Choosing and Managing Microsoft Licensing Solution Partners (LSPs): A CIO’s Guide

Choosing and Managing Microsoft Licensing Solution Partners (LSPs): A CIO’s Guide

Overview of the Microsoft Licensing Ecosystem

Large enterprises typically acquire Microsoft software and cloud services through volume licensing agreements. The Licensing Solution Partner (LSP) plays a critical role in these deals: an LSP is a Microsoft-certified partner authorized to sell and manage enterprise agreements on Microsoft’s behalf.

Working with an LSP is mandatory if your organization wants a traditional Enterprise Agreement (EA) – a 3-year contract covering Microsoft products for 500+ users.

The LSP is listed as a “partner of record” on the EA and handles important administrative duties:

• Contract facilitation and management: LSPs draft EA paperwork, process enrollments like the Server and Cloud Enrollment (SCE), and manage contract amendments or renewals. Microsoft still controls the pricing and terms of an EA, but the LSP assists with the paperwork and coordination. In some cases (e.g., certain public-sector or indirect markets), the LSP may invoice the customer and add a margin on top of Microsoft’s pricing. In contrast, in most direct-bill EAs, the LSP earns a commission from Microsoft.
• Order processing and true-ups: The LSP processes all licensing orders, adding or removing products, issuing quotes, and handling the annual “true-up” (the yearly reconciliation of any usage above initial license counts). They also ensure new licenses or subscriptions are provisioned and that annual EA pricing true-up reports are completed correctly.
• Support and compliance assistance: A good LSP helps the customer understand complex product licensing rules, answers routine questions (“How many Windows Server cores do we need to license for this cluster?”), and facilitates using Software Assurance benefits (training days, support vouchers, etc.). They should also help the customer remain compliant with licensing terms, for example, by alerting them about upcoming agreement expirations or product lifecycle changes.

LSPs vs. Cloud Solution Providers (CSPs): It’s important to distinguish traditional LSPs from Microsoft’s Cloud Solution Provider partners. An LSP’s core business handles large, multi-year volume agreements like EAs and Microsoft Products & Services Agreements (MPSAs).

In contrast, a CSP sells cloud subscriptions (Microsoft 365, Azure, etc.) on a pay-as-you-go or annual basis, often for smaller or more flexible engagements. In practice, many major LSPs are also Tier-1 CSP partners, meaning they can resell cloud subscriptions in addition to transacting EAs.

However, the commercial models differ:

• An Enterprise Agreement is a direct contract between the customer and Microsoft (with the LSP as an intermediary). It typically locks in pricing for three years and provides volume discounts in exchange for a committed quantity. The LSP facilitates the deal, but Microsoft mostly bills the customer directly, and the LSP earns a rebate/fee from Microsoft. The EA model favors stability and predictable costs but offers less flexibility in the mid-term.
• In the CSP model, the partner (reseller) is the one billing the customer. Subscriptions can usually be adjusted on a monthly or annual basis. This offers flexibility (no long-term commitment to a set number of licenses) but often at higher unit costs (CSP purchases are often at the list price unless the partner gives a discount). CSP partners can set final prices, and some add their margins. For example, an LSP acting as a CSP might mark up Azure or Microsoft 365 subscription costs – one report noted certain partners charging over 15% above Microsoft’s base prices in CSP deals.

Choosing the right licensing channel and partner for CIOs and IT leaders can significantly impact costs and flexibility. A large enterprise usually uses an LSP-managed EA for core Microsoft products, possibly alongside CSP for specific needs.

Still, it must ensure the LSP isn’t pushing them into a suboptimal purchasing program for the partner’s benefit. (Some LSPs have aggressively steered customers to CSP to earn higher margins, even when an EA might have been more cost-effective.)

Changes in Microsoft’s partner landscape:

The Microsoft licensing ecosystem is evolving, and the traditional LSP model is being disrupted. Microsoft has introduced new purchasing models—notably the Microsoft Customer Agreement (MCA) under the New Commerce Experience (NCE)—which allow organizations to buy cloud services directly from Microsoft with a simplified digital agreement.

Unlike an EA, the MCA is evergreen and does not require an LSP to be involved. Microsoft’s strategy is shifting toward a more direct, self-service approach for many customers, especially cloud subscriptions.

Microsoft announced in 2023 a new “Direct Sales” approach for large accounts and has reportedly begun reclaiming many enterprise agreements from partners (one analysis projected that by 2026, all large EA customers will be moved to direct Microsoft contracts).

