Case Study – Microsoft EA Renewal Service Swedish Automotive Supplier – Microsoft EA Negotiation Cuts Costs 25% and Secures Hybrid Cloud Agility
Background
A Stockholm-based automotive components manufacturer, with 4,500 employees and operations across Sweden, Germany, and the U.S., sought Redress Compliance’s expertise to optimize its Microsoft Enterprise Agreement.
The company, supplying major carmakers, has approximately $1.2 billion (USD) in annual revenue.
Its IT landscape is a blend of legacy on-premises systems and growing cloud usage: Microsoft 365 is used company-wide (mostly E3 licenses, with some E5 for engineering software developers needing advanced features), on-premises Windows Server and SQL databases run critical ERP and factory systems, and Azure is used for certain R&D projects (like simulations and IoT data from production lines) in a hybrid cloud setup.
The EA was due to renew in the middle of 2025, and the company’s goals were clear: reduce the increasing costs of Microsoft licensing, ensure they were not over-buying given their partial cloud, partial on-premises approach, and negotiate terms that would allow them to modernize at their own pace.
They were wary of being pressured into all-cloud or all-E5 licensing when their business still required a balanced approach.
Read our guide to Microsoft EA renewals.
Challenges
The automotive supplier’s challenges included costly license bundles and the need for hybrid flexibility. Over the last EA term, Microsoft 365 E3/E5 had become a major expense, and Microsoft’s initial renewal talks were leaning heavily on moving more users to E5 (citing security and compliance).
However, the company knew that not all E5 features were needed universally – for instance, they had a dedicated CAD/design system and didn’t rely on many of the analytics in E5 for most users.
Some features overlapped with specialized automotive software or existing security tools.
Paying for full E5 across the board would be overkill. They also had shelfware in the form of underutilized add-ons: they’d previously accepted a bundle that included Microsoft Project Online and Power BI Pro for many users, but only the PMO team and a few analysts actually used those. This was money leaking out on licenses that didn’t see proportional usage.
Another challenge was ensuring their EA supported a gradual transition to the cloud.
The company was not prepared to move all servers to Azure yet – some manufacturing sites had latency or regulatory reasons to keep things on-premises. Microsoft’s push for a larger Azure commitment didn’t align with the company’s cautious timeline.
The client needed an EA that honored their significant on-premises investment (they still paid for Windows Server and SQL licenses with Software Assurance) while also providing the option to expand in Azure when ready.
There was concern that Microsoft’s sales approach favored cloud services at the expense of traditional licenses – e.g., incentives to convert to Azure in ways that might render their existing licenses’ value obsolete.
The company also had seasonal fluctuations in production (affecting how many temporary staff or contractors needed access to M365). While not as volatile as retail, they wanted some leeway to adjust true-ups if a division downsized or a project ended.
Overall, the challenges boiled down to avoiding unnecessary E5 upsells, eliminating unused license components, integrating on-premises and cloud licensing efficiently, and keeping the EA flexible enough for a dynamic manufacturing business.
How Redress Compliance Helped
- License & Usage Audit – On-Prem and Cloud: Redress Compliance conducted a 360-degree audit of the company’s Microsoft usage. They reviewed Microsoft 365 analytics and found that out of 500 E5 licenses the company had (for senior engineers, IT, and management), perhaps half were not utilizing E5-only features (like Advanced Compliance or Power BI Pro). Many could likely downgrade to E3 without any loss in productivity. Additionally, around 100 of those E5s were originally allocated for a now-completed project that utilized Power BI; post-project, those users no longer needed E5, but it had not been adjusted accordingly. On the other hand, for approximately 50 users in cybersecurity and compliance, E5 was indeed providing value – those would be retained. Redress also discovered ~300 unassigned or redundant M365 licenses (E3), mainly due to past hiring fluctuations and a recent divestiture of a small product line. For on-prem software, Redress catalogued all Windows Server and SQL Server licenses with Software Assurance (SA) and checked how many were being used in Azure under the Hybrid Benefit. They found the company was under-utilizing its Hybrid Use Rights – they had VMs in Azure running Windows. Still, they hadn’t applied all eligible on-prem licenses to cover those, effectively paying twice in some cases. This insight opened up an opportunity to utilize existing entitlements to reduce Azure costs. Lastly, Azure usage versus commitment was analyzed: the company had a moderate Azure commitment and was actually utilizing it effectively, but any significant expansion was projected to be 1-2 years out, as per the IT roadmap. This meant a massive increase now would likely lead to waste.
