Understanding Microsoft EA Pricing: Levels
Microsoft’s Enterprise Agreement (EA) pricing has long been opaque by design. For CIOs, procurement leaders, and IT sourcing managers, deciphering how costs are determined is crucial.
Historically, Microsoft offered volume-based price levels (A through D), rewarding bigger commitments with lower unit costs. Read our complete guide to Microsoft EA Pricing Changes 2025
Now, as of late 2025, those familiar tiers are being retired for online services, leaving many enterprises wondering how pricing will work in the future.
This guide provides a practical breakdown of EA pricing levels, how Microsoft calculates costs, and where savvy buyers can still negotiate beyond the so-called “transparent” list prices.
List Prices vs. Volume Levels (A–D)
Under the EA program, Microsoft publishes list prices for its products – essentially the starting price per license.
Traditionally, these list prices were adjusted by volume level tiers:
- Level A was the baseline for the smallest deployments (historically, the default price with minimal discount).
- Levels B, C, and D offered progressively greater discounts off the list price for larger user counts. In other words, the more licenses you buy, the lower your per-user cost.
This tiered structure made EA pricing a moving target – two companies buying the same product could pay different prices depending on their size. Microsoft claimed to offer “built-in savings” for bigger customers, but the actual discount percentages were rarely advertised in public. Buyers often had to work with a licensing specialist to estimate where they fell on the A–D spectrum.
As of November 1, 2025, Microsoft is eliminating these volume-based tiers for online services. Every organization, whether 300 users or 30,000, will start at the same list price (effectively Level A) for cloud subscriptions like Microsoft 365, Office 365, and Dynamics 365. The legacy Levels B–D are retired in the pricing sheet.
Microsoft positions this change as a move toward simplicity and cloud market “transparency,” but for customers, it means previous automatic discounts disappear. Larger enterprises that used to enjoy lower unit costs just by virtue of size will now face higher starting prices unless they negotiate custom discounts.
For help, read – Strategies to Maximize Your Microsoft EA Discount (and Avoid Price Increases)
To put this in context, here’s a look at the historic EA pricing levels versus the new reality in 2025:
| EA Level | Volume Range (Seats) | Discount vs. List (Historic) | Status (2025) |
|---|---|---|---|
| A | < 250 users (smallest) | None or minimal (baseline price) | Default baseline for all online services (no automatic discount) |
| B | 250–2,399 users | Moderate built-in discount | Retired Nov 2025 (reverts to baseline pricing) |
| C | 2,400–5,999 users | Larger volume discount | Retired Nov 2025 (reverts to baseline pricing) |
| D | 6,000+ users | Deepest discount tier | Retired Nov 2025 (reverts to baseline pricing) |
Table: Microsoft EA Pricing Levels – Historic Volume Tiers vs. 2025 Changes. Note: On paper, all customers now pay “Level A” list prices for cloud services. Government (GCC) and Education programs are excluded from this change (they continue with their own pricing structures).
Also, there are no changes (for now) to on-premises license tier discounts – the retirement of tiers applies mainly to cloud subscriptions under commercial agreements.
What does this mean for buyers? Essentially, the playing field has been leveled – and not in buyers’ favor. If your company previously got a 5–10% break at Level B/C or a ~12% break at Level D, those savings aren’t guaranteed anymore.
Microsoft’s “list price transparency” might sound good in theory, but it largely serves to bolster Microsoft’s bottom line.
Now every discount must be earned through negotiation, not assumed from a volume tier. The good news is that volume still matters (a large deal can command a custom discount), but you’ll need to actively make the case for it.
How Microsoft EA Pricing Is Quoted
Microsoft typically quotes EA pricing on a per-SKU, per-user, per-year basis. Each product (SKU) in your agreement has an annual price per license, which is then multiplied by the number of users and by the 3-year term of the EA.
For example, if Microsoft 365 E3 is quoted at $X per user/year and you have 1,000 users, that’s $X,000 per year – or $3 * X,000 over the standard 3-year term (before any adjustments for growth or true-ups).
Often, Microsoft or your reseller will present a bundled Total Contract Value (TCV) for the entire EA. This lump-sum figure can obscure what you’re actually paying per product.
Buyer tip: Always break down the TCV into per-user, per-SKU costs. Understanding the unit price of each component (e.g., Exchange Online Plan 2 costs $Y per user/year) is critical to identify which items are driving your spend. It also enables apples-to-apples comparison with benchmarks and highlights where Microsoft might have padded certain prices.
An informed customer will push the vendor to provide a clear price sheet detailing each product’s cost at whatever discount or rate is being offered.
Additionally, EA quotes often assume a three-year commitment. You pay annually (or upfront, depending on your preference), but the prices are locked in for the term.