This doesn’t mean LSPs disappear overnight, but it does mean:

• Enterprise purchasing options are broadening: Major customers can now choose to transact either via an LSP or directly with Microsoft in some cases. For example, Microsoft’s New Commerce platform standardizes offers and pricing across channels. A large enterprise might be offered an MCA-E (Microsoft Customer Agreement for Enterprise), allowing direct purchase of Azure and Microsoft 365 without a traditional LSP. Meanwhile, mid-sized organizations might transition from EAs to CSP/NCE arrangements through a partner.
• LSP roles are changing: With Microsoft reducing partner incentives and handling more sales directly, LSPs are consolidating and refocusing their services. Many have merged or expanded via acquisitions, sometimes at the cost of personalized service. Some LSPs now charge fees for previously “free” services (like basic EA administration) as Microsoft cut back rebates. As Microsoft shifts focus to cloud subscriptions, LSPs are expected to provide more value-add (such as cloud cost optimization, Software Asset Management, etc.) beyond just reselling licenses.

Bottom line: The LSP remains a key player in enterprise licensing today, especially for organizations with large EAs or on-premises software footprints. CIOs should be aware of the changing landscape.

LSPs are Microsoft’s channel partners, not merely procurement brokers, and Microsoft’s evolving strategies (direct contracts, NCE pricing rules, etc.) will influence how you work with LSPs. In this context, selecting an LSP that meets your organization’s needs and actively managing that relationship is more important than ever.

Key Evaluation Criteria for Selecting an LSP

Choosing the right Licensing Solution Partner can significantly impact your Microsoft spend and compliance risk.

Below are key criteria to evaluate when selecting an LSP for a large enterprise agreement, along with why each factor matters:

• Global Reach and Scale: Can the LSP support your operations across all regions where you do business? For a multinational organization, the LSP must be able to handle multi-country licensing requirements, local billing in various currencies, and regional regulatory nuances. Some LSPs are stronger in certain geographies or have a larger global footprint than others. Verify that the partner has the necessary offices or partner network to cover your key locations (e.g., software used in Europe, Asia, and the Americas) and can consolidate reporting globally. Example: If your EA covers users in 30+ countries, an LSP with global coverage will simplify contract management and ensure compliance in each locale, whereas a smaller regional LSP might struggle with international issues (taxes, currency conversion, local language support). Global reach is also tied to experience – many of the largest LSPs (e.g., SoftwareOne, SHI, Insight, Dell, CDW, Crayon, Bytes, etc.) have experience coordinating enterprise agreements across multiple continents. Make sure your LSP has that breadth if needed.
• Licensing Expertise and Team Quality: Does the LSP have deep knowledge of Microsoft’s licensing programs and a capable account team to support you? This is arguably the most important differentiator. All LSPs meet a baseline certification, but the quality of advice can vary greatly. Evaluate the experience and responsiveness of their licensing specialists. Do they offer dedicated licensing consultants or architects who can discuss complex scenarios (e.g., moving SQL Server workloads to Azure, optimizing Microsoft 365 plans) and provide clear guidance? A strong LSP will help you find the most cost-effective licensing solutions for your business requirements. They should quickly answer routine questions and engage in “what-if” planning for major changes (like acquisitions, cloud migrations, or a new Microsoft product). During the selection process, ask for examples of how the LSP solved a tricky licensing problem or saved a client money through savvy advice. Also, considering the stability of their account, team-high turnover or reliance on one rock-star employee could be a risk. As one advisory firm notes, many clients value an LSP largely for the strength of a particular account manager or licensing specialist. You want a partner with a culture of licensing excellence, not just a sales quota to meet.
• Platform Capabilities and Value-Added Services: Besides processing orders, what tools or services does the LSP provide to simplify license management? Leading LSPs often include access to online portals or software asset management (SAM) tools where you can track your license entitlements, usage, and renewal dates. Some offer bundled IT Asset Management (ITAM) solutions or dashboards for cloud spend monitoring. Others might conduct periodic compliance checks or optimization workshops at no extra charge. These platform and service capabilities can greatly enhance the value you get from the partnership. For example, an LSP that provides a self-service license portal and automated reports on your Microsoft 365 utilization can help your IT team identify unused licenses to re-harvest, directly reducing costs. When evaluating LSPs, compare their service catalogue: do they include license usage analytics, training for your staff, or dedicated technical support for deployments? Ensure the offerings align with your needs. If software asset management rigour is a priority for your company, an LSP with strong SAM services (or integration with tools like ServiceNow, Flexera, etc.) is a big plus. Key point: At a minimum, the LSP should assist with tracking your licenses and alerting you to important changes (product retirements, contract deadlines) – if they don’t offer even basic license tracking or SAM help, that’s a red flag in today’s environment.
• Independence and Conflict of Interest (Vendor Neutrality): Will the LSP act in your best interest, or are there hidden incentives that could bias their advice? This is a critical consideration because LSPs are, by definition, partners of Microsoft. They are paid by Microsoft (via fees or rebates) based on your spending, and they may profit from selling you more products. This dynamic creates a potential conflict of interest: the LSP is supposed to advise you on the optimal licensing strategy. However, if selling more licenses or moving you to certain programs increases their revenue, their guidance might be swayed. During selection, probe how the LSP maintains objectivity. Do they have any guarantees of confidentiality that they won’t share your strategic plans or usage data directly with Microsoft? Will they agree contractually to act as your advocate? Better LSPs will explicitly promise not to divulge their internal discussions to Microsoft’s account team and to put customer interests first. It’s also wise to ask the LSP about scenarios where they recommended a solution that reduced a customer’s Microsoft spend – do they have such examples, or do they only suggest expansions? An LSP that offers truly impartial guidance (even at the cost of lower short-term sales) demonstrates integrity. Vendor neutrality can also be gauged by whether the LSP’s business is diversified. If they sell other software vendors or services, they may be more aligned to find the right solution for you, not just more Microsoft licenses. Consider involving an independent licensing advisor in the evaluation process to spot any biases (more on this later).
• References and Performance Track Record: Finally, treat the LSP selection like any major vendor outsourcing decision – ask for customer references, particularly from companies of similar size and industry. Inquire about the LSP’s track record on cost management and compliance. Did they help customers optimize their license usage and avoid surprises, or were they merely order-takers? Were there any major issues with billing accuracy or support responsiveness? Real-world feedback will quickly highlight if an LSP tends to “oversell” or if they truly partner with clients for mutual success. Because the impact of LSP performance can be huge, you want evidence of positive outcomes. For instance, a strong LSP might have helped a client save 10% in an EA renewal by identifying licenses to drop or securing special discounts due to careful planning. A poor-performing LSP, on the other hand, might have missed a critical licensing change, leading the client to be non-compliant and pay a hefty true-up later. Insist on hearing both cost and compliance-related results from their reference accounts.

