Vendor Management Guide: Managing Microsoft Under an Enterprise Agreement (EA)
Overview: Managing Microsoft as a vendor under an Enterprise Agreement requires strategic planning and proactive oversight.
Microsoft’s EA covers a wide range of products: Microsoft 365 (Office 365, EMS, Windows Enterprise), Azure cloud services, Windows licensing, Dynamics 365, GitHub Enterprise, and support contracts.
This guide provides practical strategies for CIOs and vendor management teams to control costs, optimize licensing, negotiate effectively, and govern the Microsoft relationship for maximum value.
Controlling Costs Across Microsoft Services
Eliminate Unused Licenses (“Shelfware”):
Audit all Microsoft licenses (M365 seats, Dynamics 365 users, etc.) regularly and remove or reassign those not in use.
Many organizations find that they are paying for inactive accounts or accounts assigned “just in case.” By purging these “dead wood” licenses, you ensure you only pay for what’s used, often yielding significant savings. For example, a one-time license cleanup and ongoing monitoring can free up much of your EA budget tied to unused subscriptions.
Right-Size User Plans: Not every user needs a top-tier license. Analyze user roles to match them with appropriate license levels. For example, instead of giving all employees Office 365 E3/E5, assign lower-cost plans to those with lighter needs.
One licensing expert noted that in many companies, only ~40% of staff truly need the full Office 365 E3 suite; others might be fine with an Exchange Online or Microsoft 365 F3/E1 plan for email and web apps.
Similarly, for Dynamics 365, license heavy users with full plans and casual users with Team Member or read-only licenses to avoid overpaying. This “right-sizing” approach ensures that no one is over-licensed (wasting money) or under-licensed (risking compliance).
Monitor and Optimize Azure Consumption: Cloud spending can spiral out of control without proper oversight. Leverage Azure Cost Management tools to track usage and set budgets/alerts. Implement continuous cost monitoring to detect anomalies or over-provisioned resources early.
Take advantage of cost-saving options in Azure: for predictable workloads, purchase Azure Reservations (1-3 year commitments for VMs, databases, etc.) to save up to ~72% vs. pay-as-you-go prices. Use the Azure Hybrid Benefit to apply existing Windows/SQL Server licenses to Azure VMs and spot VMs for non-critical tasks to cut cloud costs further. Also, shut down or scale down dev/test resources after hours and eliminate idle resources.
Common mistakes that lead to Azure overspending include overprovisioning resources without monitoring, neglecting to tag resources for accountability, and missing out on available discounts like reserved instances. Avoid these pitfalls by enforcing governance (e.g., require proper tagging by project/department and regularly rightsizing VMs).
Leverage Multi-Year Commitments Carefully: Under an EA, Azure consumption can be prepaid via an Azure Monetary Commitment, often at a discount off retail rates. Committing a baseline upfront provides price predictability and sometimes bonus credits from Microsoft.
However, commit only what you are confident you will use – overcommitting the lock budget to Azure even if it needs to drop. Conversely, if your cloud usage grows, use the EA renewal to negotiate better Azure rates or credits in exchange for higher commitment. Microsoft is eager to grow Azure consumption.
Consolidate and Eliminate Redundant Tools:
Audit your software stack to ensure it overlaps with Microsoft’s offerings. An EA’s value is maximized when you replace third-party tools with capabilities bundled in Microsoft 365 or other licenses.
For instance, moving to Microsoft 365 E5 might allow you to drop separate anti-virus, archiving, or conferencing solutions that are now included features – the savings from eliminating those extra tools can offset a lot of the Microsoft licensing cost.
Ensure you’re not paying twice for the same function (e.g., using a third-party email security on top of M365, where Microsoft Defender is included). Similarly, consider whether GitHub Enterprise can consolidate source code hosting spread across multiple tools but manage seat counts closely so you only pay for active developers.
Use Software Assurance Benefits:
If your EA includes Software Assurance (SA), take full advantage of the benefits – they can significantly reduce external spending. SA benefits include training vouchers, planning services days, license mobility, and support incidents.
For example, SA gives rights to new software versions – a company with Windows 10 Enterprise SA can upgrade to Windows 11 Enterprise at no extra license cost. Utilize the training vouchers for staff (offsetting training budgets) and the included support calls before paying for additional support. These pre-paid benefits come as part of your EA; if you don’t use them, you’re missing out on value you’ve already purchased.