This means price protection – Microsoft can’t raise that SKU’s price on you mid-term. However, it also means you’re committing to those licenses (or a minimum quantity) for three years, with penalties or true-up charges if you increase usage.
If Microsoft presents a quote that only lists a total, ask them to show the math: how many licenses of each product and at what unit price make up that total. This transparency is key to negotiating and ensuring the quote aligns with any promised discounts.
Don’t negotiate blind. Benchmarking Microsoft EA Discounts: How to Tell If Your Deal is Competitive.
On-Premises vs. Cloud EA Pricing Models
Not all EA costs are calculated the same way. It’s important to distinguish between on-premises software licensing vs. cloud subscriptions within an EA, as well as how Azure fits in:
- On-Premises Licenses (Perpetual + Software Assurance): In a traditional EA, you might license products like Windows Server, Office, or CALs as perpetual licenses. The EA lets you spread payments over three years, essentially financing the license purchase, often bundled with Software Assurance (SA). SA is an add-on (typically ~25% of the license price per year) that provides upgrades and support, functioning like maintenance. This model is more CapEx-like (you own the license after full payment) with an annual OpEx component (SA). Pricing is usually quoted as an annual fee per license (covering 1/3 of the perpetual cost plus that year’s SA). Volume tiers historically gave discounts on the license portion for larger purchases. Key point: On-prem pricing has its own structure, and the removal of tiers doesn’t currently change on-premises EA pricing – volume discounts there remain as before (and you can still negotiate those too).
- Cloud Services (Subscription Model): Cloud offerings in the EA (like Microsoft 365, Office 365, Dynamics 365, Power Platform, etc.) are sold as subscriptions – you pay per user per month or per user per year, and you do not own the software outright. This is pure OpEx. EA pricing for these is straightforward: annual price per user * number of users. Historically, the annual per-user price was lower if you were at a higher EA level (B, C, D), but now everyone starts at the same annual list price. The subscription fees cover everything (there’s no separate SA because you always get updates as part of the cloud service). One nuance is that if you commit to a 3-year EA term for a cloud service, Microsoft typically locks your price for that term (protecting you from price increases during it), whereas month-to-month outside an EA could be pricier or subject to change. The EA still offers price protection, even for cloud services, but you must negotiate any additional discounts on top of the fixed list rate.
- Azure (Consumption Commitments): Azure in an EA doesn’t have a per-user cost at all – it’s handled via monetary commitment. Organizations commit to spend a certain dollar amount on Azure over the term (e.g., $1M per year), often in exchange for a discount off Azure’s pay-as-you-go rates. Azure’s pricing model is more akin to buying a pool of credit or locking in a volume of consumption. EA Azure pricing can involve an upfront commitment discount (the more you commit to spend, the bigger the discount on usage meters) and overage rates if you go beyond your commitment. Volume tier levels (A–D) historically influenced Azure pricing less directly, as Azure has had flat global pricing for consumption. Instead, discounts were negotiated on a case-by-case basis based on the size of the commitment. In 2025, Azure’s approach remains unchanged by the tier elimination – it was already a “one price list” model. The main point is that Azure costs in an EA require a different kind of analysis (cloud consumption forecasting and optimization, rather than per-user license counting).
Factors Affecting EA Pricing
Even with a single list-price tier for online services, EA pricing is far from one-size-fits-all. Several key factors will drive what you ultimately pay:
- User Volume and Spend: The number of users (and overall spend) still matters for negotiation. Larger organizations have more leverage to request discounts, even if Microsoft doesn’t automatically give one. If you’re bringing a multi-million-dollar deal or tens of thousands of seats, Microsoft’s sales team has room to provide incentive discounts (now termed “strategic discounts”) to win or retain your business. Small enterprises (just a few hundred seats) might not get an automatic break, but they can still negotiate if there are competitive situations or growth potential.
- Product Mix and Cloud Transition: Your blend of on-prem vs. cloud products, and whether you’re migrating to newer cloud services, can affect pricing. Microsoft often offers special transition pricing or promotions for customers migrating from legacy on-premises licenses to cloud subscriptions (for example, discounts or free months when transitioning from Office on-premises to Microsoft 365, or bridge licenses that ease double payment during migration). Suppose your EA renewal involves a significant technology shift (e.g., adopting Microsoft 365 E5, or adding new products like Microsoft Copilot or advanced security suites). In that case, Microsoft may be more flexible on price to facilitate that move. These are negotiation levers – highlight that you’re willing to adopt strategic new workloads in exchange for better rates.
