Case Study – Microsoft Negotiation Service – U.S. Healthcare Provider – Microsoft EA Renewal Saves 28% and Increases Operational Flexibility
Background
A large U.S. healthcare provider, operating a network of hospitals and clinics with 25,000 employees (including medical staff and administrators) across several states, was facing the renewal of its Microsoft Enterprise Agreement.
The organization, headquartered in California, generates roughly $5 billion in annual revenue and relies on Microsoft technologies for clinical and back-office operations.
Their Microsoft estate included Microsoft 365 E5 for most employees (doctors, nurses, and administrative staff), Azure cloud services for data backups and a health analytics platform, as well as Dynamics 365 for patient outreach and scheduling.
Many critical applications were still on-premises due to regulatory requirements, meaning a hybrid environment.
With six months left on the three-year EA, the healthcare network sought to renegotiate terms to eliminate waste and ensure the new agreement would support upcoming digital health initiatives without exceeding the budget.
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Challenges
The healthcare provider’s main concerns were skyrocketing costs and underutilized licenses – classic “shelfware” issues that had accumulated over the last term.
Microsoft’s initial renewal quote was $30 million over three years, about 15% higher than the expiring agreement. This increase was driven largely by the high cost of Microsoft 365 E5 licenses.
Redress’s analysis (and the provider’s suspicion) revealed that many users with E5 primarily used only email, Word, and basic collaboration tools, rarely touching the advanced security, compliance, or analytics features of E5.
This mirrors industry trends – nearly 44% of Office 365 licenses in a typical company are underutilized – suggesting the hospital network was likely overpaying for functionality that most staff didn’t need. Additionally, specific applications like Project and Visio were licensed for thousands of users, despite only a few hundred actively using them, a common source of waste. Another challenge was cloud spending and commitment.
The existing EA had a significant
Azure consumption commitment that the hospital’s IT team struggled to fully utilize; certain months saw Azure usage well below the committed level, resulting in wasted dollars on unused capacity.
Conversely, when new projects (such as a telehealth app) spiked usage, the rigid commitment made it difficult to accommodate without incurring overage rates.
The one-size-fits-all EA structure also lacked flexibility, as it threatened to lock the healthcare network into another three years with little room to adjust if the organization’s needs changed (for example, scaling down after completing a major IT project or in the event of funding cuts).
Lastly, operational continuity in a healthcare context meant that any negotiation had to ensure no disruption to critical systems – the stakes were high to keep all clinical and administrative systems running affordably and reliably.
Microsoft’s sales team was heavily promoting an upsell to new Azure-based AI analytics tools and additional Power Platform licenses, which felt more aligned to Microsoft’s agenda than the provider’s immediate needs.
How Redress Compliance Helped
- License Usage Audit and Right-Sizing: Redress Compliance started with a comprehensive audit of Microsoft 365 usage across the hospital network. This analysis quickly identified that approximately 5,000 users on M365 E5 could be downgraded to E3 without losing any necessary functionality – these were staff members in roles such as general administration, front-desk personnel, and many nurses who did not utilize advanced E5 features. Redress also inventoried the use of add-on applications: for instance, it turned out that out of 3,000 Visio licenses, only ~300 were actively used for medical diagramming or process mapping; the rest were assigned by default but sitting idle. Armed with this data, Redress drew up a license reallocation plan: reserve E5 only for roles that genuinely require advanced capabilities (e.g. cybersecurity team members, certain researchers), provide E3 plus necessary add-ons (like EMS security or Power BI) to the majority, and eliminate or reclaim licenses for rarely used apps. This right-sizing approach promised substantial savings with minimal impact on users.
- Azure Consumption Optimization: The Redress team evaluated Azure utilization and the terms of the current Azure commitment. They discovered the hospital could operate efficiently with a lower base commitment combined with more flexibility. Redress proposed negotiating a reduced annual Azure commit (closer to the actual baseline usage observed, thereby avoiding overpaying for unused cloud time) and allowing burst capacity on a pay-as-you-go basis for peak times (such as during new telehealth rollouts or data analysis projects). They also ensured that the client was leveraging any applicable Azure Hybrid Benefits for their Windows Server and SQL Server deployments in Azure, which would further reduce Azure costs by utilizing existing licenses.
- Negotiating Pricing and Discounts: In preparation for talks with Microsoft, Redress benchmarked the hospital’s deal against other healthcare and public sector Microsoft customers. Knowing that enterprise deals often secure significant discounts (15–30% off list prices for large customers), Redress set a target to push Microsoft well beyond the token discount in the initial quote. They crafted a negotiation narrative that emphasized the hospital’s willingness to walk away from extraneous products and even consider alternative solutions if the Microsoft renewal didn’t deliver value. During negotiations, Redress presented the usage data transparently, effectively saying: “We know exactly what we use and don’t use. We will not pay for software that isn’t needed.” This fact-based approach, combined with highlighting that the $30M proposal included significant waste, compelled Microsoft to reconsider. Redress successfully negotiated a 28% reduction from the original proposal. This was achieved through a combination of expanded discounts on M365 (Microsoft conceded to deeper discounts, especially on E5, as the volume was declining) and eliminating unnecessary licenses. Additionally, Microsoft agreed to price protections (caps on any increases) for the add-on products the client retained, such as Visio, ensuring those wouldn’t become costly surprises later.