Manage Support Contract Costs:
Microsoft’s Unified (formerly Premier) Support is often pegged to a percentage of your license spend, which means support costs will climb as you consume more Microsoft services. It’s not uncommon to see ~9% year-over-year increases in Unified Support fees due to this model.
To control this:
- Evaluate support usage vs. cost: Are you utilizing the unlimited support incidents and proactive services enough to justify the price? If not, consider negotiating a lower-tier support package or leveraging partners.
- Negotiate caps or credits: At EA renewal, ask if Microsoft can provide flat or reduced support pricing given your overall spend, or include some support hours/credits as part of the deal.
- Consider third-party support for less critical workloads: Independent providers claim to cut 30–50% off annual support costs compared to Microsoft’s support. This can be an option to introduce competition, but it should be weighed against the value of Microsoft’s direct expertise for mission-critical systems.
- Also, use any free support incidents from Software Assurance first, and ensure your IT teams only escalate to costly support when necessary.
License Optimization and EA Flexibility Tactics
Implement a Rigorous License Assignment Process:
Treat licenses as assets that must be actively managed. Establish a process to reclaim and reallocate licenses when employees leave or change roles. Inactivate or reassign Office 365/Dynamics seats immediately when not needed – don’t wait for the annual true-up.
Departments should not hoard extra licenses “just in case”; unused licenses still incur costs. By continuously harvesting these licenses and reallocating them on demand, you avoid paying for idle capacity. Many companies have realized huge savings by doing a one-time license cleanup and keeping it clean thereafter.
Rightsize and Mix License Editions:
Right-sizing means giving each user the appropriate level of service—no more, no less. Within Microsoft 365, create user profiles (personas) and assign licenses accordingly: e.g., frontline workers get F3 (or Office 365 F3) for email and Teams only, information workers get E3, and only power users get E5 for advanced analytics or security features. It’s completely acceptable (and recommended) to have a mix of licenses (E5/E3/E1/F3) in your EA.
Microsoft allows true-up of higher SKUs as needed, but you can keep a lower base and only expand expensive licenses for those needing them. The same logic applies to Dynamics 365 – if only 50 users need the full Sales Enterprise app and 200 others just need to view data or do light tasks, license those 200 with the cheaper Team Member licenses or use Power Apps where possible. Also, Dynamics 365 offers “attach” licenses: if one user needs multiple modules (e.g., Sales + Customer Service), buy one at full price and others as discounted attach licenses instead of two full licenses.
Optimize Windows and Office Licensing:
If you have Microsoft 365 E3/E5, each user’s Windows 10/11 Enterprise upgrade and Office Pro Plus are included. Avoid double-licensing devices—e.g., don’t separately purchase Windows Enterprise upgrades for PCs already covered under your users’ M365 licenses.
Conversely, if you have many shared PCs (like shift workers or labs) where per-user licensing is inefficient, consider per-device licensing (Microsoft has options via Windows Enterprise per device or Office device-based licenses in certain programs).
The goal is to align the license model to your usage pattern. Per–user licensing is great for users with multiple devices, while per-device licensing can save money if you have more users than devices (e.g., call centers). Evaluate and adjust these at renewal.
Consider a Subscription Model for Flexibility:
A standard EA locks you in for three years with a fixed number of licenses (you can add more via true-up, but generally not reduce). If your organization expects significant downsizing or fluctuation, consider an Enterprise Agreement Subscription (EAS) instead of a traditional EA.
An EAS allows you to decrease license counts at each anniversary, providing flexibility to “true-down” if your user count drops (albeit you do not own the licenses perpetually). This can prevent paying for unused capacity in volatile situations.
For example, if a division is being spun off next year, an EAS could let you reduce those licenses at renewal rather than carrying them unused. A pitfall to avoid is sticking with a rigid EA when a more flexible model (CSP monthly subscriptions or an EAS) would better fit your business trajectory.
Avoid Overlap and Bundle Wisely:
Microsoft’s licensing bundles (like Microsoft 365 E3/E5 or Dynamics 365 plans) can be cheaper than buying components à la carte. However, make sure you need all components in a bundle. Don’t pay for an expensive bundle if a smaller plan + a couple of add-ons would suffice.