Example Scenarios of LSP Impact: To illustrate, consider two scenarios:

• Cost Impact: A global retailer was approaching its EA renewal with plans to increase Azure usage. Their incumbent LSP simply forwarded Microsoft’s standard renewal quote. Sensing a better deal was possible, the CIO brought in an independent licensing expert to double-check. The review found that many of the retailer’s Windows Server licenses were eligible for Azure Hybrid Benefit (AHB) – something the LSP hadn’t actively flagged. By fully leveraging existing licenses with AHB for Azure, the company trimmed its Azure bill by 20%. The CIO questioned why the LSP hadn’t suggested this; it turned out the LSP focused on selling new Azure consumption (which earned them commission), and they paid little attention to optimizing existing entitlements. This example shows how an LSP’s lack of proactive advice or slight conflict of interest can cost an organization millions. Takeaway: Choose an LSP known for optimization insights, and consider third-party validation of any “recommended” spend increases.
• Compliance Impact: A large manufacturing firm relied on its LSP, including software asset management tools, to track license usage. The LSP assured them all was well heading into year two of the EA. However, the LSP’s tools only captured Microsoft 365 and server licenses deployed through official channels – they missed several standalone SQL Server instances installed for a Skunkworks project. Unfortunately, Microsoft selected the firm for a software audit. The audit revealed the untracked SQL deployments, leaving the company short on licenses and facing a significant back payment. The CIO was surprised that the LSP’s compliance checks hadn’t caught this. The LSP’s response: “You didn’t tell us about those servers.” A more diligent partner or an independent SAM review could have uncovered the issue earlier. Takeaway: LSPs can assist with compliance, but the ultimate responsibility lies with the customer. Ensure robust processes (beyond the LSP’s default) to verify deployments, and don’t assume the LSP’s tools or advice are infallible.

In summary, selecting an LSP requires a balanced scorecard approach. Weigh hard criteria like global presence, skills, and service offerings, and soft factors like culture, trustworthiness, and alignment with your interests.

The right LSP should be an extension of your IT procurement and licensing team, bringing expertise and efficiency, without simply functioning as a sales agent for Microsoft. Invest time upfront to find a partner who checks these boxes; it will pay off through smoother negotiations, fewer compliance headaches, and potentially significant cost avoidance.

Governance and Performance Management of LSPs

After selecting an LSP, the work is not over. Managing the LSP relationship is crucial to ensure you get the value and outcomes you expect. Gartner-style best practices for vendor management apply here: governance, regular performance reviews, and maintaining leverage.

