Case Study – Microsoft Negotiation Service – U.S. Technology Firm – Microsoft MPSA Optimization Avoids 17% Cost Escalation and Enhances Cloud Agility
Background
A U.S. software technology firm based in Seattle, with 400 employees, was managing its Microsoft licenses through a Microsoft Products and Services Agreement (MPSA) rather than a traditional Enterprise Agreement.
The company develops SaaS solutions and relies heavily on Microsoft Azure for hosting its applications, as well as Microsoft 365 for internal productivity (mainly using Microsoft 365 Business and a few Office 365 E3 licenses for management).
The MPSA was originally chosen for its flexibility, as the firm was smaller and rapidly growing – MPSA is a transactional volume licensing program suited for mid-sized organizations. Under the MPSA, the firm would purchase licenses as needed without a multi-year commitment.
By 2025, the company’s headcount and cloud usage had grown significantly, and Microsoft was encouraging a move to an Enterprise Agreement at the next renewal, implying it could “save money” and be more convenient.
The tech firm engaged Redress Compliance to assess whether sticking with an optimized MPSA or transitioning to a Microsoft Customer Agreement or Enterprise Agreement would be the best strategy, as well as to negotiate the best terms under their current model.
Read how to negotiate with Microsoft.
Challenges
The main challenge was avoiding an unnecessary cost escalation. Microsoft’s account representatives were strongly pitching the idea that the firm “graduated” to an Enterprise Agreement given its growth. However, the preliminary EA proposal the company received had a hefty price tag and a requirement to commit to certain license quantities and Azure spend for three years.
The firm was concerned that signing an EA would lock them into more licenses (and costs) than needed, given the variable nature of their business – as a tech company, they valued agility and often shifted resources between projects, sometimes needing fewer Microsoft licenses if, say, they moved some development to open-source tools.
The MPSA they had provided a lot of this flexibility (buying licenses when required, dropping them when not), but it lacked the deeper discounts of an EA.
Another challenge was license management complexity. Under MPSA, purchases were ad hoc and spread across departments – the company lacked a centralized view, and some teams occasionally overbought licenses for short projects and failed to retire them later. This led to some waste and inefficiency.
There was also the issue of Azure consumption costs: the firm’s Azure usage was rising unpredictably with the onboarding of new customers on its SaaS platform.
The Microsoft pitch was that an EA would offer discounts on Azure, but it also imposed a fixed annual spend. The tech firm feared overcommitting to Azure spend, yet also didn’t want to pay retail rates under the MPSA if there was a way to get discounts.
Essentially, the company was at a crossroads: continue with an MPSA (flexible but maybe suboptimal pricing), or move to an EA (better unit pricing but rigid).
The lack of independent insight into what actual savings an EA would bring (versus Microsoft’s sales talk) made this decision difficult. They needed to ensure that whichever path they chose, they wouldn’t overspend or lose flexibility critical to their DevOps culture.
How Redress Compliance Helped
- Licensing Model Analysis: Redress Compliance conducted a thorough comparison of scenarios: staying on MPSA versus moving to an Enterprise Agreement or the newer Microsoft Customer Agreement (MCA). They gathered the firm’s actual license purchase history and Azure consumption data from the past 18 months. The analysis revealed that the firm’s Microsoft 365 needs, while growing, were still around 450 user licenses – below the 500-user threshold where EAs typically start to make sense. Redress pointed out that MPSA is designed for organizations with 250+ users, up to EA size, and the company was just crossing that boundary. If they went with an EA, they would be committing to 3 years and likely a bundle of services they may not fully use. The MCA (a newer, flexible agreement) was also considered; Redress explained that the MCA is a pay-as-you-go model and noted Microsoft’s push to use MCA for cloud purchases. In effect, Redress laid out the pros and cons of each route, giving the tech firm a clear understanding beyond the sales pitch.
- MPSA Spend Optimization: Assuming the firm would stay on MPSA (at least in the near term), Redress next focused on optimizing license procurement under that model. They reviewed all current licenses and identified about 50 that were no longer in use (developers had spun up test environments with Windows Server or SQL Server licenses that were now shut down, and some former employees still had Office 365 licenses assigned). Redress helped the firm retire those, thereby avoiding the need for renewals. They also centralized the purchasing process – rather than each department buying licenses piecemeal, Redress recommended consolidating through a single procurement owner to leverage volume and ensure no duplicate purchases. Additionally, Redress negotiated with the firm’s Microsoft reseller to apply better discounts on large orders. Under MPSA, pricing can sometimes improve if you reach a higher product pool or if the reseller agrees to reduce their margins. Redress leveraged its market knowledge to negotiate a better rate for a bulk purchase of Microsoft 365 licenses, which the firm required for its planned hires.
- Azure Cost Management & Alternative Discounts: One key area was Azure. Redress examined whether the firm could get Azure cost benefits without an EA. They found that the company was eligible for Azure volume discounts or could utilize a CSP partner to receive a percentage discount on the pay-as-you-go rates. Redress assisted the firm in migrating some of its Azure subscriptions to a Cloud Solution Provider that offered a 5% discount on Azure usage. This provided immediate savings on cloud costs while maintaining a flexible arrangement (month-to-month). Redress also reviewed Azure resource usage and recommended sizing and reservation optimizations (such as using Azure Reserved Instances for the databases that ran 24/7, which could cut costs by 20-30% without an EA). These cloud optimizations meant the firm was spending less on Azure than before, making the EA’s promised Azure discount less tempting in comparison.