For instance, not everyone needs the full EMS security suite in M365 E5—perhaps only your admins need the top-tier security, and standard users could use E3 + an ATP add-on rather than E5. Model different scenarios—What if you drop Visio licenses for users who never use them or switch some Visio/Project users to cheaper web versions?
What if you use third-party CRM for a subset of users instead of Dynamics licenses? Running these analyses ensures you’re not overspending on bundled features nobody uses. Be prepared to adjust the mix of licenses at renewal to cut out low-value spending.
Regular True-Up Management:
Use the annual true-up process as an opportunity to optimize. True-up isn’t just about adding licenses – it’s about reviewing your needs each year. Throughout the year, track growth and reductions. While you generally cannot reduce counts mid-term, you can plan at the anniversary to retire certain products from your EA if their 3-year term is completed or move users off a license if an alternative was implemented.
Also, budget for true-up costs so they don’t catch you off guard: true-ups happen on a known schedule (usually each anniversary), so incorporate expected additions into your IT budget. Avoid the pitfall of unplanned growth without a budget—communicate with business units that any new project using Microsoft tech will have licensing costs that hit at true-up.
Incorporate Usage Data in Decisions:
Continuously analyze usage metrics for your Microsoft 365 and Dynamics services. If a feature isn’t being used, consider downgrading the licenses at renewal. For example, if very few people utilize Power BI Pro (which might be included in E5 but not E3), you might decide E3 is sufficient for more people. Or, if you deployed GitHub Enterprise seats widely but see many inactive users, revoke those seats until there’s a justified need.
These micro-optimizations add to big savings and prevent over-licensing due to assumptions instead of data. As one expert put it, the cloud has made under-licensing less common – now the bigger issue is over-licensing, so the onus is on the organization to understand employees’ roles and the tools they truly need.
EA Negotiation Strategies and Renewal Preparation
Start Early and Set Objectives: Microsoft EA negotiations can be complex – don’t wait until the last minute to prepare. A common mistake is starting the renewal process too late, leading to rushed decisions. Begin preparation 12-18 months before your EA expiration.
Assemble a cross-functional negotiation team (IT, procurement, finance, and key business units) to define what a successful deal looks like. Outline your priorities: e.g., cost savings, adding a certain product, flexibility for growth/decline, support terms, etc. Early planning ensures you have time to analyze options and won’t be forced to accept Microsoft’s first offer due to deadline pressure.
Gather Data – Know Your Baseline:
Microsoft will come to the table knowing your current spending and likely usage; you need to know it even better. Collect all relevant data: current licenses and costs, deployment levels, user counts, Azure consumption trends, and any contracts/MSAs/amendments from the last cycle.
This factual baseline lets you identify over-licensed areas to cut or under-served areas to address. For example, discover how many E5 licenses are unassigned or how much of your Azure commit went unused.
Detailed license and usage reports can reveal opportunities – e.g., hundreds of inactive M365 accounts that can be removed before renewal or an opportunity to switch some products to a cheaper edition. Also, review Microsoft’s Product Terms and roadmap for changes (new product packages, pricing changes, end-of-life products) that might affect your negotiation strategy.
Define a Clear Scope and Stick to It:
Scope which Microsoft products and services you need in the next EA term. It’s easy to be tempted by Microsoft’s pitch to adopt the latest offerings (they will push new products like Viva, Security, or Azure services). Be wary of “bundle creep.”
Only include products that align with your IT strategy and deliver business value. If Microsoft proposes adding Power Platform or additional Dynamics modules, ensure you have evaluated them properly. It’s okay to say no to extras that inflate cost.
Conversely, if you know you will eventually need certain Microsoft 365 upgrades (e.g., moving some users to E5 for compliance features), plan and budget for them in the negotiation rather than doing them ad hoc later at a higher price.
Leverage Microsoft’s Sales Incentives:
It helps to understand Microsoft’s priorities. Microsoft’s account teams have sales targets for certain products – currently, Azure consumption, Microsoft 365 E5 upgrades, Dynamics 365 adoption, Power Platform, and new offerings (like Microsoft Viva) are high on their agenda. Use this to your advantage in a “give-get” strategy: Be willing to commit to or increase the usage of these strategic products in exchange for concessions.
