Microsoft Enterprise Agreement: A Complete Guide – 2025

What is a Microsoft Enterprise Agreement?

• Three-year volume licensing for large enterprises.
• Covers cloud and on-premises software.
• Offers volume discounts and Software Assurance.

A Microsoft Enterprise Agreement (EA) is the highest tier of volume licensing solutions designed specifically for large organizations.

The EA is a comprehensive licensing framework that covers Microsoft products and services throughout the organization. It is structured around a standardized three-year commitment.

It offers a mix of on-premises software and cloud services, which allows organizations to maintain a hybrid IT environment while benefiting from simplified license management, volume discounts, and predictable costs.

What is a Microsoft Enterprise Agreement?

The Microsoft Enterprise Agreement stands out from other licensing programs due to its unique and flexible structure.

Below are some defining characteristics of an EA:

• Annual Payments: Instead of requiring a large upfront payment, payments are split into three equal annual installments. This feature allows for budget predictability and financial planning throughout the agreement term.
• Fixed Pricing Protection: EA customers enjoy fixed pricing protection for three years. This means that, even if Microsoft increases its product prices, EA customers will continue paying the originally agreed-upon rates for the products in the EA, providing cost certainty.
• Volume-Based Discounts: The EA model includes volume discounts that scale with organizational size. The larger the deployment, the greater the discount. This is ideal for organizations with 500 or more users or devices, where volume pricing can provide significant cost savings.

The Microsoft Enterprise Agreement allows organizations to access both on-premises and cloud services under a single agreement, simplifying licensing and reducing administrative overhead. It is especially suitable for enterprises that combine traditional IT environments with cloud adoption in a hybrid model.

Read our Microsoft EA FAQs.

Microsoft Enterprise Agreement Eligibility: Do You Qualify?

The eligibility requirements for a Microsoft Enterprise Agreement are specific and designed to ensure the program serves organizations of suitable size and scope.

Below, we cover eligibility for both commercial and government organizations.

Commercial Organizations

• Minimum Requirement: Commercial organizations must have at least 500 users or devices to qualify for an EA.
• Maintenance of User/Device Count: The 500-user/device threshold must be maintained throughout the agreement, including new enrollments and renewals.

Example: A software development company with 700 employees and a mix of desktops and mobile devices qualifies for an EA, provided that it maintains this minimum count throughout the three-year agreement period.

Government Organizations

• Lower Threshold: Government organizations benefit from a lower entry point, with a minimum requirement of 250 users or devices.
• Special Pricing and Terms: Governments often receive special pricing and have distinct terms recognizing the public sector’s unique needs.
• Separate Enrollment Process: Due to the specific requirements of government operations, enrollment for government institutions differs from that of commercial entities.

Example: A city council with 300 employees qualifies for an EA, benefiting from special government pricing and a reduced entry threshold compared to commercial organizations.

Upcoming Eligibility Changes

Starting January 2025, significant changes will affect EA eligibility, especially for organizations using cloud-based services:

• Cloud Enterprise Agreements in direct markets will no longer be renewable under the traditional framework.
• Affected Customers will be redirected to either the Microsoft Customer Agreement for Enterprise (MCA-E) for larger organizations or the Cloud Solution Provider (CSP) model for organizations seeking more partner-driven support.

These changes highlight Microsoft’s commitment to evolving its cloud services and adapting the licensing model to meet the requirements of modern IT environments.

Key Features of a Microsoft Enterprise Agreement

The Microsoft Enterprise Agreement offers several distinctive features, making it a valuable choice for large organizations.

Below, we explore the key benefits that make the EA a preferred solution for enterprises.

1. Financial Benefits

• Volume Discounts: The EA offers volume discounts based on an organization’s size, with larger organizations eligible for more significant discounts.
• Price Protection: The EA includes price protection against increases during the agreement term, ensuring stable and predictable costs over the three years.
• Predictable Annual Payments: Instead of requiring an upfront payment, the EA breaks the cost into three equal annual payments. This makes budgeting more predictable and manageable for finance teams.

Example: A fixed license price over three years benefits an organization with 3,000 users, ensuring it is insulated from market fluctuations or price hikes.

2. Software Assurance Benefits

• Access to Latest Versions: Software Assurance provides automatic access to the latest Microsoft software versions, ensuring that organizations always have the most current features and security updates.
• Training and Support: EA customers gain access to training resources and 24/7 support, which are particularly valuable for onboarding new users and addressing technical issues quickly.
• Deployment Planning Services: Software Assurance also includes deployment planning services, which help organizations implement new products smoothly and effectively while minimizing disruption.
• Additional Product Use Rights: Software assurance provides organizations with additional use rights, such as virtualization rights, which are crucial for hybrid and cloud-based environments.

3. Management Advantages

• Centralized License Management: The EA offers centralized management of all Microsoft licenses, simplifying administration and reducing management overhead.
• Simplified Compliance Tracking: An EA makes compliance tracking easier, allowing IT administrators to quickly verify that the organization is properly licensed.
• Standardized Technology Platform: By standardizing a consistent set of tools across the organization, IT teams can reduce complexity, improve compatibility, and streamline support operations.
• Flexible Deployment Options: Enterprises can deploy both on-premises software and cloud-based solutions, offering a high degree of flexibility in terms of where and how they use Microsoft services.

Example: A global financial services company can use the EA to centralize license management across multiple geographic locations, ensuring consistent usage policies and simplified tracking.

Read about Microsoft EA for the Government and the Public.

EA Pricing Models: Volume-Based Discounts and Recent Changes

Understanding how EA pricing works is crucial for budgeting and negotiations. Microsoft EAs use a tiered volume pricing model: the more licenses or users you commit, the lower the price per unit. Traditionally, there are four programmatic discount levels based on the number of users/devices licensed:

• Level A: 500 – 2,399 users/devices
• Level B: 2,400 – 5,999 users/devices
• Level C: 6,000 – 14,999 users/devices
• Level D: 15,000+ users/devices

Each tier offers progressively larger volume discounts, so bigger organizations get better unit pricing​. For instance, a company with 3,000 seats falls in Level B and would expect deeper discounts than an 800-seat Level A company. Microsoft has advertised that large EAs can yield built-in savings of up to 45% off list prices due to volume pricing and package deals. Actual discounts vary by product and negotiation.

Pricing structure features:

• Price Lock During Term: When you sign a new EA, the pricing for those licenses is typically locked in for the 3-year term, with payments usually made annually. This price protection means that even if Microsoft raises global prices, your costs for existing EA licenses won’t increase in the medium term. However, at renewal, this protection ends – pricing resets to the then-current price list unless you negotiate otherwise​. This is why many organizations experience cost jumps at renewal if Microsoft’s list prices rise in the interim or if prior special discounts are not carried forward.
• Level-based Discounting: The EA level (A, B, C, or D) is determined by your initial order quantity, such as the number of qualified users or devices. Higher levels = higher volumes = larger built-in discounts. For example, Level D (15k+ seats) might enjoy significantly lower unit costs than Level A​Note: These built-in discounts are “programmatic”; you can often negotiate additional discounts on top, especially for large deals or strategic products. However, Microsoft’s business desk must approve those cases on a case-by-case basis.
• Enterprise-wide Requirement: EAs typically require committing to licensing all “qualified” users or devices for certain products (such as Windows or Office) to ensure broad coverage. In exchange, Microsoft grants discounted “platform” pricing for those enterprise products.