Below are strategies to govern your LSP engagement without over-relying on the partner:

• Establish a Clear Governance Structure: Treat the LSP as a strategic supplier that requires executive oversight. Internally, assign a specific owner (or team) for the LSP relationship – for example, your Head of IT Procurement or a Software Asset Manager. Define roles and responsibilities: what will the LSP handle vs. what will your internal team and any consultants handle? Ensure the LSP knows there is an informed customer team on your side. This prevents the common scenario of “outsourcing” all licensing thinking to the LSP. The LSP should be an advisor, not the final authority on what to buy – you retain that control. Set up an internal cadence (e.g., monthly sync meetings) to discuss licensing status so that you’re always aware of your position independent of the LSP’s reports.
• Define SLAs and Performance Metrics: Including Service Level Agreements (SLAs) or at least documented expectations in your contract or governance plan is wise. Specify measurable performance indicators for the LSP, such as quote turnaround time (e.g., all standard quotes within 2 business days), true-up report accuracy, license delivery times, and quality of licensing advice. Also, require timely notification of Microsoft products or policy changes that could affect you. You have a baseline to evaluate the LSP by laying out these expectations. During quarterly business reviews, review these metrics openly. If the LSP is falling short – for example, perhaps they took two weeks to process a simple license add or provided an incorrect product recommendation – call it out and seek improvements. Don’t accept “we’re doing our best” if it doesn’t meet the agreed standard.
  Additionally, incorporate a confidentiality clause: ensure the LSP contractually agrees not to share your sensitive information or any planned changes with Microsoft or other parties without consent. This includes your cloud usage data, expansion plans, or competitive information. Such confidentiality terms reinforce that the LSP is your partner and build trust that they won’t undercut your negotiating position by informing Microsoft of your intentions.
• Quarterly Business Reviews and Strategic Check-ins: Hold formal QBRs (Quarterly Business Reviews) with the LSP’s account team and your stakeholders. In these meetings, go beyond status updates – use them to drive accountability and improvement. Key topics to cover: Are there any billing vs. contract terms discrepancies? How has your license consumption trended against projections? Is the LSP proactively bringing forward optimization ideas? (They should be.) Review any support tickets or licensing questions from the quarter – were they resolved promptly and accurately? By reviewing these items regularly, you create a feedback loop. Document any action items for the LSP (e.g., “provide a cost-saving proposal for under-used Dynamics licenses by next meeting”). An LSP who knows you will scrutinize results is likelier to stay on their toes.
  Furthermore, use some QBR time to discuss upcoming needs or changes in your business. For example, if you’re planning a major move to Azure or considering Microsoft’s new product bundle, an early discussion allows the LSP to research and get back to you with the best options (or reveal if they lack the expertise to do so). Pro tip: Keep minutes of each review and track whether the LSP follows through on promised deliverables. This creates a record in case you need to escalate issues later.
• Benchmark and Audit the LSP’s Performance: It can be very useful to periodically benchmark your LSP’s pricing and service against the market. Microsoft largely sets prices for Microsoft licenses, but large enterprises may get special discounts or concessions – you want to ensure your LSP helped you obtain those and that your discounts align with what similar companies achieve. Consider engaging an independent firm or using industry benchmarking data to compare your agreement. According to one advisory, every enterprise should “benchmark their LSP/reseller spend and agreement” to identify savings. If your analysis finds that you’re paying more than the norm for certain SKUs, that’s a sign to push the LSP (and Microsoft) harder in negotiations. Besides pricing, also benchmark service levels: if peer organizations report getting more value-added (like free workshops or more attentive support) from their LSPs, use that information in your QBR discussions – ask your LSP to match those value-added services. Internally, you might conduct user satisfaction surveys for the LSP’s support (e.g., poll your procurement and IT staff who interact with it). Treat it similarly to how one would manage an outsourcing vendor. If results are below expectations, have a remediation plan: for instance, require the LSP to provide additional training to its team on your environment or escalate to a more senior account manager. Always remember you have choices (the LSP likely knows this too). If issues persist, you will be warned that the business may be moved elsewhere upon renewal. This threat carries weight because switching LSPs at an EA renewal is relatively easy and commonplace.
• Maintain Leverage and Avoid Over-Reliance: A common mistake is letting the LSP become your organization’s sole repository of licensing knowledge. This can happen subtly – for example, your IT asset manager might start deferring every question to the LSP’s rep, or you rely on the LSP’s portal and neglect maintaining internal records. Resist this. Keep documentation of what you’ve purchased and why, and ensure your team understands the basics of Microsoft licensing. If the LSP makes a recommendation, have your team (or an external consultant) validate it. This dual control protects you from mistakes. It’s also wise to periodically test the market even if you’re not ready to switch LSPs. Engage in a light RFP or exploratory discussion with another LSP before your EA renewal. Not only will you get a sense of alternative offerings, but it also signals your current LSP that they must continually earn your business. Microsoft allows customers to change LSP at renewal or even mid-term (with notice), so you are not “locked in” the way you might be with a long-term outsourcing contract. Use that fact to your advantage in maintaining leverage. If your LSP knows you are an educated customer and are willing to shop around, they are more likely to be responsive and fair. One expert suggests planning from the start as if the LSP might fail to deliver all promised services, and determining how you would detect and address that. For example, if the LSP promised quarterly license optimization reviews but hasn’t held one in six months, you should be prepared to call this out and potentially bring in an independent party to fill the gap.
• Leverage Independent Advisors for Oversight: Involving an independent licensing expert (a third-party advisor not affiliated with any LSP or Microsoft) can significantly bolster your governance. Firms like Redress Compliance and other independent licensing consultancies act solely in the customer’s interest – they don’t sell Microsoft licenses, so their advice is unbiased. There are several points at which you might engage such an expert:
  • During QBRs or annual reviews, an independent advisor can attend or review the reports to validate that the LSP’s advice is sound. They might spot, for example, that you have an opportunity to retire some licenses or that a proposed purchase isn’t needed – things an LSP might not emphasize if it reduces sales. An external viewpoint can keep the LSP honest and ensure you’re not missing optimization opportunities.
  • Before major negotiations or renewals: As you approach an EA renewal or a big license purchase, an independent expert can help you formulate a strategy (e.g., determine your effective license position, identify what you need to buy, and what you don’t). They can also benchmark Microsoft’s proposal using their knowledge of other deals. This gives you negotiating leverage that goes beyond what the LSP typically provides. Remember, the LSP gets paid when you sign a renewal, even though they want you to get a good price to keep you happy, their incentive is ultimately to close the deal. An independent negotiator on your side has no such conflict and will push purely for your best outcome.
  • Continuous compliance monitoring: Some enterprises retain independent licensing advisors periodically (e.g., an annual or semi-annual check) to audit their deployments and license positions. The benefit is an objective assessment of compliance and usage optimization. As noted in one analysis, “true SAM [Software Asset Management] requires objectivity, and you can’t get that from a Microsoft LSP”. LSPs may offer SAM services. Still, those often amount to running basic scripts and then selling you any licenses you’re short on. By contrast, an independent SAM review will more rigorously identify unused licenses or alternative licensing models since the third party isn’t trying to sell you software. This proactive approach can save money and prevent audit risks.
  • Ad-hoc support and second opinions: Even on day-to-day questions, you might occasionally seek a second opinion from an independent source (especially if the decision has big cost implications). For instance, if your LSP recommends licensing a certain server farm with Windows Server Datacenter edition, you could double-check with an independent expert whether that is indeed the most economical option or if a different approach (like an Azure-hosted solution or outsourcing that workload) might avoid Microsoft licensing costs. Independent advisors often reveal options that Microsoft or LSP reps won’t mention because those options might reduce your Microsoft footprint.