- Negotiation with Microsoft – Pushing Back on the EA: The firm was accompanied by Redress in discussions with Microsoft, essentially negotiating not to sign an EA unless it truly made sense. This was a unique situation where Redress’s role was to ensure the client didn’t get funnelled into a larger contract unnecessarily. They communicated to Microsoft that the firm was content with its current model but open to improved pricing. This led Microsoft to offer some concessions even under the MPSA/MCA route. For instance, Microsoft agreed to provide the firm with extended price protection on their Microsoft 365 licenses for two years (to guard against price hikes) and to let them enroll in an “MPSA spending account” that gave a small rebate for reaching certain spend thresholds. Redress also ensured that if the firm decided to move to an MCA for Azure (Microsoft’s new Customer Agreement), it could do so without losing any prior investments – Microsoft provided assurances that any Azure reservations or licenses would carry over seamlessly. In essence, Redress negotiated the best of both worlds: the firm maintained its flexible licensing approach and avoided a heavy EA commitment, yet still secured some financial benefits and commitments from Microsoft.
- Planning for the Future: Ultimately, Redress collaborated with the client to develop a forward-looking plan. They acknowledged that if the company continues to grow, an EA might become advantageous within a year or two. To prepare for this, they outlined triggers to watch (e.g., if the employee count exceeds 600 or if the annual Microsoft spend crosses a certain threshold), at which point they should revisit the EA decision. By doing so, the firm has a roadmap and won’t be caught off-guard by Microsoft’s pushes; they will enter any future EA negotiation on their timeline and terms, ideally with Redress’s continued guidance.
Outcome and Impact
- Avoided 17% Cost Increase: By optimizing the current licensing model and not signing up for an over-scoped EA, the tech firm avoided a projected 17% cost escalation. Microsoft’s EA proposal would have locked them into a higher spend (with many licenses and Azure capacity they didn’t yet need). Instead, their yearly Microsoft spend under the optimized MPSA decreased slightly, even as they grew, due to the efficiency improvements and discounts that Redress helped secure. In effect, the company achieved “savings” by not overspending – the budget that would have been dedicated to unnecessary Microsoft commitments was kept free, amounting to hundreds of thousands of dollars over the three years.
- Enhanced Agility and Control: The firm retained a high degree of agility in its IT strategy. Licenses can be added or dropped as projects start or end, and cloud usage can be scaled without worrying about under-fulfilling a contract. This is a perfect fit for a tech company that practices agile development and frequently pivots resources. The CEO remarked that they felt they didn’t “sell their soul for a discount” – meaning they didn’t sacrifice flexibility just to maybe save money under an EA. And thanks to Redress’s interventions, they also got some price stability (two-year price lock on key licenses) even outside of an EA. The company now has better internal controls in place for license assignments, preventing the kind of over-buying that occurred previously.
- Optimal Cloud Spend: Through Redress’s cloud optimization and leveraging a CSP arrangement, the firm achieved an immediate reduction in Azure unit costs. They managed to cut their Azure hosting bill by about 10% through reserved instances and partner discounts, all without a long-term cloud commitment. This means their margins on their own SaaS product improved correspondingly. They also have more insight into their cloud usage patterns and can plan capacity with cost in mind. The outcome is that the company is running leaner – paying for what it uses and getting discounts where possible – without locking into a potentially restrictive enterprise contract.
- Strategic Roadmap for Microsoft Licensing: Perhaps one of the less tangible but critical outcomes is that the company now has a clear strategy for its Microsoft licensing. Redress’s analysis gave them confidence that their current approach is the right one for now. And with the roadmap in hand, they know what metrics would justify considering an EA in the future (like significantly higher headcount or spend). This means sales tactics won’t easily sway them; they will make that decision based on data and a well-planned negotiation strategy. This strategic positioning is invaluable: Microsoft’s introduction of the Microsoft Customer Agreement and changes in licensing programs won’t catch them by surprise. They are in control of how they will consume Microsoft services as they grow, on their terms.
Client Quote
“We’re a tech company that lives and breathes agility – the last thing we wanted was to get stuck in a giant contract we didn’t need. Redress Compliance showed us that bigger isn’t always better when it comes to Microsoft agreements. They helped us prove that staying flexible was the cost-effective choice for us.
We avoided a 17% cost increase and instead are saving money by only buying what we need, when we need it. Redress even wrung out extra discounts and price locks for us, all while we kept our freedom to scale on our terms.
It was like having a licensing guru on our side, cutting through the noise. Now we have a clear plan for the future – and we know Redress will be there to help if and when an EA ever truly makes sense. Until then, we’re operating lean and mean, just the way we like it.” – CEO, U.S. Technology Firm.
Call-to-Action
Unsure if a Microsoft Enterprise Agreement is the right fit for your growing business? Contact Redress Compliance for a free Microsoft agreement review or renewal strategy session. We’ll help you analyze your options – whether it’s MPSA, CSP, MCA, or EA – and ensure you get the best pricing without unnecessary commitments. Make a confident, informed decision with an independent expert on your side.
Further Reading
- Read about our Microsoft Contract Negotiation Service.
- Read about our other Microsoft Case Studies.