Changes in Recent Years: Microsoft has made notable adjustments to EA pricing and eligibility:

• Microsoft eliminated some automatic volume discounts for the smallest EA tier. A few years ago, Level A customers stopped receiving a pre-set discount off the list price, meaning smaller EAs might pay closer to retail rates​. This was part of a 2018 pricing change that removed programmatic discounts for the lowest tiers, prompting customers to negotiate discounts instead of relying on built-in cuts.
• The minimum size for an EA has increased. Historically, organizations with 250 seats could qualify, and then the threshold increased to 500; now, Microsoft officially positions EAs for 500 or more users. More importantly, Microsoft has signaled plans to phase out Level A (500-2,399 seat) EAs altogether in favor of its newer Microsoft Customer Agreement (MCA) model for those customers​. Industry watchers report that Microsoft intends to raise the minimum EA size to 2,400 users (the current Level B threshold), meaning that organizations with fewer than 2,400 users would no longer be offered an EA at renewal. If this continues, those mid-size customers will be steered to MCA or Cloud Solution Provider (CSP) agreements instead. In preparation, Microsoft has already begun contacting some smaller EA customers, especially those that are “cloud-only,” to transition them to the new format.
• Cloud Service Pricing: As Microsoft’s cloud offerings, such as Azure and Microsoft 365, have matured, their pricing within an Enterprise Agreement (EA) has also evolved. Cloud subscriptions under EA are often priced similarly to standalone subscriptions. Still, with benefits for committed spending, for example, Azure under an EA provides a monetary commitment (prepaid credits) along with usage discounts compared to pay-as-you-go rates. Also, Microsoft may offer additional discounts or incentives for bundling cloud services at renewal, as moving customers to the cloud is a key goal​.
• Price Increases and Currency Adjustments: Microsoft periodically announces price increases for certain products or regions. These will affect your renewal if they occur after your last EA signing. Also, renewal pricing may reflect these adjustments if your EA is priced in a foreign currency and its value changes. It’s important to stay aware of Microsoft’s pricing announcements during your term and factor them into renewal planning.

Practical Takeaway: Thoroughly understand your organization’s pricing tiers and how they influence costs. Suppose your user count is on the cusp of a higher tier. In that case, it may be worth evaluating if consolidating licenses (or including more affiliates) to reach the next level makes financial sense due to the steeper discount.

Conversely, if Microsoft is pushing you to a new agreement model (like MCA) due to size, be prepared: MCA/CSP typically don’t offer the same kind of upfront volume discounts and price protections as an EA​. In such cases, you’ll need to negotiate hard on pricing or adjust your licensing strategy to maintain cost efficiency.

Read Microsoft EA Renewal FAQs

Predictable Budgeting and Increased Savings

The EA’s pricing structure ensures predictable budgeting and increased savings as the organization grows. Fixed pricing allows enterprises to forecast expenses accurately, while volume-based discounts incentivize expanding the number of users and devices covered under the agreement.

• Volume Increases Lead to Discounts: The more devices or users an organization adds, the lower the per-unit cost, resulting in significant cumulative savings.
• Flexible Product Additions: Organizations can add products or services during the agreement term without incurring price changes, allowing them to scale their IT resources in response to changing business needs.

Example: A company that starts with 2,500 users under Level B pricing can seamlessly expand to 6,500 users, automatically qualifying for Level C discounts and resulting in increased savings.

Maximizing Enterprise Agreement Investment

To maximize the value of an EA, organizations should:

• Analyze User and Device Counts: Accurately assess the current number of users and devices to ensure proper placement within the pricing tier that offers the best value.
• Plan for Future Growth: Consider potential expansion and future IT needs. Planning for expected growth can ensure the organization benefits from better pricing as it moves to higher tier levels.
• Understand Total Cost of Ownership: Evaluate not only the licensing cost but also the total cost of ownership (TCO), which includes Software Assurance, support, and deployment services.
• Leverage Available Discounts: Utilize the volume-based discounts and explore whether government or educational pricing applies to maximize savings.

Example: A global logistics company reviews its growth trajectory and anticipates expanding its workforce by 1,000 employees over the next year. By planning, it secures a pricing level that accommodates this growth without requiring a costly mid-term change to its licensing agreement.

Read Microsoft EA Cost Optimization FAQs.

How to Prepare for Microsoft Enterprise Agreement Negotiations

Preparation for Microsoft Enterprise Agreement (EA) negotiations should ideally begin 18 months before renewal, following a structured approach called the T-18 Plan. Early planning ensures that all necessary data and stakeholders are ready for productive negotiations.

Team Assembly

The first step in preparing for an EA negotiation is creating a strong negotiating team. The recommended team size is three to six members, and it should include representatives from key functional areas of the organization.

• Procurement Specialists: To handle pricing and contract terms.
• IT Personnel: To understand the current and future technology requirements.
• Legal Representatives: To review contract language and amendments and ensure compliance.
• Project Management Professionals: To help plan, track milestones, and ensure all stakeholders are aligned.

The team should be led by an executive sponsor, often the CIO or CFO, who can provide leadership and leverage within the organization. It is also crucial to include members with strong organizational connections, as well as domain expertise, to help gather input and gain internal support.

Read Microsoft EA Negotiations FAQs.

Documentation Preparation

Thorough documentation is essential to effective negotiation preparation. Gather all existing Microsoft agreements to understand your starting point and history with Microsoft.

• Current Enterprise Agreement: This serves as the base document for negotiations.
• Unified Support Contracts: These contracts outline existing support commitments and help identify any overlaps or changes that are needed.
• Related Amendments and Enrollments: Include all past amendments and enrollment details that can impact the new agreement.

Maintaining detailed records ensures the team has all necessary documents to reference during negotiations, reducing the chances of being caught off guard by unfamiliar terms or commitments.

Strategic Planning

A comprehensive readiness document should be created, providing a full overview of the organization’s needs and current Microsoft relationships. This document will be instrumental during the negotiation process.

Key Elements to Include

• Current Terms and Conditions: Analyze your existing terms to determine which conditions you want to maintain, remove, or modify.
• Complete an Inventory Assessment. This involves assessing all existing licenses, usage metrics, and unused or underutilized software that could influence future requirements.
• Future Technology Requirements: Document anticipated technology needs for the next 6 to 24 months, including plans for cloud migrations, virtualization, and hybrid models.
• Anticipated Costs: Provide cost projections for upcoming technology implementations. This helps set clear financial boundaries for what can be included in the new agreement.

Read how Microsoft EA compares to MPSA.

The Renewal Process for Microsoft Enterprise Agreements

Renewing a Microsoft Enterprise Agreement involves multiple steps to ensure the new terms match the organization’s current and future needs. Starting the renewal process early allows for a thorough assessment of all aspects.

Pre-Renewal Assessment

The pre-renewal assessment phase should begin six months before the renewal deadline. During this phase, it is critical to evaluate all current software and services.

Goals of the Pre-Renewal Assessment

• Identify Optimization Opportunities: Look for opportunities to improve efficiency or reduce costs by eliminating unnecessary licenses.
• Review Current Software Usage: Evaluate the deployment and use of existing software to determine if any adjustments are needed.
• Evaluate Future Requirements: Determine any additional requirements for the upcoming year, including new products, expansions, or reductions in the user base.

Usage Analysis

Conducting a thorough usage analysis helps provide a detailed overview of current usage and areas for improvement.

• Current Installations: List all current installations of on-premises and cloud software.
• Cloud Service Utilization: Assess the utilization rates of cloud services, such as Azure or Microsoft 365, to identify areas where usage falls below expectations.
• License Optimization Opportunities: Identify licenses that are underutilized or can be reallocated. This step can significantly reduce costs by eliminating unused licenses.
• Compliance Status: Verify compliance with existing license agreements to avoid issues during future audits.

Read on to learn how to audit your Microsoft EA.

Requirements Documentation

Create detailed documentation that defines the organization’s needs over the term of the agreement.

• Technology Roadmap: Outline a technology roadmap that includes future deployments, migrations, and upcoming updates.
• Growth Projections: Include expected growth, such as increased headcount or the addition of new business units, that will affect software requirements.
• Departmental Needs: Engage with different departments to identify their specific software requirements and assess whether their current licenses meet these needs.
• Compliance Requirements: Ensure compliance requirements are understood and incorporated into planning to minimize potential risks.