In summary, managing an LSP is an active endeavour. Set expectations early, monitor performance closely, and don’t hesitate to bring in outside expertise to ensure the LSP is delivering.

By instituting strong governance practices, you transform the LSP from a mere order-taker into an accountable partner aligned with your IT and business goals.

Remember that you own the strategic decisions. The LSP is there to execute and advise, but you must validate their advice. This balanced oversight will help you get the most value from the relationship while avoiding unpleasant surprises.

Risk and Compliance Considerations

Managing Microsoft licensing in a large enterprise inherently comes with risk, primarily the risk of non-compliance (using more software than you’re licensed for) and the potential financial exposure if Microsoft conducts an audit.

An LSP can assist with compliance, but you should understand the limitations and how to mitigate risks proactively:

• Software License Audits: Microsoft reserves the right to audit customers’ compliance with license terms and regularly exercises that right. An audit can be triggered randomly, by certain behaviours (like significant drops in purchases or anonymous piracy tips), or as part of a program (e.g., Microsoft’s global compliance initiative). If your organization is found to be under-licensed – even inadvertently – the consequences can be costly. You must purchase the necessary licenses to cover any shortfall, often back-dated to when the unlicensed use began and, in some cases, with added penalties or interest. For example, if you’ve been using 100 extra Office 365 E3 subscriptions for a year without licenses, Microsoft could demand retroactive payment for those, possibly at the list price. Certain compliance gaps are not obvious; one emerging risk is cloud services configuration. It’s possible to unknowingly exceed entitlements (such as using Azure Hybrid Benefit beyond your allowances or mixing license-included and license-free user plans in a way that violates terms), and Microsoft may later charge you for those overages. The best defence is to avoid falling out of compliance in the first place via diligent internal SAM practices (inventory and reconcile your deployments regularly). An LSP can help by providing tools or reports; ultimately, the customer is accountable for compliance.
• SAM Engagements vs. Audits: Microsoft often initiates Software Asset Management (SAM) engagements, framed as a friendly review of your licensing position, usually conducted by a third-party consultant or auditor on Microsoft’s behalf. These are presented as optional and helpful (“a SAM review to optimize your usage”). Do not be lulled into a false sense of security: a SAM engagement is effectively an audit by another name. During a SAM review, you will be asked to provide deployment data and run inventory tools, and the findings can result in a request to purchase licenses for any shortfall, just like a formal audit. The main difference is that in a voluntary SAM review, Microsoft might allow you to purchase missing licenses on your normal discount plan (rather than the full list price or with penalties).
  In contrast, Microsoft could enforce purchase at MSRP plus audit costs in a contractual audit. But in either case, you’ll have to resolve any gap by buying licenses or proving you’ve removed the software. Do not assume your LSP will handle a SAM or audit for you. While an LSP might offer to “help” if you’re audited, remember that the LSP is ultimately a Microsoft partner. They may assist in gathering data, but they are not your legal advocate. The LSP is vested in selling you the licenses to close any shortfall. This is why many experts recommend politely declining a Microsoft-initiated SAM instead of conducting your internal compliance audit first. By doing so (with help from independent licensing consultants), you can identify and fix compliance issues on your terms before involving Microsoft. If Microsoft then requires a verification, you’ll be in a much stronger position with accurate data

