Case Study – Microsoft Negotiation Service – U.S. Manufacturing Company – Microsoft EA Negotiation Yields 20% Cost Reduction and Streamlined Licensing
Background
A large U.S. manufacturing company with 15,000 employees and operations across North America, Europe, and Asia was approaching its Microsoft Enterprise Agreement renewal. Based in Chicago with several plant locations worldwide, this industrial manufacturer’s IT environment included a mix of on-premises systems (for plant operations and ERP) and an increasing use of cloud services.
Their Microsoft EA covered Microsoft 365 for all office staff (mostly E3 licenses, with a subset of E5 for R&D and engineering teams using advanced analytics), Windows Server and SQL Server licenses with Software Assurance for data centers, and a moderate Azure commitment supporting IoT telemetry and supply chain analytics.
The EA was set to expire in 6 months. The company sought to negotiate a renewal that would optimize licensing costs and better accommodate its global operations, which had undergone shifts in workforce and IT needs during the past term.
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Challenges
The manufacturer faced rising EA costs and uneven license utilization across divisions. During the last EA term, the company acquired a smaller competitor and divested one business unit; however, the EA did not allow for a reduction in license counts accordingly.
This resulted in over-licensing in some areas (for example, dozens of unused Microsoft 365 seats tied to the divested unit remained on the books). Microsoft’s initial renewal quote not only maintained those excess licenses but also added a 5% price increase, citing “annual adjustments.”
Additionally, Microsoft was encouraging an upgrade of the company’s engineering and design departments to full M365 E5 and pushing adoption of Power BI Pro for all users (bundled into a suite) – moves that would significantly increase costs without clear ROI.
The global nature of the business posed another challenge: the firm had multiple affiliates in Europe and Asia purchasing some Microsoft services outside the EA. This fragmented licensing made it hard to track usage and spending. The company sought a more unified view, but Microsoft’s rigid EA structure, organized by legal entity and country, made consolidation challenging.
There were also concerns about flexibility; the manufacturing industry is cyclical, and during downturns, the firm needed the ability to scale down user counts or Azure usage – something the current EA didn’t support.
Finally, the company’s CIO was wary of Microsoft’s standard contract terms around True-ups and the lack of portability of licenses across regions, which felt misaligned with the company’s dynamic operations.
How Redress Compliance Helped
- Enterprise-wide License Assessment: Redress Compliance conducted a thorough inventory of all Microsoft licenses in use across the company’s global locations. They identified that roughly 1,200 Microsoft 365 E3 licenses in the U.S. were unassigned or tied to former employees (a result of the divestiture and normal staff turnover). In Europe, a subsidiary was found to be paying for a separate Office 365 subscription outside the EA, which could be brought under the central agreement for volume savings. This assessment underscored significant license optimization opportunities – by eliminating or reallocating underused licenses, the company could avoid paying for up to 10% of its total M365 seats in the renewal.
- Workload and Usage Optimization: Redress analyzed usage patterns in specialized engineering software and Azure. They found that only the core product design team actively utilized the advanced analytics features available in M365 E5; many others in R&D were satisfied with E3, supplemented by occasional Power BI access. They also discovered that the company was licensed for more SQL Server cores than were deployed, due to a conservative overestimation in the previous EA. Proposed redress: tailor the renewal to keep only 300 critical users on E5, and use M365 E3 for the rest of the workforce, adding Power BI or other add-ons à la carte only for those who need them. They also recommended using the Azure Hybrid Benefit more aggressively – since the firm owned Windows Server licenses with Software Assurance, they could run those in Azure at a lower cost. This would ensure that no double payment is made for Windows licenses on Azure virtual machines, thereby trimming cloud costs.
- Contract Restructuring for Global Coverage: The consulting team at Redress worked with the client’s procurement and legal departments to design a contract structure that consolidated purchasing. They negotiated with Microsoft to allow the European subsidiary’s Microsoft 365 subscriptions to be rolled into the main EA as an affiliate enrollment, achieving unified oversight. Redress also addressed geographic flexibility by introducing language into the agreement that permits transferring licenses between regions (within the company’s affiliates) without Microsoft’s prior approval, as long as the total count remains within the contracted amounts. This was crucial for the client’s streamlined global license management.