- Customer Segment (Commercial vs. Government/Education): Microsoft’s pricing programs differ by sector. Commercial enterprises are subject to the changes we’ve discussed, but government and academic customers have separate agreements and discounts. For instance, Government EA (or GCC pricing) and Education Enrollment (EES) often have built-in discounts or fixed lower rates as part of those programs. If you’re in one of those segments, your “list price” might already be lower than commercial, and volume discounts might still apply as before. Always compare your pricing to the appropriate benchmark for your sector, not just the commercial list, as Microsoft’s public price lists (often quoted on Microsoft’s website) are usually commercial MSRPs.
- Regional Pricing and Currency Exchange: Microsoft adjusts pricing by region and currency. Where you buy can influence your costs due to local market factors. Microsoft periodically does currency alignment adjustments, meaning if a currency has weakened against the US dollar, they may raise local prices to compensate (and vice versa). They also maintain some price differentiation across geographies (though they have been moving toward more global consistency). For a multinational company, the EA price in Europe vs. the USA may differ based on such adjustments or local list price variations. Additionally, taxes and local exchange rates can impact your effective cost. It’s important to know if a price is quoted in USD or local currency and whether any expected adjustments are on the horizon during your term.
- Contract Timing and Microsoft’s Priorities: (Another factor to keep in mind is Microsoft’s fiscal timing and sales incentives – for example, deals closed at the end of Microsoft’s fiscal year (June) might get extra discounts to hit targets. Additionally, if Microsoft is heavily promoting a new product or cloud service, it may offer better pricing to drive adoption. Savvy buyers align their needs with Microsoft’s priorities, leveraging those for a sweeter deal.)
Each of these factors can become a point of negotiation. The elimination of standard tiers means you must proactively raise these points – Microsoft’s initial quote may simply show list prices, but there’s often wiggle room if you justify it.
For instance, “We’re rolling out Azure AD Premium to all users (new workload) and committing to Azure spend, we expect better than list price on these.”
Always approach the EA pricing discussion knowing your own value as a customer: the revenue you bring, your willingness to be an early adopter, your loyalty, etc., can all influence the final deal.
Microsoft’s Margin & Deal Size Considerations
From Microsoft’s perspective, pricing negotiations are about managing margin and strategic value.
They have internal guidelines for how much discount a sales team can offer based on deal size, deal type, and the customer’s importance. Understanding this dynamic can help you position your requests:
- Larger, Multi-Product Deals = More Flexibility: If your EA is worth a significant amount (say many millions over three years), Microsoft stands to gain a lot and will be keen to prevent you from walking away or downsizing. Additionally, suppose you’re purchasing a broad suite of products (Microsoft 365, Dynamics, Azure, security add-ons, etc.). In that case, Microsoft can afford to take a smaller margin on one product because they’re getting a bigger footprint of your IT spend. This is why bundling products can sometimes yield a better overall discount. Microsoft considers the Total Contract Value and projected growth; a significant commitment can justify special pricing approval from senior management. Enterprise customers can and should push for more aggressive discounts in line with what similar organizations (in size and industry) are paying – Microsoft won’t volunteer these, you have to assert what you need.
- Microsoft’s Margin Targets: Microsoft typically has a target profit margin for EA deals. A standard deal with no fuss might only get the basic list (Level A) pricing, which has Microsoft’s highest margin. When you push back, the sales team might dip into their discount budget to close the deal. They often can apply strategic discounts, concessions, or one-time credits if there’s a risk of losing the account or if you have a competing offer. Keep in mind, these are not advertised – you’ll never see “Level E” pricing on a website. However, large customers often negotiate additional percentages off the list or extra services and licenses included. Your job is to make a compelling case for why you deserve a better price (e.g., you’re considering a competitor, you might move to CSP, you are expanding usage significantly, etc.) while Microsoft’s goal is to maximize revenue and margin.
- Strategic Products and Adoption: Microsoft is often willing to sacrifice margin on new or strategic products to drive adoption. For example, if Microsoft is pushing its AI-powered additions like Copilot, or wants more clients on Teams Phone or Power BI, they may offer those at a steep discount (or free trials) as part of your EA to encourage uptake. These can be negotiation chips: you might say “We’ll pilot Microsoft 365 Copilot for 1,000 users this year – but we want a 20% discount on it” or similar. Microsoft might agree if they’re eager to showcase wins for that product. Always ask yourself and Microsoft, “What does Microsoft get out of this deal beyond revenue?” – if you can give them a success story, wider product adoption, or competitive takeaway, they often reciprocate with better pricing.