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• Non-Compliance Exposure and SAM Program Risks: If you use a Microsoft SAM program through your LSP or another partner, be cautious about information sharing. Any data you provide to Microsoft or its auditors will be used to reconcile licenses. It’s not uncommon for companies to be surprised by these reviews because they assumed certain uses were covered. For instance, using a development or test instance without proper licenses or end-users activating features beyond their assigned license level can all contribute to a shortfall. The financial exposure from non-compliance can be significant, often reaching hundreds of thousands or even millions of dollars for large enterprises. Beyond the immediate cost of purchasing licenses to rectify the shortfall, there’s also the operational disruption of an audit: teams have to divert time to collect deployment data, meetings with auditors, etc., sometimes over many months. Also, consider the impact of reputational and vendor relationships; an acrimonious audit settlement can sour your relationship with Microsoft, at least temporarily. You should have a robust internal Software Asset Management function or an external SAM service that monitors license consumption to manage these risks. Do not solely rely on yearly true-up processes or the LSP’s compliance tool (as illustrated in the example earlier). Those might catch the obvious over-usage for products under the EA at true-up time. Still, they might miss dev/test usage, legacy deployments not under active support, or cloud service misconfigurations. An independent compliance audit (conducted by specialists who mimic Microsoft’s audit approach) can identify these gaps privately, allowing you to purchase any needed licenses or reconfigure usage without the pressure of an official audit.
• LSP’s Role in Compliance: Your LSP can be a resource in understanding Microsoft’s licensing rules – indeed, one reason to have an LSP is to interpret the thousands of pages of Microsoft Product Terms for you. They might also offer basic compliance checks. However, be aware of the LSP’s limitations and incentives. As noted, LSPs work on commission and are aligned with Microsoft’s sales objectives. Their guidance on compliance will often be to err on buying more licenses “to be safe.” Some LSPs provide a SAM tool or service. Still, this frequently involves running a Microsoft-provided tool (like MAP Toolkit or Azure AD reports) and delivering the output with minimal analysis. They might not actively look for ways to optimize your license counts downward because reducing your usage or licensing spend is not in their financial interest. If an LSP discovers you are under-licensed, they will almost certainly encourage you to purchase the shortfall immediately (through them, of course). While that does resolve compliance, it might not address root causes nor consider alternatives like removing unused software, reallocating licenses, or negotiating special terms with Microsoft. Thus, verify compliance through independent means while using your LSP’s knowledge. Keep a healthy scepticism: if an LSP insists you need a certain number of licenses, double-check the math or get a second opinion from an impartial expert. It’s not about distrusting your LSP but recognizing their role – they are Microsoft’s representative in many ways. One independent licensing advisor bluntly characterized many LSP-provided SAM services as “the bare minimum to keep you compliant… True SAM requires objectivity, which you can’t get from an LSP.”.
• Using Independent Advisors to Mitigate Risk: As previously discussed, independent licensing consultants (like Redress Compliance or others) can be extremely valuable in managing compliance risk. They can perform an objective license position assessment (LPA) to tell you exactly where you stand. Engaging them before Microsoft or the LSP conducts a formal review allows you to self-correct quietly. If an audit does occur, independent experts can also help defend your organization: they know Microsoft’s audit playbook and can guide you in responding to auditors’ requests, negotiating findings, and ensuring you’re not over-penalized. These advisors often suggest settlement strategies such as migrating to a new subscription bundle that satisfies compliance while minimizing cost impact, rather than buying the licenses that an auditor claims you need. Moreover, independent experts will focus on your risk exposure holistically, not just Microsoft. Still, they might alert you to related issues (for example, if they notice you have Oracle or SAP license risks during their review, many have multi-vendor expertise). This broad view of software compliance helps avoid tunnel vision on just Microsoft and fosters better overall IT governance.

