Understanding the Enterprise Agreement (EA)
The Enterprise Agreement is Microsoft's flagship licensing contract for large organisations (typically 500+ users or devices). It locks in a three-year term where the company agrees to licence core products enterprise-wide. In return, Microsoft provides predictable pricing and significant volume discounts.
Enterprise-Wide Coverage
You standardise licensing for key products (Windows, Office, 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 (Level A, B, C, D) are based on quantity, with larger enrolments receiving better per-unit prices. Rates are generally fixed for the 3-year term, shielding you from Microsoft's list price increases.
Spread Payments & True-Ups
Costs are paid annually over the 3-year term. If usage grows, you add licences mid-term and report them at an annual true-up, deferring payment until the anniversary date.
Software Assurance Included
EA bundles Software Assurance with all licences — providing rights to new versions, training credits, 24/7 support, planning services, and other benefits without additional purchase.
A global firm with 5,000 employees might choose an EA to achieve 30%+ off retail pricing and the flexibility to deploy software as needed, reconciling differences only once a year. Microsoft rewards the commitment with better pricing and strategic incentives such as deployment funding or discounted add-ons.
Understanding the MPSA
The MPSA (Microsoft Products & Services Agreement) is a transactional volume licensing agreement designed for flexibility. It has no fixed term or expiration — once signed, you can continually purchase licences or cloud services as needed, without a blanket commitment to cover all users.
No Organisation-Wide Commitment
Purchase only what you need, for whichever subset of users or projects requires it. There is no requirement to licence an entire user base — ideal for organisations with mixed environments or those not yet ready to standardise.
Pay-As-You-Go Purchasing
Purely transactional — order licences (perpetual or subscriptions) when needed and pay at that time. No true-up process; if you add a user, you simply purchase a new licence immediately.
Volume Discounts via Points
All purchases earn points that accumulate toward price levels (A, B, C, D). As you reach higher thresholds, your unit pricing improves — but discounts build over time rather than being locked in upfront.
Optional Software Assurance
You choose whether to attach SA to each licence. This flexibility can save cost if you only need basic licensing, but means you must plan for upgrades and support separately if you opt out.
Comparing EA with Open Value instead? See our dedicated guide.
EA vs Open Value →Commitment vs. Flexibility
The core trade-off between EA and MPSA is committed volume vs. flexible consumption. An EA requires committing to a baseline of licences enterprise-wide for three years. This suits organisations 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 price protection, enterprise support, and the convenience of one renewal every few years.
MPSA emphasises flexibility. There is no long-term obligation — you adjust purchases as needed. This is valuable for organisations with fluctuating headcounts, project-based licensing needs, or those still assessing their future Microsoft roadmap. You are not locked into a large contract, which is reassuring if you expect changes such as 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 due to the guaranteed spend. Under MPSA, pricing is more strictly governed by volume tiers and partner margins.
EA is about commitment for reward. MPSA is about flexibility with control. Enterprises aiming for a cloud-first transformation often find an EA aligns better with their long-term plans — Microsoft may include more favourable cloud licensing terms in EAs. Organisations focused on on-premises or those that cannot predict their usage may lean toward MPSA's transactional nature.
Cost and Pricing Comparison
| Factor | Enterprise Agreement (EA) | MPSA |
|---|---|---|
| Minimum size | 500 users/devices (approx. entry point) | No official minimum (250+ recommended for value) |
| Contract term | 3-year fixed term (renewable) | No fixed term (open-ended agreement) |
| Upfront commitment | Yes — must cover all qualified users/devices organisation-wide | No — purchase only what and when needed |
| Payment schedule | Annual payments (spread over term) | Per purchase (transactional, pay at order) |
| Volume discount | Locked-in pricing tier (Levels A–D); deeper discounts negotiable for large deals | Cumulative points; discounts applied as you reach higher thresholds over time |
| Price protection | Price level fixed for term (protects against hikes) | No long-term price lock; each purchase at current price |
| True-up flexibility | Yes — deploy now, report/pay at next anniversary | No — must purchase immediately when needed |
| Software Assurance | Included on all licences | Optional per licence |
| Cloud services | Integrate M365/Azure with fixed annual pricing or credits; best for hybrid cloud commitments | Purchase cloud services ad-hoc; no special bundling incentives |
| Contract changes | Rigid — no reductions mid-term; adjustments at renewal | Highly flexible — add or stop buying at any time |
Key Considerations and Pitfalls
- Licence management and double-paying. An EA simplifies compliance tracking, but requires discipline. Buying outside the EA for covered products (e.g., a department independently purchasing Office via MPSA while the company has an EA) is a costly mistake — you'll double-pay. Establish internal procurement controls to prevent rogue purchases that violate EA commitments.
- Cost of workforce reduction. With an EA, reducing licence counts mid-term is generally not possible. If your workforce shrinks, you may be stuck paying for unused licences until renewal. MPSA has the advantage here — if you downsize, you simply stop acquiring new licences. No wasted spend on unused capacity.
- Cloud transition economics. Enterprises planning a major move to cloud services should note that EAs often bundle cloud-friendly benefits — Azure credits, discounted M365 bundles, and incentive pricing driven by Microsoft account teams at renewal. MPSA offers no such bundled cloud commitment benefits. If you opt for MPSA and later decide to adopt cloud en masse, you may need to switch to an EA or CSP to get better terms.
- Negotiation leverage. EAs present the biggest opportunity for savings — you can negotiate custom terms, phased ramp-up discounts, and special product pricing. With MPSA, pricing flexibility is limited; resellers have set discount caps. Large enterprises often achieve lower unit costs under an EA once all discounts and concessions are factored in. A raw price list comparison may make MPSA look cheaper until you consider negotiated EA discounts.
