them at an annual true-up, deferring payment for those additions until the anniversary.
• Software Assurance Included: EA bundles Software Assurance (SA) with licenses, providing rights to new versions, training credits, 24/7 support, and other benefits. These extras support enterprise IT with upgrades and support without an extra purchase.

Example: A global firm with 5,000 employees might choose an EA to get 30%+ off retail pricing and the flexibility to deploy software as needed, only reconciling differences once a year.

The enterprise-wide commitment ensures every user has the latest tools, while Microsoft rewards the commitment with better pricing and strategic incentives (like funding or discounted add-ons).

Understanding the MPSA (Microsoft Products & Services Agreement)

The MPSA is a transactional volume licensing agreement designed for flexibility and adaptability. It has no fixed term or expiration – once signed, you can continually purchase licenses or cloud services as needed, without a blanket commitment to cover all users.

Key characteristics of MPSA include:

• No Organization-Wide Commitment: You purchase only what you need, for whichever subset of users or projects requires it. There’s no requirement to license an entire user base. This is ideal for organizations with mixed environments or those that are not yet ready to fully standardize on a single Microsoft platform.
• Pay-As-You-Go Purchasing: Unlike the EA’s scheduled annual payments, MPSA is purely transactional. You order licenses (perpetual or subscriptions) when needed and pay at that time. There’s no true-up; if you add a user, you simply purchase a new license immediately.
• Volume Discounts via Points: MPSA continues to offer volume pricing through a point system. All purchases earn points that accumulate toward price levels (A, B, C, D). As you reach higher point thresholds with cumulative orders, your unit pricing improves. However, discounts under MPSA typically kick in as your purchases scale over time, rather than upfront.
• Optional Software Assurance: You can choose whether to attach Software Assurance to each license purchase. This flexibility can save cost if you only need basic licensing, but it also means you must plan for upgrades or support separately if you opt out of SA.
• Single Agreement, Multiple Purchasers: MPSA consolidates all purchases under one master agreement. Different departments or affiliates can purchase through the same MPSA, streamlining procurement without requiring each to have a separate contract. A self-service online portal (Business Center) allows authorized buyers to add licenses directly, improving agility.

Example: A mid-sized enterprise of 800 users with mainly on-premises servers might prefer MPSA to buy licenses in a staggered fashion.

They can acquire 100 server licenses this quarter and 50 more next year as needs grow, without committing to a large upfront quantity. If they’re not deploying company-wide cloud services yet, MPSA provides flexibility to license only what they use.

Commitment vs. Flexibility

The core trade-off between an Enterprise Agreement and MPSA is committed volume vs. flexible consumption. An EA requires committing to a baseline of licenses enterprise-wide for a period of three years.

This suits organizations with stable or growing IT needs that want to lock in pricing and ensure compliance coverage for all users.

The EA’s rigidity is offset by perks like price protection, enterprise support, and the convenience of one renewal every few years.

MPSA, on the other hand, emphasizes flexibility. There’s no long-term obligation – you can adjust purchases as needed. This is valuable for organizations with fluctuating headcounts, project-based licensing needs, or those still assessing their future Microsoft roadmap.

You’re not “locked in” to a large contract, which can be reassuring if you expect changes (like mergers, divestitures, or shifts to alternative solutions).

The flip side: without a committed contract, Microsoft’s deepest discounts and strategic incentives are harder to obtain. In an EA, Microsoft’s account team may offer special pricing or bundle deals (especially for cloud products) due to the guaranteed spend. Under MPSA, pricing is more strictly adhered to, and any negotiations occur with your reseller on a per-order basis.

In short, EA is about commitment for reward, while MPSA is about flexibility with control. Enterprises aiming for a cloud-first transformation often find that an EA aligns better with their long-term plans (Microsoft may include more favorable cloud licensing terms in EAs).

Conversely, organizations focused on on-premises or those that cannot predict their usage may lean toward the transactional nature of MPSA.

Cost and Pricing Comparison

Both agreements can potentially save money over buying standalone licenses, but their cost models differ.