In summary, license compliance is a shared responsibility: the LSP can assist, but you must actively manage the risk. Prepare for the worst (an audit) by doing the best – maintain accurate records of deployments and entitlements, educate your IT staff on the importance of sticking to licensed usage, and use independent resources to double-check.

Also, ensure that any true-up or annual reconciliation process is thorough: Don’t just accept a zero true-up if you suspect usage grew—investigate it. Sometimes, internal under-reporting (intentionally or not) can lead to a nasty surprise later if Microsoft discovers it.

It’s better to catch and resolve a license shortage at true-up (where you pay your negotiated EA price) than in an audit (where you might pay the list price plus 1 year’s retroactive fees, as allowed in some contracts). Finally, cultivate a mindset of continuous compliance.

A Microsoft licensing environment is not static – new users onboard, VMs spin up in Azure, and developers deploy new software, so your compliance status can change monthly. Regular internal audits (with or without LSP help) are key. By taking these precautions and leveraging independent advice, you can substantially reduce the risk of compliance issues and be well-prepared if Microsoft comes knocking.

Recommendations for CIOs and Sourcing Leaders

Choosing and managing a Microsoft LSP requires strategic foresight and ongoing attention.

Here are clear steps and recommendations for CIOs, IT procurement heads, and sourcing professionals to ensure success in this area:

1. Conduct a Rigorous Selection Process for Your LSP: Don’t simply go with the incumbent or the first name that comes to mind. Treat the selection like a major RFP. Define your requirements – global coverage needs, level of licensing advisory you expect, and any specific must-have services (SAM tools, cloud optimization, etc.). Use these requirements to evaluate multiple LSP candidates. Inviting at least 2–3 LSPs to bid or present their capabilities is advisable, even if Microsoft tends to direct you to one “preferred” partner. Leverage the fact that you have a choice: as mentioned, you can switch LSPs at EA renewal or even mid-term with 90 days’ notice. So, ask tough questions and compare: for example, “How many Microsoft-certified licensing specialists do you have on staff? Can you support us in Latin America and Asia-Pacific? What differentiates your service from others?” Insist on detailed answers. Also, request sample deliverables (e.g., a sample quarterly report or license optimization plan). A disciplined selection process will reveal differences that a casual approach would miss. Remember that many LSPs appear similar, so dig into those subtle differences (account team quality, additional services, etc.). If you lack the internal expertise to judge, consider hiring an independent advisor to assist in the LSP selection; they can provide an objective scorecard. Tip: Check whether the LSP will commit to key principles like confidentiality and customer advocacy in writing. An LSP that readily agrees to non-disclosure and puts your interests first (even including specific contract clauses) shows a partnership mentality.
2. Negotiate a Strong Contract with Performance Clauses: Once you’ve chosen an LSP, take the time to negotiate the LSP agreement or engagement contract (separate from the Microsoft EA contract). Microsoft’s EA contract is between you and Microsoft – the LSP has its terms for how they’ll serve you. Ensure this agreement includes clear expectations: for example, attach a Service Level Agreement (SLA) document or a detailed statement of work. Specify the services the LSP will provide (e.g. “quarterly license compliance report, annual strategy briefing before EA renewal, on-site training session on Microsoft licensing for IT staff, etc.”). Set KPIs like response times, accuracy, and customer satisfaction targets. Importantly, include a clause that allows you to terminate or switch LSPs if they fail to meet these service commitments (at minimum, align it with Microsoft’s 90-day notice period mid-term). While you might never need to invoke it, having this in the contract gives you leverage. Also, negotiate any financial terms: while the LSP’s commission from Microsoft is fixed, some LSPs charge additional fees for premium services (for example, complex true-up assistance or access to special tools). Make sure you know what is included at no charge and what might incur extra costs upfront. Push back on any fees for basic services you believe should be part of the partnership. Given the competitive landscape, many LSPs will waive or reduce fees to win a large enterprise client – for instance, they might include a SAM tool subscription for free or provide a certain number of consulting hours at no cost. Don’t be afraid to ask for these concessions. Finally, lock in the confidentiality and non-disclosure commitments in the contract (as noted earlier) so that it’s legally binding that the LSP cannot share your plans with Microsoft without approval. A well-structured LSP contract will set the tone for accountability and high service quality from day one.
3. Proactively Manage the Relationship and Track Performance: After onboarding the LSP, institute the governance practices discussed in the previous section. Set up regular meetings (monthly operational check-ins and quarterly executive reviews) and hold the LSP accountable to their promises. Create a simple scorecard to track key performance metrics, such as: “# of days for license quotes,” “Accuracy of true-up (licenses reconciled vs. actual usage),” “Savings or optimization opportunities identified,” etc. When the LSP brings you a licensing recommendation, always ask for the rationale in writing – and keep a record. This helps avoid miscommunication and creates a paper trail if advice later turns out incorrect. Internally, continue to invest in your team’s licensing knowledge. Encourage your staff to attend Microsoft licensing webinars, get training, or even certification if relevant. The goal is not to replace the LSP’s expertise but to be able to challenge and validate it. If the LSP suggests something that doesn’t sound right, your team should be confident to research it or query it further. Another aspect of managing the relationship is to recognize good performance. Provide positive feedback if your LSP team does an excellent job (e.g., helps negotiate a discount beyond expectations or prevents a compliance issue). LSP account teams often go above and beyond for engaged and appreciative clients, which can lead to even better service. On the flip side, if there are problems, escalate promptly. Don’t tolerate repeated mistakes or slow responses – bring it up with the LSP’s management. Use the governance framework (SLAs, QBRs, etc.) to address issues formally. If needed, involve Microsoft – for instance, if the LSP’s delay jeopardizes a project, inform your Microsoft account manager and ask them to put pressure as well. Microsoft is interested in its LSP keeping customers happy, so it can sometimes help behind the scenes.
4. Benchmark Periodically and Keep Competition in Mind: As your EA term progresses, set a schedule to benchmark the market before any major renewal or purchase. About 12–18 months before your EA expires, start gauging if you want to continue with the current LSP or consider a change. This doesn’t always mean going through a full RFP again, but at least do some reference calls or exploratory meetings with other top LSPs. You might find that a competitor has developed a new service or tool that your current LSP lacks. Also, ask peers in other companies about their experiences. Suppose you discover another Fortune 500 company saved a lot using a particular LSP method (for example, an automated Azure cost optimization report offered monthly). In that case, you can demand the same from your LSP or contemplate switching. As noted earlier, you can easily change LSP at renewal time. The switching cost is not zero (there’s effort in transitioning account management), but it may be worth it if there’s a clear value gap. Keeping an eye on the competitive landscape ensures your LSP never grows complacent. In the final year of your EA, you can invite your current LSP and one alternate to each present a renewal proposal – essentially a bake-off. This can spur creative offers, such as increased rebates or extra services. Be transparent that you are evaluating alternatives; an LSP that assumes automatic renewal might not try as hard to win your business. The exercise can extract better terms or service commitments even if you remain with the incumbent. Treat the LSP like a competitive marketplace service, not a fixed utility. This mindset will drive better outcomes and cost-efficiency over the long term.
5. Engage Independent Expertise for Strategy and Oversight: Knowing when to pull in an independent licensing expert is a hallmark of savvy CIOs in today’s environment. There are several junctures where an outside advisor is especially valuable: during major negotiations, during compliance evaluations, and when planning significant changes (like a cloud migration or M&A integration). These experts (such as Redress Compliance and similar firms) work for you, not for Microsoft or the LSP, and thus provide purely objective counsel. They can perform tasks like a license baseline review, identifying areas where you might be over-licensed (wasting money) or under-licensed (at risk) – something an LSP might not volunteer to do comprehensively. They can also help architect your future licensing strategy: for instance, deciding whether to stay on an EA vs. move to an MCA direct model, or how to optimize your Microsoft 365 subscription mix. Engaging independent consultants is particularly wise before an EA renewal negotiation. They often know Microsoft’s discounting patterns and fallback terms from other clients, which gives you powerful information. Your LSP, even if well-intentioned, won’t have the same freedom to tell you, “Microsoft will likely give 15% off if you push on this”, – but an independent advisor can because they’ve seen it elsewhere and have no conflict in sharing it. Additionally, if you are concerned about your LSP’s performance or advice, an independent assessment (a “second opinion”) can validate whether the LSP is doing a good job. For example, an independent consultant could review the true-up of the LSP prepared and confirm if it’s accurate or if there are discrepancies. If issues are found, you can address them with the LSP or consider alternatives, avoiding blind reliance. Many enterprises also find value in independent experts during audits or SAM engagements: legal counsel often suggests using a third party to interface with Microsoft’s auditors to keep the process fair and ensure you’re not over-penalized. Bottom line: Don’t hesitate to get outside help – the cost of independent advice is often far less than the potential savings they uncover or the audit penalties they help avoid. It’s a smart insurance policy that complements your
   LSP’s services.

By following these steps, CIOs and sourcing leaders can significantly improve Microsoft licensing outcomes. The goal is to create a balanced ecosystem of support: a capable LSP handling day-to-day transactions and providing frontline advice, combined with strong internal governance and neutral third-party oversight, to ensure the LSP and Microsoft deliver the best possible value to your enterprise.

With Microsoft’s licensing programs and partner models evolving, this multifaceted approach will position your organization to adapt confidently.

Whether Microsoft shifts toward direct contracts, new cloud offerings emerge, or your business needs change. Ultimately, taking control of the LSP relationship and not treating it as an autopilot arrangement will empower you to optimize costs, stay compliant, and align your Microsoft investments with your strategic goals.