Read about Microsoft EA for remote workforces.

Cost Optimization: Reducing EA Costs and Maximizing Value

One of the biggest challenges at EA renewal is controlling costs. Over a multi-year EA, organizations often accumulate excess licenses or suboptimal bundles, leading to overspending. Renewal time is your chance to optimize and trim the fat.

Here are strategies to reduce EA costs and ensure you get maximum value from what you pay:

• Eliminate Shelfware (Unused Licenses): Identify paid licenses that are not being used. These include extra Office 365 seats, rarely used Visio or Project licenses, or workloads migrated off Microsoft but still covered. Plan to true-down at renewal – i.e., do not renew those unused licenses. Many companies find double-digit percentage savings this way. For example, one enterprise discovered only ~600 of its 1,000 Visio licenses were actively used, so they renewed just 600 and saved the cost of 400 licenses​. Another company realized it had given all employees a premium EMS E5 security suite, but most weren’t using its advanced features. At renewal, they right-sized by licensing only IT admins with E5 and downgrading the rest to E3, achieving significant savings while still meeting their needs. Make it a rule: if a product or service hasn’t been used in the last year, review whether it’s still needed going forward.
• Right-Size License Types and Quantities: Beyond dropping unused licenses, ensure the license mix matches actual usage profiles. This can mean shifting users to lower-cost editions if appropriate (e.g., not everyone needs Office 365 E5 or Windows E5 if E3 is sufficient) or reducing quantities to the exact number required, rather than over-provisioning “just in case.” Right-sizing often requires usage analysis – for example, tracking how many users use Power BI Pro or how many devices require Windows Enterprise – but pays off in avoided excess. The EA renewal is the best time to reallocate and adjust license types because you can make clean changes for the next term (whereas, in the mid-term, you’re more locked in)​. Ensure that any downsizing is done in compliance with licensing rules, of course. However, remember that you can always add licenses mid-term if needed (via True-Up), whereas removing them mid-term is not possible. So it’s safer to start lean and add later than overbuy upfront.
• Leverage Azure Credits and Hybrid Benefits: If your EA includes Azure or other cloud services, fully utilize any committed cloud spend or credits to prevent them from going to waste. Many EAs have a monetary Azure commitment (essentially pre-paid Azure credits) – track your consumption to ensure you use what you’ve paid for. If you consistently under-consume Azure in your EA, consider reducing the committed amount at renewal to avoid overpaying. Conversely, negotiating a higher upfront commitment can earn you larger discounts on Azure rates if you plan to use Azure significantly. Microsoft offers better pricing for committing to Azure spending (such as an enterprise Azure plan) compared to pay-as-you-go. Additionally, take advantage of Azure Hybrid Benefit (AHB) where possible. This
  benefit lets you apply existing on-prem licenses (Windows Server, SQL Server with Software Assurance) to cover Azure VM costs, drastically reducing Azure charges​. Ensuring you properly use AHB can cut cloud bills by 30-50% for those workloads. In short, optimize your cloud resources: right-size VM instances, eliminate idle resources, and use Microsoft’s cost management tools or Azure Advisor to identify savings​. Cloud cost control directly impacts your EA spending.
• Cut Redundant or Overlapping Services: Large organizations sometimes pay for overlapping capabilities. For example, you might have a third-party security product that offers similar features to those in your Microsoft 365 E5 bundle, or multiple analytics tools where Microsoft Power BI could be sufficient. Assess your software portfolio for opportunities to consolidate on Microsoft (or vice versa) to eliminate duplicates. If you’ve upgraded to Microsoft 365, which includes Teams for communication, you should no longer need separate conferencing or collaboration subscriptions. Similarly, ensure you’re not double-paying for Windows or SQL Server licenses in the cloud if those are covered by your on-prem agreements (use the hybrid use benefit instead). Streamlining services not only saves licensing costs but also simplifies compliance.
• Utilize Software Assurance (SA) Benefits or Consider Dropping SA: Software Assurance adds 25 %+ to license costs annually, but it also brings benefits such as version upgrades, training vouchers, planning services, extended support, and license mobility. Review whether you fully utilize SA benefits – if yes, they can offset other costs (e.g., using SA training days instead of paying external trainers)​. If not, you might be wasting money on SA. At renewal, you could choose to renew certain licenses without SA (or let SA lapse) if you determine the benefits aren’t needed for those products. Be careful: dropping SA means losing rights, such as new version upgrades and license mobility. For instance, without SA, you cannot move Windows or SQL Servers to the cloud or between hosts freely (breaking compliance), and you lose access to upgrade to new versions. A balanced approach is to keep SA on products where you need the benefits (or where it’s required for cloud or hybrid use), and possibly not renew SA on stable, legacy products that you don’t plan to upgrade or migrate. This can reduce costs, but weigh the risk of future needs.
• Consider Alternative Licensing for Certain Segments: Not all parts of your organization need to be under the EA if it’s not cost-effective. For example, development and test environments might use Visual Studio subscriptions (which include some Azure credits) instead of full EA licenses. Smaller acquired companies or subsidiaries could be put on CSP agreements or Microsoft 365 Business plans if an enterprise EA SKU is overkill for them. During renewal, identify if a portion of your estate could be licensed more cheaply via a different program. Microsoft’s CSP (Cloud Solution Provider) program can sometimes offer flexibility and monthly billing that suit a small division better than the 3-year EA commitment. Just be mindful that moving licenses out of the EA could reduce your volume tier and, thus, your discounts on the remaining EA licenses. It’s a financial optimization puzzle to solve.

In summary, drive a leaner, more value-focused renewal. Every license on your new EA should have a purpose and an active user – if not, it doesn’t belong there. By right-sizing the house, you save money, tighten compliance (fewer unused licenses means lower audit risk), and get more clarity on what you’re paying for. Coupled with a strong negotiation (next section), cost optimization efforts can significantly lower your EA TCO for the next cycle.

Microsoft Enterprise Agreements vs. Open Licensing

Understanding the differences between Enterprise Agreements and Open Licensing is crucial for organizations to select the most appropriate licensing option based on size and needs. Below, we break down the key characteristics of each program.

Enterprise Agreement (EA) Characteristics

• Minimum Requirements: Requires 500 users or devices, making it suitable for larger organizations.
• Commitment Duration: Requires a three-year commitment, providing stability and fixed pricing throughout the term.
• Volume Discounts: Offers significant discounts based on volume, making it cost-effective for organizations with substantial licensing needs.
• Software Assurance: Automatically includes Software Assurance benefits, which provide access to updates, support, and additional deployment rights.
• Enterprise-Wide Standardization: Encourages enterprise-wide standardization of Microsoft technologies, simplifying IT management and support.

Open License Features

• Target Audience: Suitable for small to mid-sized organizations that need flexibility rather than long-term commitments.
• No Minimum Purchase Requirement: Unlike EAs, this option does not require a minimum purchase, making it more accessible for smaller operations.
• Payment Structure: Operates on a pay-as-you-go basis, allowing organizations to purchase licenses as needed without a significant upfront commitment.
• Perpetual Licensing Options: Offers perpetual licenses, allowing for long-term use of the software without renewal.
• Flexibility: This option offers greater license purchasing and deployment flexibility, making it ideal for smaller organizations or those with unpredictable needs.

Cost Comparison

Feature	Enterprise Agreement	Open License
Initial Cost	Higher upfront investment	Lower initial cost
Volume Discounts	Significant	Limited
Payment Structure	Annual payments	Pay as you go
Long-term Value	Better for large organizations	Better for small organizations

Hidden Costs in Microsoft Enterprise Agreements

Despite the benefits of the Microsoft Enterprise Agreement (EA), organizations should be aware of several hidden costs to avoid unexpected expenses.

Below, we cover some of the key hidden costs and provide insights into how to manage them effectively.

True-Up Expenses

The true-up process reconciles additional licenses deployed annually during the agreement’s term.