Below is a comparison of key pricing and contract elements for Microsoft Enterprise Agreement vs MPSA:

Note: In both cases, large enterprises typically negotiate with Microsoft or partners for the best available pricing. However, EA allows more direct negotiation with Microsoft (especially for big deals), whereas volume tiers and partner margins largely govern MPSA pricing.

Key Considerations and Pitfalls

Choosing between EA and MPSA isn’t just about size – it’s about strategy and awareness of potential pitfalls:

• License Management: An EA simplifies tracking compliance (one big agreement to manage), but it requires diligence in sticking to the agreed product selection. Buying outside the EA for covered products (for example, a department independently buying Office via MPSA while the company has an EA) is a costly mistake – you’ll double-pay because EA already covers it. Establish internal procurement controls to prevent rogue purchases that violate your EA commitments.
• Cost of Change: With an EA, reducing license counts mid-term isn’t usually possible (except for specific cloud subscriptions at anniversary). If your workforce shrinks or you want to drop a product, you might be stuck until renewal – effectively paying for unused licenses. MPSA has the advantage here: if you downsize, you simply stop acquiring new licenses. There’s no wasted spend on unused capacity, though you won’t get money back on already-purchased licenses either.
• Cloud Transition: Enterprises planning a major move to cloud services should note that EAs often bundle cloud-friendly benefits (such as Azure credits or discounted Microsoft 365 bundles). Microsoft account teams utilize EA renewals to drive cloud adoption through incentive pricing. MPSA offers no such bundled cloud commitment benefits – it’s purely transactional. If you opt for MPSA and later decide to adopt cloud services en masse, you may end up shifting to a different agreement (CSP or an Enterprise Subscription) to obtain better terms.
• Negotiation and Discounts: EAs can be complex to negotiate, but also present the biggest opportunity for savings. You can negotiate custom terms – e.g., phased ramp-up discounts or special pricing for a product across the term. With MPSA, pricing flexibility is limited; resellers have set discount caps. As a result, medium-to-large enterprises often find they achieve lower unit costs under an EA once all discounts and concessions are factored in. Not recognizing this can be a pitfall – a raw price list comparison might make MPSA look cheaper until you consider negotiated EA discounts for a similar scope.
• Administrative Effort: MPSA’s flexibility means continuous procurement decisions. Your asset management team will need to frequently evaluate needs and initiate purchases. With an EA, much of the procurement is front-loaded (at signing and true-up cycles). Some enterprises value the steady, predictable rhythm of an EA, whereas others prefer the on-demand control of MPSA despite the added procurement overhead.

Choosing the Right Agreement for Your Enterprise

There is no one-size-fits-all answer in the Microsoft Enterprise Agreement vs MPSA decision – it hinges on your enterprise’s profile and plans:

• Large, Stable Enterprises (High Growth or > ~2400 seats): These organizations typically favor an Enterprise Agreement. The scale unlocks top-tier discounts, and the 3-year commitment aligns with strategic IT roadmaps. Moreover, Microsoft is often more willing to negotiate extras (like deployment funding or enhanced support) for EA clients. Unless flexibility is a higher priority than cost, an EA usually delivers better value here.
• Mid-Sized or Evolving Organizations (500–2400 seats): This is a gray zone. If your usage is steady and you want the benefits of an EA, you may pursue it – but be aware Microsoft has been nudging mid-market customers toward modern alternatives. If you fall in this range, evaluate the EA’s cost vs. the freedom of MPSA. For a primarily on-premises shop with 800 seats, an MPSA might suffice, especially if you’re unsure about adopting new Microsoft technologies in the short term. On the other hand, if you foresee growth or a need to standardize everyone on Microsoft 365, an EA could still be justified.
• Smaller Enterprises or Decentralized Needs (< 500 seats or project-based): If an EA isn’t available or practical (sub-500 users usually can’t sign a new EA), MPSA is often the next best option for volume licensing. It provides a structured way to purchase licenses in bulk as needed. Additionally, organizations with highly dynamic needs (e.g., project teams that spin up software temporarily) appreciate not being tied into multi-year commitments.
• Cloud-Focused vs. Legacy Software Mix: Consider Your Technology Mix. If you’re cloud-first (planning widespread Azure or Microsoft 365 adoption), leaning into an EA or a subscription agreement can streamline that journey. However, if you have a large number of legacy on-premises systems that simply need to remain licensed, MPSA’s transactional model may be more cost-effective and straightforward. Some enterprises even use a hybrid approach – for example, maintaining an EA for user-based cloud services, but using MPSA to purchase a handful of on-premises server licenses for a niche need. This can work, but coordination is key to avoid overlap or gaps.
• Microsoft’s Direction: Keep in mind Microsoft’s licensing direction. In recent years, they have introduced the CSP and Microsoft Customer Agreement (MCA) for cloud subscriptions and have tightened eligibility requirements for Enterprise Agreements in certain segments. MPSA itself replaced older Select agreements and remains supported for now. When planning long-term, consider that Microsoft may further encourage cloud subscription models. Ensure that whichever path you choose can be adapted; for instance, an EA can usually be converted or replaced with a cloud-centric agreement later, whereas an MPSA might require an EA or CSP switch to achieve certain cloud benefits.