- Embedding Flexibility in the EA: A major focus for Redress was to inject flexibility into the new EA to suit the unpredictable healthcare environment. Redress negotiated provisions for annual true-downs, allowing the client to reduce certain license counts at each anniversary by a few percent if needed. For Azure, Redress achieved an innovative term: quarterly reviews of Azure spend with the ability to adjust the commitment level by up to 10% if usage trends significantly increase or decrease, providing a safety valve against over-commitment. They also secured the right for the hospital to pilot new Microsoft technologies (like an Azure AI service or Power Platform tool) with a small number of users without incurring a full EA-wide commitment. This meant the client could try new solutions in a controlled way and only expand them if they proved valuable. Such terms are uncommon in standard Microsoft agreements, and obtaining them was a big win for the client’s future-proofing.
Outcome and Impact
- 28% Cost Savings Redirected to Patient Care: The renegotiated EA resulted in roughly a 28% reduction in Microsoft spending compared to the initial renewal quote. In concrete terms, Microsoft’s original $30 million proposal was reduced to approximately $21.5 million over three years. These savings – around $8.5 million – are substantial for a healthcare organization; leadership earmarked a portion of the freed funds to invest in new patient-care technologies and staff training programs. Importantly, the cost reduction was achieved without cutting any essential services. All hospital employees still have the Microsoft tools they need to do their jobs, but the organization is no longer paying for thousands of unused premium licenses and software instances.
- Operational Flexibility and Adaptability: The new Microsoft agreement is far more aligned with the healthcare provider’s operational needs. The flexibility to adjust licenses annually and to scale Azure commitments means the IT department can respond to changes – whether it’s a sudden need to ramp up cloud resources for a pandemic response or to scale down during a quiet period. For example, if a research grant ends and 100 contractors leave, the organization can reduce those licenses at the next true-up instead of carrying unnecessary costs. Such agility was previously missing and is now built into the contract. Additionally, by right-sizing licenses (moving thousands of users to E3 and eliminating unused apps), the risk of “shelfware” going forward is significantly lower. Processes are being implemented to regularly review license usage, ensuring the organization remains optimized – a crucial practice, as studies have found that approximately 20% of E5 licenses at enterprises often end up as shelfware. Now the hospital’s IT team has clear visibility and a mandate to keep usage efficient.
- Enhanced Focus on Healthcare Innovation: With the Microsoft environment optimized and streamlined, the IT department can focus more on innovation than on resolving licensing issues. The savings and the new pilot clauses mean the provider can experiment with Microsoft’s latest healthcare cloud offerings on a small scale. For instance, they can test a new Azure AI service to help with medical image analysis in one department without committing to an enterprise-wide purchase. This aligns technology adoption with actual care outcomes and evidence, rather than buying into Microsoft’s sales pitch upfront. In essence, the Microsoft EA is now a strategic asset rather than a financial drag – it’s enabling the healthcare network to modernize (e.g., plan for a gradual cloud migration of electronic health record systems) on its own terms. Moreover, the improved contract terms ensure that Microsoft cannot dictate the pace of adoption or force the hospital into a corner; the organization retains control over its IT roadmap.
Client Quote
“Redress Compliance treated our money like it was their own – and in healthcare, every dollar saved means more we can invest in patient care. We ended up saving 28% on our Microsoft renewal, which is a significant amount for our hospital network. Redress showed us where we were overspending on fancy licenses that most of our staff didn’t even use. They negotiated fiercely on our behalf and even got Microsoft to bend on flexibility in ways we didn’t think possible. Now our Microsoft contract isn’t this rigid, overwhelming thing – it adapts to our needs. We have the right licenses for the right people, and we’re not throwing money away on shelfware. Redress’s independent, expert guidance put our needs above Microsoft’s sales agenda, and it paid off for us and our patients.” – CIO, U.S. Healthcare Provider Network
Call-to-Action
Is your hospital or organization paying for Microsoft features you don’t need? Contact Redress Compliance for a free Microsoft agreement review or renewal strategy session. We’ll help you cut through the vendor sales pitch, optimize your licensing costs, and reinvest those savings where they matter most – in your core mission.
Further Reading
- Read about our Microsoft Contract Negotiation Service.
- Read about our other Microsoft Case Studies.