For example, you might negotiate: “We will move 500 more users to M365 E5 or commit $X in Azure over 3 years if you provide an overall discount on our E3 pricing and two extra years of price lock on those services.” Azure, in particular, is a powerful bargaining chip.
Some customers find that agreeing to consume more Azure (through reserved instances, longer commitments, or Azure Credits) can unlock better discounts on other licenses. Microsoft may give on price if they get assurance of broader product adoption. Come with a proposed give-get list: e.g., increased Azure = better Office 365 discount; adopting Dynamics 365 = more flexible payment terms, etc.
Benchmark and Challenge Pricing:
Do your homework on pricing. Use independent benchmarks or consult advisors to determine what discount percentages similar organizations get. Then, set an aggressive but reasonable target for your deal. When negotiating, be specific in your asks—for instance, instead of saying, “We need about 30% off,” state that you need 29.7% off a particular SKU cost.
This level of specificity signals to Microsoft that you have done a detailed analysis and aren’t just guessing. It adds credibility to your ask and pressures them to justify any gap. Remember, Microsoft’s initial quote is just a starting point.
Virtually everything is negotiable in an EA – per-user pricing, discount tiers, payment terms, and even certain legal clauses. Also, request multi-year price protection (so prices don’t escalate annually beyond what’s agreed). Be aware that Microsoft often structures deals with front-loaded discounts (higher discount in Year 1, then decreasing) – push back for consistent pricing or understand the total 3-year cost impact.
Consider Alternative Sourcing as Leverage: Even if you are likely to stay with Microsoft, having a Plan B strengthens your hand. Explore alternatives and be ready to show Microsoft that you have options. For example, evaluate Google Workspace vs. M365 for a portion of users or AWS/Google Cloud comparisons for certain workloads.
Calculate the savings if you migrate off certain Microsoft services and share those figures in negotiations. This isn’t to fully replace Microsoft but to create competitive tension. If Microsoft believes you might shift workload to a competitor to save money, they will be more inclined to offer concessions to keep the business. (One caution: do this credibly – vague threats won’t work, but a well-researched cost comparison can.)
Also, get quotes for Microsoft licenses through different channels (CSP, etc.) as a sanity check – while large enterprises usually get the best pricing via EA, sometimes a Cloud Solution Provider can offer promotional rates that you can ask Microsoft to match in the EA.
Negotiate Support and Contract Terms, Too:
Price is important, but so are contract terms. For support, if Premier/Unified Support is part of your Microsoft relationship, negotiate caps on support cost increases or additional services. If your support costs have ballooned, raise this issue – Microsoft knows their support pricing model is costly, and they may offer a concession (like credits or fixed renewal price) to retain your support contract.
Also, consider asking for additional benefits, such as more Training Vouchers, FastTrack assistance for deployments, or a pool of consulting hours from Microsoft’s engineers.
Ensure any sales promises (like “we’ll help you deploy this at no cost”) are written into the contract or an amendment. Everything you negotiate—special usage rights, extended support for legacy systems, pilot licenses for new products—should be documented in the EA or an addendum to avoid disputes later.
Maintain Control of the Narrative:
Manage the information flow to Microsoft throughout negotiations. Only share what is necessary about your plans. Remember, Microsoft’s reps are trying to maximize sales – if you reveal your full expansion plans or budget, they will aim to capture it. For instance, avoid volunteering that you plan to hire 500 people next year or roll out Power BI to everyone unless sharing that helps you get a better deal.
What you say can be used as leverage against you in pricing. Provide enough info to justify your requests, but don’t overshare deployment plans that might weaken your position. Internally, get executive sponsorship (CIO or CFO/CEO) for the negotiation strategy. If talks stall at the account team level, don’t be afraid to escalate within Microsoft – their management will step in to keep a major customer happy, especially if large revenue is at stake. Polite escalation and involving Microsoft’s enterprise negotiators can yield better discounts or terms when the standard field team has hit its limit.
Prepare for Renewal as an Ongoing Process:
Treat EA renewal prep as a continual process, not a one-time scramble. Six to nine months out, finalize your bill of materials – exactly which licenses (and how many) you will need going forward, based on the cleanup and rightsizing you’ve done.