- Smaller Deals Still Have Options: If you’re a smaller enterprise (just at or below the old Level A/B threshold), you might feel you have less leverage – and it’s true, Microsoft’s salesperson might have tighter limits on discounting for you. However, don’t assume you must pay full price. If your account is strategically significant (say you’re a high-profile brand, or in a sector Microsoft wants to grow), or if you threaten to shift to a more flexible CSP arrangement or rival service, Microsoft can become surprisingly accommodating. They want to keep every customer in the Microsoft ecosystem rather than losing you to Google or others. Leverage relationships and explore alternative licensing programs as a negotiation tactic; sometimes, just the evaluation of other options can prompt Microsoft to present a better EA offer.
In summary, Microsoft’s pricing structure without volume tiers puts more onus on the buyer to find the pressure points.
But those pressure points are still there. Microsoft’s sales reps are motivated to close deals and hit quotas – use that to your advantage by timing your negotiations and anchoring them in realistic, data-backed demands for a discount.
An authoritative, well-informed stance can turn the “one-size-fits-all” list price into something much more customized to your organization.
Example EA Pricing Breakdown
Let’s illustrate how EA pricing might look, comparing historical tier pricing to today’s baseline and what a negotiated outcome could be. Consider two common bundles, Microsoft 365 E3 and E5 (per user per month pricing):
| Product | List Price (MSRP) | Historic Level C (approx. 10% off) | Post-2025 Baseline (Level A) | Negotiated Target (Example) |
|---|---|---|---|---|
| M365 E3 | $32 per user/month | ~$28.80 per user/month | $32 per user/month | ~$26–$28 per user/month |
| M365 E5 | $57 per user/month | ~$51.30 per user/month | $57 per user/month | ~$47–$50 per user/month |
Table: Conceptual EA pricing example for Microsoft 365 E3 and E5. In the past, a company in Level C (mid-large size) might have automatically paid about 10% less than the list. Now all companies start at least ($32 or $57 in these examples).
A strong negotiation could target bringing the price down to the high-$20s for E3 or the high-$40s for E5, which would represent a roughly 12–18% discount off the list. The exact achievable discount will depend on the factors discussed (deal size, strategic importance, etc.).
The key is to not assume that the list price is the final price – sophisticated buyers will still push to bridge the gap between the new “baseline” and what historically was achievable with volume tiers.
In many cases, you can argue for similar end discounts (or better) by highlighting the value of your account.
Keep in mind this is a simplified example. Microsoft’s price list includes dozens of products, and each could have its own historic discount variances.
But this illustrates the shift: what was once a given reduction is now a point for negotiation. If you go into an EA renewal blindly accepting list prices, you could be leaving money on the table.
Checklist: Analyzing EA Pricing Before Negotiation
Before you head into your next EA renewal or negotiation, run through this pricing analysis checklist to ensure you’re fully prepared:
- Gather Microsoft’s current list prices per SKU: Obtain the latest price list or quote from Microsoft for all the products you plan to include. This is your starting point (Level A pricing for everything). Having the raw list price for each item lets you calculate and sanity-check any discounts later.
- Break down the TCV into unit costs: Don’t focus only on the 3-year lump sum. Calculate the per-user, per-year cost of each component in your EA. This transparency will help you spot any outliers or overpriced items in the bundle. It also helps you communicate with stakeholders about what each license is costing.
- Compare historic tier pricing to the new baseline: If you had a previous EA, review what effective price per user you were paying under that agreement (many procurement teams keep an internal analysis of past deals). Identify the percentage increase if you were to pay the full list next term. For example, “Under our last EA, Office 365 E3 was effectively $X; now the list is $Y, which is 8% higher.” This gives you a sense of the impact and a basis to request relief or discounts to offset the change.
- Factor in customer segment, region, and special programs: Make sure you know if there are alternative programs or prices you could leverage. If you’re eligible for a government or education program, or if moving to a Cloud Solution Provider (CSP) could offer more flexibility, factor that into your strategy. Also be aware of any currency or regional price increases that might hit your area soon – you might negotiate to sign or renew before a scheduled price hike or seek price hold guarantees if currency volatility is a concern.
- Benchmark discounts by deal size and industry: Use any available data (peers, advisors, or consultants) to gauge what discount % is attainable for an organization of your size. For instance, a 5,000-seat company might learn that others of similar size achieved a 10-15% discount off list on certain products. Having these benchmarks can empower you to push back on a weak initial offer. Microsoft’s first quote might be “level pricing” with 0-5% off – but if you know market norms, you can respond with confidence: “Companies like ours typically get closer to 15% off on a renewal – we need to see a better offer.”
By following this checklist, you’ll enter negotiations with a clear picture of your pricing. Knowledge is power – understanding Microsoft’s EA pricing structure, especially amidst these 2025 changes, allows you to counter the removal of volume tiers with your own data-driven negotiation.
Remember, Microsoft’s pricing may no longer automatically adjust in your favor, but informed customers can still achieve optimal results by preparing thoroughly and advocating for their interests.
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