- Negotiation and Benchmarking: Redress used industry benchmarks from similar manufacturing firms to challenge Microsoft’s pricing. They noted that manufacturing sector EAs of comparable size often see significant discounts on Azure and Microsoft 365 due to competitive pressures in the cloud market. Presenting these data points, Redress pushed Microsoft for a better deal. Microsoft’s initial stance of a 5% increase was countered by Redress, pointing out the risk that the client might shift workloads to alternative cloud providers or delay upgrades if costs weren’t contained. This leverage proved effective. Redress negotiated a 20% cost reduction versus the initial quote by combining the removal of unnecessary licenses and securing an additional discount percentage on the remaining ones. Microsoft conceded to a deeper discount on Microsoft 365 licenses and a more reasonable Azure pricing tier.
- Future Flexibility Built-in: A key negotiation win was introducing annual flexibility in the new EA. Redress secured provisions allowing the company to adjust (true-down) its Microsoft 365 user counts by up to 5% at each anniversary if business conditions changed – a rare concession in standard EAs. They also got Microsoft to agree to an Azure “flex pool”: the firm would commit to a certain Azure spend annually, but if they used less, a portion of the unused commitment could roll over or be applied to other Microsoft cloud services (e.g., Power Platform) rather than being forfeited. These terms ensured the manufacturer wouldn’t overspend during a slow year, aligning the contract with the cyclical nature of its industry.
Outcome and Impact
- 20% Cost Reduction Achieved: By the end of the negotiation, the manufacturing company secured a deal that was 20% cheaper than Microsoft’s initial renewal proposal. Over the three-year term, this translated to several million dollars in savings. The cost reduction was largely driven by scrapping the excess licenses and adjusting the license mix. For example, moving hundreds of users from E5 to E3 and eliminating duplicate licenses in Europe immediately reduced wasteful spending. The finance department was pleased to see the annual Microsoft budget decrease despite Microsoft’s original push for an increase – a testament to the effective negotiation.
- Streamlined and Unified Licensing: The new EA structure is far more streamlined for the global enterprise. Now, all major Microsoft cloud subscriptions across the U.S. and Europe fall under one agreement, giving the IT department a single pane of glass to manage licenses. This unified global licensing strategy means better visibility into who is using what software. The company’s CIO and IT asset management team can track license utilization across all plants and offices from a single agreement portal, thereby improving governance. It also simplifies compliance, as users can be accounted for and licenses can be moved to where they’re needed most, eliminating redundant purchases.
- Improved Flexibility and Efficiency: The negotiated terms provide the manufacturer with flexibility that directly supports its business model. In the event of a market downturn or a production slowdown, the company can scale back some of its license count at the next EA anniversary, rather than being locked into paying for unused capacity. Conversely, if the company expands or acquires another plant, it can add those users at the pre-negotiated rates without a hitch. Azure cost management has also been improved: by leveraging existing licenses through the Hybrid Benefit and the new rollover allowance, the firm drastically reduces the likelihood of wasted cloud spend. All these adjustments have made the company’s Microsoft investment more efficient and aligned with actual needs. The IT team is now implementing internal processes, with Redress’s guidance, to periodically review license usage and ensure they continue to stay optimized throughout the EA term.
Client Quote
“We thought Microsoft had all the power in these negotiations – until we brought in Redress. Redress Compliance demonstrated to us that, with the right data and strategy, we could set the terms. They uncovered that we were oversubscribed and overspending on our licenses worldwide. Thanks to their insight, we negotiated a new EA that cut our costs by 20% and simplified everything. We’ve transitioned from juggling multiple agreements and unused licenses to a single, streamlined contract that adapts to our needs. Redress even helped us secure terms to adjust for our industry’s ups and downs, which is practically unheard of with Microsoft. We feel in control of our Microsoft licensing now, instead of the other way around.” – VP of IT Procurement, U.S. Manufacturing Company
Call-to-Action
Struggling with a one-size-fits-all Microsoft contract that doesn’t fit your business? Contact Redress Compliance for a complimentary Microsoft agreement review or a personalized renewal strategy session. We’ll help you optimize your licenses and negotiate a flexible, cost-effective agreement – so you only pay for what you need, when you need it.
Further Reading
- Read about our Microsoft Contract Negotiation Service.
- Read about our other Microsoft Case Studies.