• Annual Reconciliation: Organizations must conduct an annual reconciliation to account for added users, devices, or services since the last true-up. This process ensures that all additions are appropriately licensed.
• Full Upfront Payment: True-up orders require a full upfront payment for additional licenses, with no option to split the payment. This can strain cash flow, especially for organizations experiencing rapid growth.
• Cost Consideration: This can create cash flow challenges, especially if the number of users or devices has increased significantly over the year.

Example: A company adds 200 users over a year. During the true-up process, it must pay for all 200 additional licenses in full, rather than spreading the costs out, which could potentially strain its budget.

Software Assurance Requirements

Software Assurance (SA) is a mandatory component of an Enterprise Agreement (EA), and it can introduce additional costs that organizations need to plan for.

• Annual Maintenance Fees: SA involves annual maintenance fees, typically a percentage of the original license cost. These fees must be budgeted in addition to the annual license payments, making the overall cost of an EA higher than it might initially seem.
• Cannot Purchase Without SA: In an EA, licenses cannot be purchased without Software Assurance (SA), unlike in Open License models, where SA is optional. This means that organizations must pay for additional features and support, even if they don’t need them.

Example: An organization that needs to purchase additional Windows Server licenses must also include Software Assurance, even if the extra support and upgrade features are not required, resulting in higher costs.

Implementation Costs

Implementing and deploying software under an EA often involves additional costs beyond the licensing fees.

• Training Requirements: Employees may need training to use the new software effectively. Microsoft offers training through Software Assurance, but it may not be sufficient for all needs, and additional training from external providers may be required.
• System Integration Expenses: Integrating new Microsoft solutions with existing systems often requires additional investments in IT services or third-party vendors. The cost of integrating new technologies can be significant, especially in complex environments.
• Migration Costs: Moving from on-premises to cloud services or upgrading to a new software version may involve migration costs that need to be factored into the overall budget.
• Deployment Planning Services: While Software Assurance offers deployment planning, complex IT environments may require additional consultation and external help, which can increase the cost.

Additional Considerations

Other important factors may introduce hidden costs or limit the flexibility of an Enterprise Agreement.

• Platform Commitment Risks: Signing a Microsoft EA means committing to a specific platform. For growing organizations, this can introduce risk if future needs change, such as a decision to move away from Microsoft technologies to another provider.
• Limited Ability to Reduce Subscription Quantities: One drawback of an EA is the limited ability to reduce the number of licenses during the term. This means that even if the number of users decreases, organizations may still be obligated to pay for licenses that they no longer need.
• Potential “Shelfware”: When workforce reductions occur, organizations might be left with unused licenses, sometimes referred to as shelfware. This happens when licenses purchased under the EA are no longer needed, leading to unnecessary ongoing costs.

Example: A company facing downsizing ends up paying for unused Office 365 licenses because it was unable to adjust the number of licenses during the EA term, resulting in unnecessary costs for software that is not being used.

Negotiation Tactics: Securing Better Terms with Microsoft

Renewal time is negotiation time. An EA renewal effectively negotiates a new contract, giving you a prime opportunity to improve the terms. Microsoft expects customers to negotiate – failing to do so leaves money on the table​.

Here are tactics and considerations to negotiate the best deal:

• Don’t Wait – Start Early and Leverage Time: Engage in pre-renewal discussions well before your EA expiration. Starting negotiations 6-12 months in advance allows you to work through proposals and counter-proposals​methodically. It also allows you to time your deal optimally, such as Microsoft’s fiscal year-end. Microsoft’s fiscal year ends on June 30, and both the end of the quarter and the end of the year are when sales teams are eager to close deals to hit their quotas. By initiating talks early, you can pace them so that the final approvals and signing occur when Microsoft is most motivated to give concessions (e.g., in Q4 of their fiscal year, when they may offer extra discounts or credits to win your renewal). Avoid last-minute negotiations – if you go to Microsoft a few weeks before expiration, you lose leverage and may be forced to accept whatever is on the table.
• Present a Unified Front: Microsoft sales reps often employ a “divide and conquer” approach, engaging different stakeholders (e.g., IT vs. finance) to gather information or create pressure. Counter this by making sure your team is aligned internally. Define clear roles: who leads commercial discussions, handles technical scope, and so on. All internal stakeholders should support the agreed negotiation strategy and not undermine it. For example, ensure no one on your side indicates a willingness to sign “as-is” if your strategy is to push for a better deal. A cohesive message strengthens your negotiating position.
• Use Data as Leverage: Include detailed data on your current usage, license consumption, and projections. Demonstrate that you know exactly what you have and what you need. This prevents overselling and allows you to reject unnecessary items. If Microsoft’s initial quote includes, say, 1,000 Windows Server licenses, but your audit shows you only use 800, you have evidence to demand the removal of the excess. Showing the underutilization of certain products can also justify price reductions or flexibility requests. Additionally, research prevailing discount levels – if you know similar companies got a 20% discount on a certain product, use that as a benchmark in discussions (without revealing names).
• Leverage Microsoft’s strategic interests: align your requests with what matters to Microsoft. Currently, Microsoft’s priority is cloud adoption and subscription services​. If you plan to increase Azure usage or roll out more Microsoft 365 services, use that as a bargaining chip. Emphasize your commitment to Microsoft’s cloud: “We’re evaluating moving our legacy ERP to Azure”, or “We intend to upgrade to Teams Phone for all employees.” This positions you to ask for incentives in return, such as Azure credits, an extra discount on Azure consumption, or a favorable deal on the Microsoft 365 E5 licenses needed for Teams Voice. Microsoft often provides better pricing if it knows it can secure a larger share of your IT roadmap. Conversely, suppose there are Microsoft products you might drop or replace. In that case, you can (tactfully) use that as leverage too – e.g., suggesting that you move some workloads to AWS or switch some users to Google Workspace, which can encourage Microsoft to offer concessions to keep that business.
• Bundle and Broaden the Deal Scope: One tactic is to bundle new products or expansions into the renewal to get a better overall deal. If you’re considering adopting a Microsoft product you don’t currently have, such as Dynamics 365, Power BI, or security add-ons, negotiating it as part of your EA renewal can yield introductory discounts or favorable terms for that product. Microsoft loves to showcase customers increasing their cloud footprint, so they may be willing to be flexible on price if you add, for example, Dynamics 365 licenses bundled with your renewal instead of buying it later. Bundling can also mean consolidating separate contracts into the EA (such as folding in a standalone Azure agreement), which gives Microsoft a larger, single deal to win, often leading to improved discounts across the board. Be strategic: only add what aligns with your needs. If you know you’ll buy it eventually, adding it during the EA negotiation might secure a better price.
• Negotiate Discounts and Concessions Aggressively: Microsoft’s first offer is rarely the best. Prepare to counteroffer – multiple times if needed. Common areas to negotiate:
  • Discount Percentages: Scrutinize the discount on each major line item. If they offer, for example, a 15% discount on Office 365, push it higher by citing your volume or competitive offers. Use any benchmarks you have. Customers are expected to ask for better pricing. Microsoft’s sales teams have some flexibility, and anything beyond their limit is sent to Microsoft’s internal “business desk” for approval. Justify to help your rep advocate internally (e.g., budget constraints, competitor pricing, a long history as a loyal customer, etc.).
  • Price Caps or Fixed Pricing: You can negotiate to cap price increases for additional quantities or True-Ups. For instance, request that if you add more users during the term, they get the same unit price as the initial users (or a fixed discount level)​. This prevents the scenario of paying more later if your headcount grows. You could also negotiate rate locks for renewal options – e.g., if you agree to a certain growth, Microsoft agrees to hold pricing steady.
  • Billing and Payment Terms: While list pricing is usually the same whether you pay annually or upfront, you may be able to negotiate an incentive for prepayment (if you can pay upfront). In some cases, customers have gotten an extra percentage point or two off in exchange for paying for 3 years at once, because it helps Microsoft book revenue faster. At a minimum, ensure that the payment timing aligns with your cash flow preferences. Microsoft is usually fine with annual payments, which is the default.
  • Flexible True-Up/True-Down: Normally, you can only increase license counts annually (True-Up) and can’t reduce them until renewal. If you expect significant fluctuation, try to negotiate provisions for partial adjustments or an earlier checkpoint. Microsoft is reluctant to use true-down flexibility, but large customers have occasionally negotiated the ability to reduce a certain percentage of licenses mid-term or convert them to cloud subscriptions if needed (especially during events like economic downturns)​. Even if you can’t drop licenses mid-term, you might be able to negotiate an option to transition some on-premises licenses to cloud services without penalty, preserving your spend while adding flexibility.
• Exploit Competitors and Alternatives: Even if you’re a “Microsoft shop,” letting Microsoft know you have options creates leverage. Mention that you are also considering alternatives for specific workloads, such as AWS or Google for cloud computing, Zoom for meetings, etc. If Microsoft believes part of your spending is risky to a competitor, they will often sharpen their pencil on price or offer extras to sway the decision. For example, showing an AWS cost comparison for similar infrastructure might prompt Microsoft to offer a larger Azure credit or discount to compete. Be credible – focus on areas where alternatives are realistic, but you don’t have to leave Microsoft to gain this negotiating benefit.
• Mind the Timing of Commitments: Microsoft reps have quarterly and annual targets. There’s often a spike in generosity as the end of Q4 (June) nears and sometimes at the end of Q2 (December). If you’ve done the work early, you can choose to finalize the deal at a time when Microsoft is under pressure to close. In practical terms, this could mean not signing your renewal in April but waiting until late June, if your EA expires in July – thereby negotiating in late May or early June. Microsoft may come back with a “last call” improvement as the deadline looms. However, be careful not to push timing so far that you risk missing the renewal deadline (which could cause a lapse in coverage). Always leave a bit of a buffer to complete the paperwork.
• Engage the Right People: Your primary interface will be Microsoft’s account manager and perhaps a specialist or technical salesperson. But remember, final pricing and terms often require approval from Microsoft’s Business Desk, a corporate pricing approver. If negotiations stall at the rep level, it can help to request a meeting with a Microsoft sales manager or bring in an executive sponsor from your side to escalate key asks. When high-level management is involved, Microsoft knows the deal is important and might be more willing to approve exceptions. Also, if you buy through a reseller (LSP), ensure they actively advocate for you. Sometimes, having multiple resellers bid (if possible in your region) can create competition that results in a better offer.
• Document Every Concession: During negotiations, if Microsoft verbally agrees to a concession (such as extra training days or a special break on pricing for a specific component), get it in writing (via email, at least) and ensure it is reflected in the final contract or an amendment. People change roles, and memories fade – you need the legal document to capture all promises. Before signing, double-check that your negotiated discounts are displayed correctly on the order and that any special conditions (e.g., extended timelines for a migration or a custom usage right) are included as an agreement amendment.