- Tailored License Optimization: Redress crafted a plan that balanced the company’s hybrid needs. For Microsoft 365, they recommended scaling back E5 to only critical users (about 250 of them) and moving the other 250 E5 users to E3, possibly with a couple of standalone add-ons for specific needs (e.g., if a team needed Power BI Pro, just license those individuals for it rather than E5 for all). This directly cuts costs while preserving necessary functionality. The 300 surplus E3 licenses were marked for elimination at renewal, freeing up that spend. Redress also advised optimizing on-prem vs. cloud licensing: They ensured that all eligible on-prem server licenses with SA would be used to cover Azure VMs via Hybrid Benefit, reducing Azure costs by leveraging sunk investments. For example, they matched a pool of 20 Windows Server Datacenter licenses to cover a similar number of Azure VM cores that were previously charged as if no license existed – a significant cost avoidance in Azure. On Dynamics 365 (if applicable) or other Microsoft products, they verified that the company wasn’t paying for modules it was not using. The EA renewal would thus drop the Project Online licenses (except a handful for PMO) and reduce the Power BI Pro count from a blanket allocation to what’s needed – about 30 power users. Redress also proposed converting their EA to an Enterprise Agreement Subscription (EAS) model for certain components. By making their Office licenses an EAS, the company could potentially reduce counts if needed at renewal, providing a measure of flexibility if the workforce contracts. While EAS means you don’t own the licenses after the term, this company valued flexibility over ownership due to the pace of tech change. This move was considered specifically for M365 licenses.
- Negotiation – Securing Discounts and Hybrid Protections: In negotiations, Redress leveraged the fact that the client was willing to expand Azure in the future, but only with proper terms. They negotiated a 25% cost reduction on the EA, achieved through a combination of pure cost cuts and credit for existing investments. Microsoft agreed to provide additional discounting on M365 E3, as the overall seat count was not dropping drastically, but some E5 licenses were removed. Effectively, Microsoft maintained its revenue but shifted it, and Redress captured some of that shift as a discount for the client. On E5 licenses retained, Redress got Microsoft to extend a promotional discount (as if they were new E5 upsells) even though they were existing – a perk often given to encourage adoption, which Redress argued for to reward the client’s prior adoption. For the on-prem components, Redress negotiated that the company could re-purpose some of its underused on-prem license value towards Azure (sometimes Microsoft can offer Azure credits in exchange for not using certain on-prem software – a sort of trade-in to encourage cloud move, without the client losing investment). They also ensured that any Azure growth could be achieved under the EA with a price lock and the ability to opt for Microsoft’s newer consumption-based agreement if it became more favorable, thus avoiding lock-in to an outdated model. The new EA explicitly included Azure Hybrid Benefit usage: language was added to clearly allow applying existing licenses to Azure VMs (removing any ambiguity for the operations team). Redress also secured an agreement that if the client decided to shift certain licenses to an EAS model (subscription), they could do so at the next anniversary, effectively building in a downgrade option if they chose to require more flexibility later. Microsoft, eager to keep the client in the EA, consented to these creative terms.
- Long-Term Hybrid Cloud Roadmap: Redress worked with the client to align the EA with their hybrid cloud roadmap. They outlined that in year 2 or 3, if the company decided to migrate more production systems to Azure, they could leverage the EA’s pricing or even negotiate a side agreement at that point. However, until then, they should minimize their spending. The roadmap included periodic reassessment: e.g., after implementing a new IoT project, evaluate Azure usage and consider whether committing more (for a bigger discount) or staying pay-as-you-go was better – essentially making Azure commit decisions based on real data, not vendor pressure. They also put in place a plan for continuous license governance: a small “license optimization” task force in IT, trained by Redress, now quarterly reviews M365 and server usage to identify any creep (like if E5 features start not being used, they flag it, or if new hires got E5 without justification, etc.). This means the company won’t fall back into an oversized licensing situation by the next renewal. The roadmap adheres to the principle of cloud on your terms: use Azure where it makes technical and business sense, but don’t let the contract dictate it. It also emphasized maximizing existing investments (e.g., fully use your Windows Server rights in Azure before buying new Azure-only capacity).
Outcome and Impact
- 25% Cost Reduction: The negotiated changes yielded a substantial 25% reduction in the EA’s cost. Over the three-year term, the company will spend approximately $6 million, rather than $8 million, saving around $2 million. This came from trimming unnecessary licenses (dropping redundant E5s, unused E3s, and unneeded add-ons), and from improved discounts across the board. Interestingly, the company ended up with slightly fewer total licenses (due to cleanup), but even beyond that, the effective price per license decreased thanks to Redress’s negotiation. This cost reduction was achieved even as the company kept all critical capabilities – demonstrating that it was a pure efficiency gain.