True-up just before renewal ensures you’re compliant when heading in (you don’t want to negotiate while out of compliance). Work closely with your Microsoft reseller or Licensing Solution Provider (LSP) – they can provide quotes and sometimes advocate on your behalf.
Ensure all internal stakeholders (security team, app owners, etc.) have input on needs or pain points to address. By renewal time, you should have a clear plan that maximizes needed tech and minimizes wasted spend, and a unified front with leadership support for either outcome (best offer or walking away).
Know your options if negotiations extend near the deadline: Microsoft can provide a short-term extension if genuinely needed. Alternatively, you might execute a contingency purchase of critical licenses via month-to-month subscriptions to bridge any gap. But ideally, your early start and solid data will avoid that.
Vendor Governance Best Practices for Microsoft Engagement
Ongoing License Management & Audits: After signing the EA, the real work governs the usage over its term. Implement a robust Software Asset Management (SAM) practice for Microsoft licenses.
This includes:
- Quarterly license reconciliation – check actual user counts vs. licenses purchased. Identify unassigned or inactive licenses and reclaim them (so you don’t true-up unnecessary licenses).
- Department chargebacks or awareness: Make business units aware of the license costs they drive. When managers see the cost impact, they’re more likely to release licenses they don’t need. Consider show-back or charge-back reports for transparency.
- Internal true-up drills: Simulate your true-up ahead of time. This gives you time to correct any surprises (e.g., a team deployed 100 Azure VMs without telling IT procurement).
- Compliance self-audits: Microsoft can initiate software audits or SAM assessments. Reduce this risk by internally auditing usage vs. entitlements annually. Ensure you have documentation for any special terms (e.g., extra use rights granted in the contract) so new Microsoft reps or auditors are aware. Good governance can prevent “friendly” SAM engagements from becoming expensive compliance purchases.
Performance and Value Tracking:
Treat the EA as an investment that should yield returns in productivity and capabilities. Set up governance meetings with Microsoft (e.g., quarterly business reviews) to review: Are you using the services effectively? Are you paying for users adopting the new tools (Teams, OneDrive, Dynamics features, etc.)?
Identify any roadblocks to adoption – Microsoft has customer success resources that can help drive utilization (after all, they want you to renew and possibly upgrade in the future). Have Microsoft demonstrate the business value you’re getting.
For instance, if you bought Microsoft 365 E5 largely for advanced security, request periodic reports or workshops from Microsoft to ensure those security features (like Defender, Sentinel, etc.) are fully utilized to improve your security posture. This keeps Microsoft accountable and your organization informed about ROI.
Cost Governance for Azure:
Cloud spending requires active governance. If you have significant Azure usage, form a cloud cost management committee or use a Cloud Center of Excellence approach. Enforce policies such as estimating Azure costs beforehand for every project and tagging every resource with an owner and cost center.
Use Azure Cost Management + Billing to set budgets on subscriptions/resource groups and alert owners when they approach limits. Periodically review Azure Advisor recommendations for optimization (e.g., rightsizing VMs, removing unused disks).
Encourage architecture best practices that save money (e.g., scaling out with smaller VMs, using on-demand platform services, etc.).Additionally, keep an eye on Azure Reserved Instance utilization—if you bought RIs, ensure they’re being fully used; if not, adjust or exchange them.
By governing cloud resources closely, you’ll prevent overspending and be able to forecast cloud costs more accurately for the EA. Many enterprises create cross-functional cloud governance teams involving IT, finance, and application owners to review and optimize cloud cost reports regularly.
Keep an Eye on Changes:
Microsoft’s product offerings and licensing rules evolve frequently. Subscribe to Microsoft announcements or work with your LSP to stay informed about relevant changes (new product bundles, price increases, end-of-life notices, etc.).
For example, if Microsoft decides to raise prices on certain Microsoft 365 plans (as happened in 2022), you want to know to budget or adjust well in advance. Or, if they introduce a new bundle that could simplify your licensing (e.g., a new Dynamics bundle or added features in an existing license), you might take advantage of it.