Expert tip: Negotiation is not just about price but also terms and relationships. Be professional and factual but firm about your requirements. Microsoft values long-term partnerships, so if you can articulate a win-win—e.g., “We’ll commit to adopting X cloud product if you can accommodate Y in pricing”—you often get further than a purely adversarial stance.

At the same time, don’t hesitate to say “no” and push back on offers that don’t meet your goals; Microsoft negotiators expect pushback and will rarely walk away from a renewal negotiation with a willing customer. In the end, the best agreements are those where both you and Microsoft feel your needs are addressed – you get a cost-effective, flexible deal, and they retain a satisfied customer.

Compliance Considerations: Managing Risks and Microsoft’s Enforcement

Ensuring compliance with Microsoft’s licensing rules is critical to EA renewals. Nothing derails a renewal (or blows up your budget) faster than discovering a massive license shortfall or facing an unexpected audit. CIOs and procurement managers should proactively address compliance in the renewal process:

• Perform an Internal License Audit Pre-Renewal: Before you enter negotiations, thoroughly assess your license usage vs. entitlements. Reconcile what you’ve deployed against what you’re licensed for. This internal audit flags any compliance gaps (e.g., usage exceeding licenses) so you can address them (by purchasing additional licenses or adjusting deployments) before Microsoft audits you. Many organizations conduct this inventory 3–6 months before renewal as a best practice​. It guides you on what you need to renew and avoids panic if Microsoft were to initiate a compliance review, since you’ve already self-corrected. In short, know your compliance position better than Microsoft does.
• Understand True-Up Obligations: During the EA term, you are contractually required to report and pay for any annual usage increases (the True-Up). Ensure that you have been doing your true-ups accurately over the last 3 years. You could carry a compliance debt into the renewal if something were missed (e.g., additional users added but not reported). The true-up process requires submitting any changes 30 days before each anniversary​. Double-check that all new deployments (servers, CALs, Office 365 seats, etc.) were accounted for. If not, expect Microsoft to catch that at renewal, possibly resulting in a retroactive charge. By proactively including any needed “catch-up” licenses in your renewal quote, you take control of the situation rather than waiting for Microsoft to bill you later (which could even come at non-discounted rates if done outside the EA).
• Common Compliance Gaps to Check: Microsoft licensing is complex, and certain areas often lead to unintentional non-compliance:
  • Server and Infrastructure Licensing: Verify that server products, such as Windows Server and SQL Server, are correctly licensed for their intended use. Check VM hosts for proper coverage (e.g., all physical cores licensed if using a per-core model)​. Ensure that any secondaries for failover are licensed according to Microsoft’s rules. If you use virtualization heavily, ensure you have Software Assurance if needed for mobility or disaster recovery (DR) scenarios.
  • Client Access Licenses (CALs): CALs for Windows Server, SQL, Exchange, and other products are often easily overlooked. Audit if every user or device accessing those services has the appropriate CAL. Microsoft often finds CAL deficits during audits​.
  • Office 365 / Microsoft 365 Usage: Ensure the number of users with access matches the licenses you have. If you allowed extra users (beyond your purchased count) to use the services, you need to true up. Also, confirm that users are assigned to the correct license plans (e.g., a user using Office 365 E5 features should have an E5 license, not an E3 license).
  • SQL Server Editions and Options: Deploying a higher edition feature (e.g., using an Enterprise Edition feature on a Standard Edition license) is a compliance violation​. Ensure that deployments align with the edition and version for which you are licensed.
  • Geographical and Affiliate Use: If your EA covers only certain regions or affiliates, ensure licenses aren’t used elsewhere informally without proper transfer or extension. License transfer and country restrictions are often buried in terms, but can be important​.
• Microsoft’s Audit and Enforcement Tactics: Microsoft maintains contractual audit rights in the EA’s terms, usually through the MBSA (Microsoft Business and Services Agreement). In recent years, Microsoft has become more aggressive in enforcing compliance, especially as it pushes cloud adoption​. Companies have observed an uptick in formal and “informal” audits disguised as Software Asset Management engagements​. These SAM reviews are where Microsoft (or a partner) offers to help you assess your licenses, often identifying gaps that require additional purchases to resolve. Be aware that if you decline to renew and remain on legacy products, you may increase your audit risk, as Microsoft will know you are out of contract and may scrutinize your environment. Always assume that any significant licensing shortfall will come to light eventually – it’s better to discover and resolve it on your terms than Microsoft’s. If Microsoft does initiate an audit, engage your experts, carefully manage scope, and negotiate any findings – but ideally, avoid getting to that point by staying compliant.
• Compliance Risks of Not Renewing vs Renewing: Oddly, renewing your EA can help you stay compliant because it typically includes maintaining Software Assurance on your licenses. If you choose not to renew, keep in mind that certain usage rights will end immediately. For example, if you have perpetual licenses with SA and don’t renew them, you lose rights such as new version upgrades and license mobility into the cloud or across servers. Microsoft cautions that many organizations rely on these SA-only benefits for compliance, such as running virtual machines in Azure Hybrid Benefit or frequently reassigning licenses​. If you let SA lapse, those VMs could become non-compliant. Thus, part of compliance planning is deciding which licenses must be kept under Software Assurance (SA) to ensure compliant use of the software. On the other hand, if you are moving fully to subscriptions (such as Microsoft 365 or Azure), you may no longer need SA on some on-premises licenses. The key is to map out the rights you need for your IT environment to remain compliant and ensure that your renewal (or alternative licensing after EA) covers those rights.
• Document and Communicate Changes: To maintain compliance continuously, it’s wise to implement internal controls. For instance, document your entitlements (what you purchased, the quantities, and allowed usage) when the new EA starts. Maintain a central record (such as the Microsoft License Statement and renewal orders) that can be easily referenced. If IT deploys new servers or adds users, have a process in place to track this and procure licenses as needed, rather than waiting for the true-up time. Regular (quarterly or biannual) internal reviews of license positions can catch issues early​. Also, communicate the “dos and don’ts” to technical teams – e.g., if they spin up an extra SQL Server instance, they need to inform procurement to obtain a license for it. A culture of license compliance can save a lot of pain.