- No Compromise on Functionality or Compliance: By smartly allocating E5 only to those who truly need it, the company continues to benefit from Microsoft’s top-tier features in areas that matter (security, compliance, advanced analytics in engineering), but avoids paying for them where they don’t add value. There has been no negative impact on user productivity; in fact, many users see the exact same tools as before, just at a lower cost to the company. The removal of unused Project and other licenses was done carefully so that no active user lost access. Compliance-wise, the company is fully covered – they remain properly licensed for all software in use, just not over-licensed. They also improved compliance with Microsoft’s rules by clarifying Hybrid Benefit usage (so they won’t accidentally violate licensing by running workloads covered incorrectly – now it’s explicit and managed). The optimizations thus maintained or enhanced compliance while cutting costs – a best-of-both-worlds scenario.
- Hybrid Cloud Flexibility Achieved: The new EA truly supports a hybrid model. The company can continue to run its on-premises servers with the assurance that Software Assurance benefits (such as upgrades and Hybrid rights) are in place, and they’re not paying extra for cloud services beyond what they use. When they are ready to ramp up Azure for, say, a new global inventory system, the EA has provisions in place to allow for that at known rates. However, until then, they’re not spending on idle Azure capacity. This flexibility is critical in manufacturing, where capital expenditures and tech adoption must align with factory schedules and product cycles. If the company experiences a downturn or needs to scale back, the EA’s subscription aspects and annual adjustment options mean they won’t be stuck with a bill for licenses they don’t need – they can scale down some if needed. Conversely, if they acquire a small company or open a new plant, scaling up is straightforward and cost-predictable. The EA has transformed from a rigid contract to a more adaptive framework.
- Maximized ROI on Existing Licenses: By leveraging existing on-premises licenses in Azure and eliminating duplicate spend, the company extracted more value from what it already owned. The finance team noted that after the changes, the effective utilization of software assets (a metric they track) went up significantly. In other words, for every dollar spent on Microsoft, a greater percentage is actually in use. One concrete example: their Azure VM costs dropped by utilizing the Hybrid Benefit they were already entitled to, saving tens of thousands of dollars annually without any new expenditure – purely by leveraging what was already in place. This type of optimization is often overlooked, but Redress’s approach of examining all entitlements ensured that nothing was wasted.
- Stronger Vendor Management and Forward Strategy: The renegotiation process also strengthened the client’s approach to vendor management. They learned how to push back with data – for example, by showing Microsoft representatives the usage statistics to justify why fewer E5 licenses were needed. Going forward, the IT procurement team feels more confident that they can run analyses and present a clear story at the table, rather than being led solely by Microsoft’s recommendations. The relationship with Microsoft evolved into a partnership rather than a one-way sales pitch. Upon seeing the detailed planning, Microsoft recognized that to retain this client, it had to offer terms that respected the client’s strategy. Redress’s involvement essentially educated both sides on a more collaborative approach: the client states their needs and constraints, and Microsoft finds ways to meet them (such as the Azure credit trade-off, which ultimately resulted in a win-win). This sets a positive precedent for any future negotiations or if new Microsoft technologies are to be added – the client will evaluate them critically and negotiate from a position of knowledge.
Client Quote
“Redress Compliance helped us cut through the noise and get exactly what we needed from our Microsoft agreement – nothing more, nothing less. We reduced our Microsoft costs by 25% while also improving our software utilization. Our hybrid cloud approach is fully supported now – we’re not paying for Azure until we need it, and we’re getting full value from the licenses we already own. Redress’s independent, expert advice was a game-changer. They showed us that it’s possible to be firm with Microsoft and still achieve a great outcome. This new EA gives us the agility to innovate on our terms and the savings to invest where they count. We couldn’t be happier with the results.” – Head of IT, Swedish Automotive Supplier.
Call-to-Action
Manufacturing and hybrid-cloud organizations: don’t let one-size-fits-all deals dictate your IT spend. Contact Redress Compliance for a free Microsoft EA Optimization Assessment. We’ll help you negotiate a customized agreement that respects your on-premises investments, paves the way to the cloud when you’re ready, and eliminates overspending. Get the flexibility and savings you deserve with Redress Compliance as your guide.
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