Recommendations

1. Assess Your Inventory and Roadmap: Start with a clear picture of your current Microsoft product usage and a 3-5 year IT roadmap. If you anticipate major expansions or cloud migrations, an EA could align better with those plans (and give you negotiating leverage for discounts).
2. Run the Numbers: Calculate a 3-year total cost under each scenario. Include license costs, Software Assurance, and any projected growth. Often, large enterprises find the EA’s bulk pricing beats ad-hoc purchases over the same period. For others, avoiding an upfront commitment (and associated true-up costs) with MPSA might save money.
3. Consider Hybrid Licensing: Don’t be afraid to use both agreements if it makes sense. For example, use an EA for enterprise-wide user licenses (such as Office 365 and Windows) and maintain an MPSA for specialty on-premises software purchases. This can help optimize costs, but it must be managed carefully to avoid compliance conflicts.
4. Leverage Renewal Time: If you have an existing EA, use renewal time as a negotiation opportunity. Microsoft will be keen to extend or expand your agreement – you can request improved pricing, more flexible terms, or the inclusion of new products. If their offer isn’t compelling, be ready to evaluate MPSA or other channels as alternatives.
5. Engage Microsoft and Reseller Early: Whatever route you choose, engage in dialogue early. Microsoft reps can inform you of any upcoming changes (e.g., eligibility shifts, new programs like MCA) that could influence your decision. Resellers can quote MPSA pricing and advise on discount thresholds. Early insight prevents last-minute surprises.
6. Plan for Compliance: In an EA, implement a process to track license consumption accurately, ensuring true-ups are accurate and compliance gaps are avoided. In an MPSA, establish a routine to review usage and procure licenses promptly when new software is deployed. Without a true-up safety net, you are responsible for staying compliant in real time.
7. Evaluate Support Needs: If premium support is crucial for your operations, factor that into your decision. EA customers often qualify for certain support benefits or can negotiate support as part of the deal. MPSA users might need to purchase a separate support agreement (like Unified Support) or rely on partners. Plan and budget accordingly.
8. Stay Informed on Licensing Changes: Microsoft licensing is constantly evolving. Keep an eye on announcements (for example, policy changes on EA renewals for mid-sized firms, or the introduction of new agreements). Being informed will help you pivot strategies – such as moving from MPSA to a cloud subscription model if it becomes advantageous.