In essence, proactive compliance management is your best defense. Microsoft’s enforcement is real – they will enforce the contract if needed, and non-compliance could result in purchasing unbudgeted licenses at full price or even backpaying fees. But if you go into your renewal with a clean bill of health and a clear plan (and include any needed fixes as part of the new agreement), you can turn compliance into just another routine checkpoint rather than a fire drill.

Key Contract Terms: Renewal Clauses, Flexibility, and Pitfalls to Watch

Enterprise Agreements are complex contracts. Understanding key terms and potential pitfalls in your EA and renewal documents will help you avoid surprises and ensure you get favorable terms.

Here are the contract elements CIOs and procurement should be mindful of during renewals:

• EA Term and Renewal Mechanics: A standard EA runs for 3 years. Ultimately, it doesn’t automatically roll over – you can sign a new agreement (renew) or not. An EA renewal is a brand-new EA contract rather than a simple extension.​ This means all terms (pricing, discounts, conditions) can be renegotiated. Microsoft usually sends a “Renewal Order” or paperwork to execute the renewal. If you do nothing, the EA will expire. For perpetual licenses, you will retain rights to the versions you had (without SA), while subscription services will shut off. Some EA contracts include a “renewal option” clause indicating you can elect to renew for another term, but it still requires signing the new agreement. Always confirm with Microsoft your intention to renew at least 30 days before expiration to avoid any lapse or confusion.
• Price Increases and Benchmark Clause: When you renew, your pricing is reset to the current Microsoft prices. If, over the last term, Microsoft raised prices for certain products (or introduced new editions), you might see higher costs. Likewise, any special discount you previously enjoyed does not carry over by default. You must renegotiate any discounts again. A big pitfall is assuming your old pricing will simply continue – when, without negotiation, you’ll likely get a quote at higher rates (even if your usage stays the same)​. To combat this, negotiate for price protection in the new term. Some customers secure a price hold or cap for year-over-year increases within the new EA, especially for subscriptions. If Microsoft is quoting significantly higher, use competitive bids or your history to push back (e.g., “We need the Office price to remain at $X per user as it was last year”). Ensure that any agreed-upon discount percentage is clearly stated in the contract or price sheet for all term years.
• Contractual Discounts and Unit Pricing: Your EA will include a customer price sheet that lists the unit prices and any applied discounts. Scrutinize this sheet. Verify that volume tier discounts (Levels A, B, C, and D) are applied correctly. If you negotiated additional discounts, ensure they are reflected. Microsoft sometimes offers step-up discounts (e.g., a larger discount if you commit to growth or meet certain conditions) – if so, the terms for earning those should be explicitly documented. Renewal Discounting is an area to watch: Microsoft has been known to reduce long-standing discounts on some renewals if not challenged​. If you had a 30% discount last time, don’t assume you’ll get 30% again unless you fight for it.
• Enterprise Subscription vs Perpetual EA: At renewal, you can switch your EA to an Enterprise Subscription Agreement (EAS) instead of a perpetual EA. An EAS means you do not keep licenses at the end – it’s a pure subscription for the term, but in exchange, you have more flexibility to reduce counts at each anniversary or not renew without owning anything. The key trade-off is flexibility vs. ownership. A normal EA (perpetual licenses + SA) might be better if your organization is stable or growing, as you’ll own licenses after 3 years. If you expect declines or want to shift entirely to cloud subscriptions, an EAS could save money because you’re not buying perpetual rights you don’t need. Remember: In an EAS, if you drop licenses, you must do so during the annual True-Up/True-Down window; you cannot adjust month-to-month, as with some cloud plans. Microsoft will often allow a mix – e.g., you might renew your desktop products on a standard EA and use an EAS for a specific product, such as developer tools, where you want the flexibility to drop it later. Consider your needs and ask Microsoft to present both EA and EAS pricing for comparison​.
• Cloud Solution Provider (CSP) Option: Another renewal path is moving certain workloads to a CSP agreement instead of the EA. CSP is a completely different licensing program, purchased through a partner with monthly billing. It offers high flexibility (add or remove licenses month-to-month) and can be good for smaller segments or pure cloud services. However, CSP lacks the centralized enterprise-level agreement benefits – typically, no upfront volume discount (pricing is often on the list or close to it for M365/Azure under CSP), and the partner, rather than Microsoft, provides support. It’s worth evaluating if CSP makes sense for parts of your estate during EA renewal. For example, if you have 200 seasonal workers who only need office work for 6 months, putting them on CSP licenses might be cheaper than including them in a 3-year EA commitment. Microsoft sometimes encourages switching to CSP/MCA for groups with 500 or fewer seats as part of the EA changes. Weigh the pros and cons carefully. Many large enterprises maintain an EA for core licensing and use CSP tactically for fringe cases or very dynamic needs​. The renewal is a good time to carve out those if appropriate (and possibly negotiate with your EA reseller to be your CSP provider for simplicity).
• Payment Terms and Renewal Flexibility: Microsoft EAs typically allow annual payments with no interest – you pay one-third of the total each year (this is standard and should be outlined in the contract). If you prefer to pre-pay the entire 3-year amount, you can, but ensure it’s reflected. Some customers negotiate custom payment schedules, such as front-loaded or back-loaded payments, to better align with their budgets. Microsoft is often open to reasonable requests, as long as the total amount is fixed. Also, clarify the renewal term options. Does the contract allow a short-term extension if needed? (Sometimes, if negotiations are delayed, Microsoft can issue a 1–3 month bridge.) Do you have an option to renew for another full term under the same conditions? Typically, no – each renewal is a new negotiation – but some public sector EAs have clauses that include preset renewal options. Knowing this helps you plan long-term.
• True-Up and True-Down Terms: Your EA agreement will outline how the annual True-Up process works. Typically, you report increases 30 days before the anniversary and are then billed after the anniversary. What’s important at renewal is how the final True-Up of the expiring term is handled. Usually, you’ll do a final True-Up for Year 3 just before renewing. If you are reducing licenses at renewal, Microsoft might allow you to offset some additions with reductions informally (e.g., you added 100 users mid-year but plan to drop 100 at renewal so that you might avoid a charge). Officially, you must pay for all increases and only drop at renewal, but in practice, discuss this with your rep. Sometimes, they can be lenient if it’s part of the renewal deal (especially when migrating products). Also, if you move from EA to EAS, ask how True-Up/True-Down is handled annually (since you can decrease); make sure the contract language supports that flexibility.
• Software Assurance Continuation: If you renew an EA with perpetual licenses, essentially, you’re renewing the Software Assurance on those. The new contract should clearly state that SA is continued without lapse, so you maintain upgrade rights and other benefits. If there is any break in coverage, you normally lose SA benefits. Thus, ensure the renewal starts exactly when the old one ends (to avoid a gap). Additionally, if you decide not to renew the SA for certain products, be aware of “expired SA” provisions. Without SA, you might lose things like the right to run prior versions, the Home Use Program for Office, or the ability to add new licenses of that product under the old terms. Plan for those changes – for example, if you drop SA on Windows, you can no longer use new versions released after the end of your old SA period.
• Contract Amendments and Special Terms: Throughout an EA, you might have negotiated special terms (via contract amendments) – such as exceptions to standard product use rights, special pricing protections, a cap on support costs, etc. Do not assume these automatically roll into the renewal. Each EA is a fresh contract, so you must explicitly renegotiate or carry forward any special clauses​. For instance, if you had an amendment allowing unlimited virtualization for a specific project, you’ll likely need a new amendment in the renewed EA to continue that. Keep a list of non-standard terms from your previous deal and bring them up during renewal negotiations. Microsoft may agree to reissue those amendments, or they might push back if the program has ended. Getting this sorted is vital to avoid losing an entitlement you rely on.
• Pitfalls to Avoid: Based on experience, here are common mistakes in EA renewals:
  • Renewing As-Is: Simply rubber-stamping the same products and quantities for another 3 years without analysis is costly​. It guarantees you carry forward inefficiencies and shelfware. Always review and justify each line item.
  • Ignoring Contract Details: It’s easy to focus on price and overlook terms. Watch out for contractual commitments (did you promise to deploy a specific product to all users to receive a discount?) or changes to product terms that Microsoft makes. Read the Notes and Product Terms for any new limitations that didn’t exist before.
  • Not Locking in Negotiated Terms: Verbal assurances mean nothing unless they are in writing. Ensure any negotiated flexibility (say, a right to swap some licenses for equivalent value during the term) is documented. If you negotiated a special price for a future True-Up, include it in the contract or send an official email.
  • Overcommitting to Unused Services: Sometimes, in the heat of negotiation, companies agree to add new Microsoft services (due to a good bundle price) but never deploy them. This results in wasted spending and can hurt credibility in the next renewal (“You bought 1000 Power BI and only used 100”). Don’t commit just because it’s cheap – commit because you plan to use it​. If you add new services, ensure that you have a rollout plan and a user adoption program in place internally, so the investment pays off.
  • Forgetting to Update Internal Compliance After Renewal: Some people think the job is done after signing. However, ensure your IT and asset management teams update license assignments and repositories to reflect the new agreement. Remove permissions for any software you dropped (so it’s not used illegally), and enable new rights you gained. Also, schedule your next internal audit cycle to keep things on track.