- Administrative overhead. MPSA's flexibility means continuous procurement decisions — your ITAM team must frequently evaluate needs and initiate purchases. With an EA, procurement is front-loaded (at signing and true-up cycles). Some enterprises prefer the steady, predictable rhythm of an EA; others value on-demand control despite added procurement overhead.
Microsoft has been tightening EA eligibility for mid-sized organisations, pushing some toward the Microsoft Customer Agreement (MCA) or CSP channel. MPSA itself replaced older Select agreements and remains available, but Microsoft's strategic focus is on cloud subscriptions. Enterprises should stay alert to licensing announcements — it is possible that MCA may overlap or replace some MPSA functions over time.
For now, both EA and MPSA remain viable. Align your choice with your short- and long-term IT strategy.
Choosing the Right Agreement
Large, Stable Enterprises (2,400+ Seats)
These organisations typically favour an Enterprise Agreement. Scale unlocks top-tier discounts, the 3-year commitment aligns with strategic IT roadmaps, and Microsoft is more willing to negotiate extras (deployment funding, enhanced support) for EA clients. Unless flexibility is a higher priority than cost, an EA usually delivers better value.
Mid-Sized or Evolving Organisations (500–2,400 Seats)
A grey zone. If usage is steady and you want EA benefits, pursue it — but be aware Microsoft has been nudging mid-market customers toward modern alternatives. If your environment is primarily on-premises and you are unsure about adopting new Microsoft technologies short-term, MPSA may suffice. If you foresee growth or need to standardise everyone on M365, an EA could still be justified.
Smaller or Decentralised Needs (< 500 Seats)
If an EA is not available or practical (sub-500 users usually cannot sign a new EA), MPSA is often the next best option for volume licensing. Organisations with highly dynamic needs (e.g., project teams spinning up software temporarily) appreciate not being tied into multi-year commitments. Also consider Microsoft Open Value for this segment.
Hybrid Approach — Using Both
Some enterprises use both agreements simultaneously — for example, maintaining an EA for user-based cloud services (M365, Azure) while using MPSA to purchase on-premises server licences for niche needs. This can optimise cost, but coordination is key to avoid overlap or gaps. Ensure your ITAM team tracks all entitlements across programmes.
5-Step Action Checklist
Inventory & Forecast
Document all Microsoft products and services your organisation uses now. Forecast needs for the next 3–5 years — including user counts, server deployments, and planned cloud initiatives.
Compare Scenarios
For both EA and MPSA, outline what would be included and estimate 3-year costs. Example: EA scenario — 600 users on M365 E3 plus 50 servers. MPSA scenario — same licences purchased transactionally. Which yields better pricing and flexibility? Run the numbers.
Check Eligibility & Microsoft's Direction
Contact Microsoft or a licensing partner to confirm EA eligibility (or whether Microsoft is steering your organisation to MCA/CSP). Ask about current promotions, incentive pricing, and programme changes that could affect your decision.
Make a Decision & Plan Purchases
Based on analysis, choose the agreement that best fits. If EA: prepare for negotiation, define products and quantities to include. If MPSA: ensure the purchasing process is ready — who will place orders, how to track points for discounts, and how to maintain compliance in real time.
Monitor & Re-evaluate Annually
Continuously monitor usage and costs. For EA: perform internal true-up audits each quarter. For MPSA: track proximity to the next discount threshold. Re-evaluate the decision annually — if your situation changes (rapid growth, cloud shift), plan to transition at the next opportunity.
Frequently Asked Questions
Which is cheaper for a large enterprise — EA or MPSA?
For large enterprises, an Enterprise Agreement usually ends up cheaper per licence when factoring in volume discounts and negotiated concessions. With thousands of users, EA can provide substantial savings and fixed pricing compared to ad-hoc MPSA purchases. MPSA may have lower upfront requirements, but its discounts for large user counts rarely match a directly negotiated EA.
Can we include cloud services like Azure or M365 in an MPSA?
Yes — you can purchase cloud subscriptions through MPSA on a transactional basis. However, an EA allows you to commit to cloud subscriptions or Azure spending over three years, often with better pricing or credits. While MPSA covers cloud, an EA may offer more advantageous terms for large-scale cloud adoption.
What happens if our company drops below 500 users during an EA?
Your EA remains in effect until it expires — you won't be forced out mid-term. At renewal, Microsoft may evaluate your eligibility. In recent practice, Microsoft has shown reluctance to renew EAs for organisations significantly under the minimum seat count, suggesting other agreements instead. During the active EA, you pay for the users you have. Communicate major changes to your licensing partner to ensure adjustments at the anniversary or renewal.
Can we switch from EA to MPSA (or vice versa)?
You generally wait until your current agreement term ends. If on an EA, you can choose not to renew and migrate to MPSA for future purchases. If on MPSA and an EA becomes more suitable, you can sign an EA at any time (provided you meet requirements) and stop new MPSA purchases. Plan the transition carefully to ensure continuity — for example, timing an EA start to coincide with MPSA subscription expiry.
Are Enterprise Agreements being phased out?
Microsoft EAs are still very much in use for large customers, but Microsoft is evolving toward cloud-first models. There have been instances of Microsoft pushing mid-sized clients to CSP or MCA instead of a new EA. MPSA remains available primarily for on-premises and hybrid needs. Both remain viable; align your choice with your IT strategy and stay alert to licensing announcements. Read our Microsoft EA Renewals guide for current intelligence.
Need Help Choosing Between EA and MPSA?
Whether you are evaluating an Enterprise Agreement, MPSA, or a hybrid approach — our independent Microsoft advisory team can help you model costs, negotiate terms, and secure the best outcome. We work exclusively in your interest, never Microsoft's.
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