Mid-term adjustments: If you need a new Microsoft product launched, talk to your rep about a pilot or addition via an EA amendment rather than signing a whole new agreement – it’s easier to consolidate under your EA if possible.
Conversely, if you find a certain product isn’t delivering value, plan to remove it at the next renewal. Keep a living roadmap of your Microsoft usage and where you see it changing, and discuss this in those quarterly meetings so Microsoft also plans for it.
Vendor Relationship Management:
Managing Microsoft as a vendor means maintaining a professional partnership and holding them accountable.
Some best practices:
- Single Point of Contact (SPOC): Have a vendor manager or IT procurement lead own the Microsoft relationship. They coordinate communications, track issues, and know the contract details. However, maintain executive relationships – e.g., your CIO should have the Microsoft account executive’s number for escalation when needed.
- Document all commitments: If Microsoft promises something (a discount, a feature delivery, a support service), get it in writing. Use meeting notes and follow-up emails to recap agreements. This avoids misunderstandings later.
- Issue and Escalation Management: If you encounter problems (e.g,. a critical support ticket is mishandled, or licensing metrics seem off), escalate promptly and firmly. Microsoft has a hierarchy – if the standard channels fail, involve your Microsoft Customer Success Account Manager or their boss. Persistent, significant issues can often be addressed with the help of Microsoft’s account team if you raise them with data. For support issues, don’t forget to leverage any Premier Support TAM (Technical Account Manager) if you have one – they can advocate internally for you.
- Measure support performance: If you’re paying for Unified Support, track the volume of incidents and resolution quality. Calculate your cost per ticket if possible. This data is useful at support renewal time to argue for a better rate or to decide whether to switch to a different support model.
- Utilize All Available Resources: Microsoft provides many self-service and free resources—use them to reduce dependence on paid support or consulting. Encourage your IT staff to use Microsoft Learn, tech community forums, and advisory hours from SA or Unified Support to build in-house expertise.
Common Pitfalls to Avoid: Lastly, be mindful of traps that many enterprises fall into:
- Automatic Renewal Complacency: Don’t let your EA renewal come and go with a simple “same as last time” order. This often results in overpaying for another three years of licenses that may not fit your current needs. Always reassess and renegotiate—needs change, and better deals are usually available for those who prepare.
- Overcommitting to appease Microsoft: It’s easy to get swept up in Microsoft’s grand proposals (e.g., “roll out Teams Rooms everywhere, adopt Azure AI, etc.”). Only commit to what your organization can realistically adopt and afford. Every new project should have a business case. Microsoft will push for broader adoption, but you must balance enthusiasm with pragmatism to avoid shelfware.
- Ignoring “True” Consumption: With subscription services, you might be shocked at true-up or renewal time if you don’t actively monitor usage. For example, you might not realize a pilot Azure environment was left running, incur thousands in charges, or not notice that only 60% of your E5 licenses have been assigned (meaning 40% wasted). Implementing the cost and license governance steps above helps avoid these surprises.
- Not capturing contract details: If you negotiated special terms (like the right to convert on-prem licenses to cloud or extra time to reduce certain licenses) but then your vendor manager leaves, that knowledge may be lost. Keep a contract brief or dossier on your Microsoft EA—a list of all entitlements, special rights, and critical dates. This institutional memory is key to vendor management continuity.
- Underutilizing what you paid for: Perhaps the biggest sin is paying for Microsoft capabilities and not using them fully. If you buy Power BI, ensure that users are trained to use it (or else consider cheaper Excel-based solutions). If you upgraded to E5 for phone system features, track how many offices ditched their old phone system for Teams. Unused potential is wasted money. A post-renewal adoption plan (with support from Microsoft’s customer success teams) is essential to realize value.
Following these strategies, an enterprise can successfully manage Microsoft under an EA with controlled costs, optimized licensing, and a balanced vendor relationship. Microsoft is a strategic partner for most large organizations – with the right diligence and negotiation, you can ensure that the partnership remains cost-effective and aligned to your business goals rather than a blank check.
The key is proactive management at every stage: before signing (plan and negotiate), during the term (govern and optimize), and at renewal (refine and renew value). With this guide, a CIO or vendor management team can approach Microsoft EAs confidently and informedly and avoid the common pitfalls that lead to overspending or underutilization.
