Negotiating Azure Commitments in Your Microsoft EA

Negotiating Azure Commitments in Your Microsoft EA

Azure infrastructure costs can represent a significant portion of an Enterprise Agreement. Negotiating the right Azure consumption commitment (a Monetary Azure Consumption Commitment, or MACC) is critical to avoid overpaying or under-committing.

This article explains how Azure commitments work, how to create realistic forecasts, and tactics for challenging aggressive baselines.

A final table compares the trade-offs between commitment and pay-as-you-go models to guide your negotiation strategy.

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Azure Commitment Basics

• Azure Commitment (MACC) vs. Pay-as-you-go: A commitment is essentially a promise to spend a fixed amount on Azure over the term (e.g., $X per year). In return, Microsoft gives a discounted rate on all consumption within that commitment. In pay-as-you-go, you pay the regular rates for each service you use, with no prepayment.
• Discounts on committed spend: Microsoft typically offers discounts on committed Azure spend (often in the 5–15% range, increasing with higher commitment levels). For example, committing $20M per year might yield roughly a 12–15% discount, whereas a small $5M commitment might only get around 5%.
• Billing and usage: Under an MACC, the committed amount can be billed up front or spread over the year, depending on your EA terms. You can then use Azure services against this pool; unused funds are generally forfeited at the end of the term if you under-consume.
• Commitment structure: In practice, many large customers put the Azure commitment in a Server and Cloud Enrollment (SCE) or directly under the new Microsoft Customer Agreement (MCA) for Azure. This means you negotiate the commitment as part of your EA (or alongside it), not as a separate contract.

Read Microsoft EA vs CSP vs MCA.

Forecast Accurately

• Use historical data: Analyze your last 12–18 months of Azure billing to establish a base usage. Let that actual usage, plus only modest expected growth, define your starting point.
• Include planned migrations: Add in known future projects that will consume Azure (e.g., moving on-prem ERP or new web apps to the cloud). Treat these as incremental spend. For example: “Our baseline Azure spend was $10M last year; we have one major SQL migration coming, so we plan 15% growth.”
• Account for savings features: Remember existing benefits. Use Azure Hybrid Benefit and Reserved Instances in your model—they effectively lower the commitment you need for the same usage. Adjust your committed funds accordingly if you pay for Azure VMs with licenses you already own.
• Be conservative on growth: If Microsoft is optimistic (e.g., suggests 30% year-over-year growth), counter with reality (e.g., “Last year we only grew 5% on Azure; a 30% projection needs clear new projects behind it”). You can always true up or increase the commitment mid-term, so don’t overcommit up front.
• Prepare your rationale: If Microsoft proposes a high baseline, ask to review their calculation. Have a clear rationale: “Based on our usage trends and pipeline, a 15% increase seems prudent, not 30%.”

Challenge Aggressive Baselines

• Question inflated proposals: If Microsoft’s draft uses a much higher spend baseline than yours, ask for details. Use phrases like “This baseline seems higher than our forecast. Can we walk through how you calculated it?”
• Negotiate tiered pricing: Propose structured discounts tied to usage thresholds. For example: “We commit to $30M over three years. If we exceed $10M in Year 1, let the excess be discounted 1% more next year.” This ensures you’re rewarded for growth.
• Avoid wasted prepayments: If your Azure usage is uncertain, consider a smaller or shorter commitment. Enterprise customers now often avoid putting large prepayments into a 3-year EA due to the risk of underuse. Instead, negotiate a modest 1-year MACC or amend yearly.
• Push for flexibility: Ask if unused commitment can roll over. Some customers negotiate a clause to carry unused funds into the next year’s spend or to convert them into Azure Reserved Instances, preserving value.
• Include “out clauses”: In extreme cases, you can request a conditional true-down for major changes (e.g., business exits, service cancellations). Though not guaranteed, raising the idea flags you’re not locked in blindly.

Read Microsoft EA Negotiations: Top Mistakes to Avoid.

Negotiate Flexibility and Safeguards

• Billing terms: We prefer monthly billing for the committed amount rather than a lump prepayment to ease cash flow. If Microsoft insists on an annual payment, see if it can be split per quarter.
• Commitment duration: Weigh 3-year vs. annual commitments. A multi-year MACC usually secures a better discount but carries more risk of overspend. For many, a 1-year renewable commitment hits the sweet spot of moderate discount with lower risk.
• Convert commitments: In some cases, unused MACC funds can be reassigned (with negotiation) to other Microsoft services or future agreements. Ask your rep about options to keep your committed money “in the family.”
• True-down alternatives: While a traditional EA doesn’t allow lowering commitments mid-term, consider Enterprise Agreement Subscription (EAS) or other enrollment types if you foresee shrinking needs.
• Strategic exchanges: Remember, committing more Azure usage is a bargaining chip. For example, “If we commit these workloads to Azure, can Microsoft extend our price protection or offer additional benefits for our on-prem license renewals?”

Table: Trade-offs between Azure commitments and pay-as-you-go.

Strategic Summary

• Balance commitment size: Commit only what your forecast justifies. Larger commits yield better discounts, but avoid “gold-plating” your baseline. Under-committing is safer; you can always increase later via an amendment.
• Push realistic baselines: Counter any aggressive proposals with your data-driven forecast. Keep the initial commitment conservative and tie future increases to clear milestones.
• Insist on protections: Negotiate clauses for unused funds (rollover, reserve credits) and extra discounts for hitting higher spend tiers. These make your commitment less risky.
• Monitor and adapt: After finalizing the commitment, track Azure usage monthly. If spending trends change, you’ll know in time to adjust strategy (e.g., buy reservations or adjust next year’s MACC).
• Collaborate between teams: Involve both finance (for budgeting) and cloud architects (for technical forecasts) in negotiation. Their combined insight yields the most accurate commitment strategy aligned with business needs.

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