Checklist: 5 Actions to Take

1. Inventory & Forecast: Document all Microsoft products and services your organization uses now and forecast needs for the next few years. This includes user counts, server deployments, and planned new initiatives (like cloud projects).
2. Compare Scenarios: For both EA and MPSA approaches, outline what would be included and estimate the associated costs. Example: EA scenario: 600 users on Microsoft 365 E3, plus 50 servers licensed for Windows/SQL, paid over 3 years. MPSA scenario: Purchase those 600 M365 E3 licenses as 12-month subscriptions via MPSA, and obtain server licenses as needed. Which yields better pricing and flexibility?
3. Check Eligibility & Microsoft Stance: Contact Microsoft or a licensing partner to confirm your eligibility for an EA (or whether Microsoft is steering organizations of your size to other programs). Also, ask about any current promotions or changes – e.g., are certain products cheaper via CSP/MCA, or are there incentives to stay on EA?
4. Make a Decision & Plan Purchases: Based on the analysis, choose the agreement that best fits your needs. If EA: prepare for the negotiation and define the products/quantities to include. If MPSA: ensure you have the purchasing process ready (who will place orders, how to track points for discounts, etc.).
5. Monitor and Reevaluate: After entering the chosen agreement, continuously monitor your usage and costs. For EA, perform internal true-up audits each quarter. For MPSA, keep an eye on how close you are to the next discount threshold. Reevaluate the decision annually – if your situation changes (such as rapid growth or a shift to the cloud), you may need to adjust your strategy or plan to transition at the next opportunity.

FAQ

Q1: Which is cheaper for a large enterprise, an EA or MPSA?
A: For large enterprises, an Enterprise Agreement usually ends up cheaper per license when factoring in volume discounts and negotiated concessions. If you have thousands of users, Microsoft EAs can provide substantial savings (and fixed pricing) compared to buying ad-hoc via MPSA. MPSA may have lower upfront requirements, but its discounts for a large user count often won’t match an EA negotiated directly with Microsoft.

Q2: Can we include cloud services, such as Azure or Microsoft 365, in an MPSA?
A: Yes, you can purchase cloud subscriptions (such as Microsoft 365 seats or even Azure prepayments) through an MPSA. However, those will be transaction-based purchases. In an EA, you could commit to a certain number of cloud subscriptions or Azure spending over three years, often with better pricing or credits. While MPSA covers cloud, an EA might offer more advantageous terms for large-scale cloud usage.

Q3: What happens if our company drops below 500 users during an EA?
A: If you start an EA with 500+ users and later drop below that, your EA remains in effect until it expires – you won’t be forced out mid-term. However, at renewal time, Microsoft might evaluate your size for eligibility. In recent practice, Microsoft has shown reluctance to renew EAs for organizations significantly under the minimum seat count, instead suggesting other agreements. But during the active EA, you are simply obligated to true-up or maintain licenses for the users you do have (you won’t pay for users that no longer exist, except in cases where you’ve committed to a minimum). Always communicate major changes to your licensing partner to ensure adjustments are made at the anniversary or renewal.

Q4: Can we switch from an EA to MPSA (or vice versa) easily if we change our mind?
A: You generally have to wait until your current agreement term is ending. If you’re on an EA, you commit for three years – you can choose not to renew it and then migrate to MPSA for future purchases. Conversely, if you’re on MPSA and later decide an EA is more suitable, you can sign an EA at any time (provided you meet the requirements), and then stop new purchases on the MPSA. There isn’t an “automatic” conversion; it’s a matter of ending one route and starting another. Plan the transition carefully to ensure continuity of licensing (for example, timing an EA start to coincide with when certain MPSA subscriptions might expire).

Q5: Are Microsoft’s Enterprise Agreements being phased out, and what does that mean for MPSA?
A: Microsoft Enterprise Agreements are still very much in use for large customers, but Microsoft is evolving its licensing toward cloud-first models. There have been instances of Microsoft pushing mid-sized clients to CSP (Cloud Solution Provider) or the Microsoft Customer Agreement instead of a new EA. The MPSA program itself replaced older Select agreements and remains available, primarily for on-premises and hybrid needs. It’s not being phased out immediately, but Microsoft’s focus is on cloud subscriptions. Enterprises should stay alert to Microsoft’s licensing announcements – it’s possible that over time, alternatives like the MCA (which is more cloud-oriented) could overlap or replace some functions of MPSA. For now, both EA and MPSA remain viable options; just align them with your short- and long-term IT strategy.

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