In summary, treat the contract as carefully as the pricing. A contract clause that limits flexibility or imposes unexpected costs later can undermine a well-negotiated price. Conversely, a strong clause (like a price cap or transfer rights) that you secure can save you money and headaches. If you lack expertise in licensing legalese, involve counsel or a licensing expert to review the paperwork.

Don’t hesitate to ask Microsoft for clarifications or adjustments – the time to fix contract language is before signing, not after. By being detail-oriented and aware of pitfalls, you can enter the new EA term confident that there are no hidden traps and you have the flexibility to manage your licenses efficiently.

Common Negotiation Mistakes in Enterprise Agreements

The success of Microsoft Enterprise Agreement (EA) negotiations heavily depends on avoiding common pitfalls that can significantly impact costs and terms.

Below, we highlight the most frequent mistakes made by organizations and recommend avoiding them.

Insufficient Preparation

A major mistake during EA negotiations is failing to start the renewal process early. Beginning negotiations at least 18 months before the renewal date is crucial to secure optimal terms. Proper preparation involves several key steps:

• Understanding Current License Usage: Conduct a detailed assessment of your current license inventory and usage. Identify which licenses are in use, which are redundant, and where there may be underutilization.
• Documenting Future Requirements: Organizations need to document anticipated changes in technology requirements for the upcoming contract term, including growth projections, new software needs, and plans for cloud adoption.
• Analyzing Cost Structures: Evaluate the current cost structure to identify areas where cost savings can be realized, such as by eliminating unused licenses or migrating to cost-effective cloud solutions.
• Building a Strong Negotiation Team: It is critical to assemble a capable negotiation team. This team should include representatives from IT, finance, procurement, and legal, ensuring that all aspects of the agreement are covered.

Example: A company that begins its negotiation process 18 months before renewal has enough time to assess its needs, analyze available options, and adjust its negotiation strategy to secure the best terms.

Read our full article on best practices for managing your Microsoft EA.

Poor Timing Management

Another common mistake is poor timing and management of negotiations. Rushing negotiations near contract expiration severely weaken an organization’s bargaining position. To avoid this, organizations should:

• Start Renewal Discussions Early: Initiate renewal discussions before contract expiration. This allows sufficient time to develop an informed position and explore alternatives.
• Plan for Multiple Negotiation Rounds: Successful negotiations often involve several discussions. Planning for multiple rounds helps fine-tune demands and take advantage of potential concessions.
• Allow Time for Internal Approvals: Ensure adequate time is allocated for internal approvals, especially when contract changes need executive-level sign-off.
• Account for Implementation Timelines: Consider the time needed to implement new agreements, such as software deployments or license changes. Avoid making rushed commitments that are unworkable.

Example: An organization that starts negotiations 9-12 months before renewal ensures enough time to revisit Microsoft’s offers and internal evaluations, avoiding rushed or unfavorable decisions.

Weak Leverage Understanding

Many organizations fail to recognize the leverage they have when negotiating with Microsoft. Successful negotiations depend on understanding your negotiating power and using it effectively. Strong leverage comes from:

• Understanding Microsoft’s Sales Cycles: Microsoft sales teams are often eager to close deals by the end of their fiscal year. Aligning negotiation timelines with these cycles can give your organization an advantage.
• Knowledge of Competitive Alternatives: Having a clear understanding of alternative solutions, whether from Microsoft competitors or open-source options, strengthens your position by showing Microsoft that you have viable alternatives.
• Clear Visibility into Usage Patterns: Knowing exactly how Microsoft products are used in your environment enables your team to resist unnecessary costs and negotiate based on real value.
• Awareness of Market Pricing Benchmarks: Understanding industry-standard pricing benchmarks helps ensure that the proposed terms align with the market and prevent overpayment.

Example: An organization that leverages its knowledge of Microsoft’s end-of-quarter sales targets can negotiate for additional discounts or favorable payment terms when finalizing its EA.

Microsoft Enterprise Agreement Case Studies

Successful EA negotiations often include effective strategy, understanding needs, and proper leverage.

Some case studies illustrate how organizations achieved success during EA renewals.

Manufacturing Industry Success

A global manufacturer achieved 14% total savings on their EA renewal through several key actions:

• Removing 235 Inactive M365 Licenses: The organization removed unnecessary licenses by auditing and identifying inactive users, resulting in immediate cost savings.
• Optimizing Cloud Usage: The manufacturer evaluated their use of Azure resources and shifted workloads to maximize efficiency, reducing excess capacity charges.
• Aligning Functionality with Business Needs: They ensured that all services being paid for directly aligned with business operations, which helped eliminate underutilized or redundant features.

Aerospace Company Optimization

An aerospace company saved approximately $10 million annually by focusing on the following strategies:

• Accurate Consumption Tracking: Implementing tools to track software and cloud service usage allowed them to pinpoint unnecessary expenses.
• Utilizing License Benefits Effectively: The company took advantage of license benefits such as hybrid use rights and cost-effective virtualization strategies.
• Creating Aggressive Harvesting Schedules: The company aggressively reclaimed and reassigned unused licenses to reduce the need for new license purchases.
• Avoiding Unnecessary Purchases: By monitoring consumption and reallocating resources, they avoided unnecessary purchases and increased their overall cost efficiency.

Global Innovation Company

A technology manufacturer facing significant price increases achieved successful outcomes by taking a strategic approach to their EA negotiations:

• Strategic License Optimization: The company adjusted its license counts and used more appropriate types of licenses based on actual needs, resulting in cost reductions.
• Targeted Workshops for Needs Assessment: Conducting workshops across different departments allowed them to accurately assess needs and consolidate their purchasing power.
• Strong Negotiation Positioning: They used data-backed usage analysis and industry benchmarks to negotiate from a strong position, helping them balance cost management with future technological requirements.

How to Reduce Costs in Enterprise Agreements

Effective cost management during an Enterprise Agreement (EA) negotiation and renewal can lead to significant long-term savings.

Below are some key strategies for reducing costs during EA negotiations and renewals.

License Optimization Strategies

License optimization can make a substantial difference in the overall cost of an EA.

• Regular Audit of User Accounts and Usage Patterns: Regular audits help identify underused or redundant licenses that can be reclaimed or reassigned.
• Removal of Inactive Licenses: Identify and eliminate licenses assigned to inactive users or departed employees.
• Right-sizing License Types: Ensure that licenses match user needs, such as assigning basic licenses to users who don’t require advanced features.
• Implementation of License Harvesting Programs: To prevent unnecessary new purchases, licenses should be proactively managed and reallocated in response to organizational changes.

Example: A business that audits user licenses quarterly may find inactive accounts or instances where employees are over-licensed, reducing costs by right-sizing those users.

Cloud Service Management

Proper cloud service management can yield substantial savings within an EA.

• Monitor and Optimize Cloud Resource Usage: Tracking cloud usage in real-time helps identify overprovisioned resources that can be scaled down or removed.
• Implement Governance Policies: Establish policies to guide cloud resource deployment and ensure no department overuses resources.
• Utilize Hybrid Use Benefits: Apply existing on-premises licenses to the cloud to take advantage of hybrid use benefits and save on Azure-based workloads.
• Regular Review of Consumption Patterns: Regular reviews ensure that cloud services are used effectively and allow for adjustments as needs change.

Volume Discount Maximization

Maximizing the volume discounts available through an EA can provide significant financial benefits.

• Understanding Tier-Based Pricing Structures: The EA pricing model is tier-based, with larger deployments providing deeper discounts. Understanding these tiers allows for better planning.
• Consolidating Purchases Across Departments: Organizations can achieve higher volume discounts by consolidating licensing needs across different departments.
• Leveraging Commitment-Based Pricing: Committing to volume purchases upfront or during Microsoft’s sales quarters can provide deeper discounts and more favorable terms.
• Strategic Timing of Additional Purchases: Time major purchases to coincide with key periods in Microsoft’s sales cycle to potentially secure discounts or concessions.

Transitioning from Volume Licensing to an Enterprise Agreement

For organizations outgrowing volume licensing, transitioning to an Enterprise Agreement involves a structured approach to ensure continuity and efficiency.

Assessment Phase

The assessment phase is a critical first step to ensure a smooth transition.

• Evaluate Current Licensing Position: Analyze current volume licensing agreements, including costs and compliance status.
• Document Existing Agreements and Terms: Maintain detailed documentation of all current agreements to ensure no commitments are overlooked during the transition.
• Analyze Usage Patterns and Costs: Understand current software usage and how it aligns with volume licensing to identify whether an EA will be more beneficial.
• Identify Compliance Requirements: Ensure compliance requirements are met, especially when transitioning between different license structures.

Migration Planning

A comprehensive migration plan helps facilitate the shift from volume licensing to an EA.

• Timeline Development: Establish a timeline for the transition, ensuring that every phase, from assessment to implementation, is well—scheduled.
• Resource Allocation: Allocate the necessary resources, including personnel and budget, to ensure a smooth transition.
• Training Requirements: Prepare training programs to help IT and administrative staff manage and implement the new licensing model.
• Communication Strategy: Communicate changes to all affected departments to ensure clarity and preparedness across the organization.

Implementation Steps

Adjusting systems and processes to accommodate the EA is important during the implementation phase.

• Update Billing Systems: Modify existing billing systems to reflect new licensing terms, payment schedules, and resource allocation.
• Configure New Licensing Portals: Set up and configure licensing portals to manage EA licenses, ensuring straightforward tracking and compliance.
• Train administrative staff on using the Microsoft Volume Licensing Service Center (VLSC) or the Microsoft 365 Admin Center for managing licenses.
• Establish Monitoring Processes: Create processes to monitor compliance, usage, and potential issues with license deployments.

Risk Mitigation

Mitigating risks during the transition is crucial for a smooth and successful implementation.

• Maintain Detailed Documentation: Keep detailed records of all changes, decisions, and updated agreements to serve as references.
• Create Contingency Plans: Develop contingency plans to address potential issues, such as service disruptions or unanticipated costs.
• Establish Clear Communication Channels: Ensure all stakeholders are informed of progress, potential issues, and resolution timelines.
• Monitor Compliance Throughout the Transition: Ensure compliance by verifying that all new licensing structures align with Microsoft’s requirements.

The success of Enterprise Agreement management relies heavily on thorough preparation, strategic timing, and careful execution of the transition.

Avoiding common negotiation pitfalls, optimizing license usage, and understanding the available benefits can substantially impact short-term and long-term costs and the overall value derived from the EA.

FAQs

What is a Microsoft Enterprise Agreement (EA)? An EA is a volume licensing program designed for large organizations. It provides licenses for cloud and on-premises software under a three-year commitment, offering volume discounts and Software Assurance benefits.

How does Software Assurance work in an EA? Software Assurance provides upgrade rights, support, training, and deployment planning services. It automatically includes an EA, helping organizations keep their software up to date and better supported.

What are the eligibility requirements for an EA? Your organization must have at least 500 users or devices to qualify for an EA. Government organizations can qualify with a minimum of 250 users or devices.

Can we switch from an EA to a CSP model? Yes, transitioning from an EA to a CSP is possible. The CSP model offers more flexibility and tailored partner support but requires careful planning to ensure continuity.

How do EA pricing tiers work? EA pricing is tiered based on the number of users or devices. Larger deployments receive greater discounts, making the EA more cost-effective for bigger organizations.

What is the true-up process in an EA? It is an annual reconciliation in which you account for additional licenses deployed during the year. These licenses must be paid in full at the time of reconciliation.

Can I reduce the number of licenses during an EA term? No, you cannot reduce the number of licenses during the early access (EA) term. You must maintain the initially agreed-upon quantity for the entire three-year duration.

What are the key benefits of an EA? An EA offers predictable annual costs, volume discounts, access to the latest software through Software Assurance, and simplified license management for large enterprises.

How do I prepare for an EA negotiation? Start preparation at least 18 months before renewal. Assemble a negotiation team, document current license usage, analyze future needs, and build a strategy for optimal terms.

Can we add more licenses during the early access (EA) term? Yes, you can go through the true-up process. Additional licenses can be deployed as needed, and payment is reconciled annually.

What is the difference between an EA and a CSP? An EA is best suited for large enterprises that need standardized licensing and predictable costs. At the same time, a CSP offers more flexibility, tailored support, and monthly payment options, ideal for smaller or growing organizations.

Are there hidden costs in an EA? Hidden costs can include true-up payments, mandatory Software Assurance fees, training and implementation costs, and limited flexibility to reduce licenses if organizational needs change.

How does Software Assurance add value? Software Assurance provides upgrade rights, 24/7 support, training resources, and deployment services, helping organizations maximize the value of their software investments.

Can I use an EA for hybrid cloud environments? Yes, an EA supports hybrid environments, allowing you to license both on-premises software and cloud services. This flexibility helps organizations gradually migrate to the cloud.

What happens if my organization grows during the EA term? If your organization grows, you can add licenses during the true-up process. Growth beyond initial projections can qualify you for better volume discount tiers.

Do you want to know more about our Microsoft EA Renewal Services?