German Automotive Supplier Replaces Microsoft EA with MCA After Azure-Only Shift
Industry: Automotive | Country: Germany
Challenge:
A leading Germany-based automotive supplier (with operations across Europe and Asia) was undergoing a digital transformation that left it using Microsoft Azure as its primary platform for IT infrastructure. Most on-premises software had been retired, and the company’s Microsoft usage was now almost entirely cloud-based – notably Azure services and a smaller number of Microsoft 365 seats.
As the end of its 3-year Microsoft Enterprise Agreement approached, the company faced a pivotal decision: renew the EA or switch to the Microsoft Customer Agreement (MCA) model. Microsoft itself was encouraging a move to the modern “evergreen” MCA contract for cloud-focused customers.
However, the procurement and IT teams were concerned because a straight transition from EA to MCA can come with financial pitfalls – studies indicated it might result in a 10% cost increase in the first year (and up to 30% over several years) if not managed properly. Under the legacy EA, the supplier enjoyed volume discounts and the ability to lock Azure pricing for three years, whereas the MCA offered no built-in price protection on Azure consumption. The company engaged Redress Compliance to chart the best course forward.
Their goals were to:
- Evaluate cost implications of leaving the EA: compare a traditional EA renewal vs. the new MCA in both best-case and worst-case scenarios.
- Maintain cost efficiency despite losing EA volume discounts – avoiding any surprise cost spikes in their growing Azure spend.
- Gain contract flexibility: take advantage of the MCA’s month-to-month, no-term nature without sacrificing the financial benefits of a longer-term agreement.
- Ensure a smooth transition operationally, with no disruption to services or compliance gaps during the contract change.
The Process:
- Microsoft Usage Assessment: Redress Compliance and the supplier’s team first took inventory of all Microsoft assets and services in use. They confirmed that the company’s dependency on on-prem licenses had dwindled – for example, legacy Windows Server and SQL Server licenses under the EA were no longer needed after a data center migration to Azure. Microsoft 365 usage was limited to head-office staff, and those subscriptions could potentially be moved under a different program if beneficial. This clarity validated that an EA renewal would mostly cover Azure consumption, making it a less fitting vehicle for the company’s needs.
- Cost Modeling & Scenario Analysis: The teams performed a thorough cost comparison. They obtained Microsoft’s pricing proposal for an EA renewal and contrasted it with projected costs under an MCA for the same services. The analysis considered the loss of EA’s fixed pricing and discounts, modeling scenarios where Azure usage grew over 20% per year. It became evident that simply shifting to pay-as-you-go pricing under the MCA, without any special terms, could indeed lead to millions in higher costs over three years. To counter this, Redress identified opportunities to negotiate custom discounts and optimize Azure resource usage. For instance, they projected savings if the company reserved Azure capacity for steady workloads and optimized or shut down unused cloud resources – steps that would reduce overall Azure spend regardless of contract model.
- Negotiation Strategy: Armed with data, the supplier’s procurement lead and Redress formulated a negotiation plan with Microsoft. A key ask was to secure Azure consumption discounts under the MCA comparable to the EA’s pricing levels. The team presented Microsoft with their cost analyses, showing how an unmitigated move to MCA would inflate costs and potentially force the company to consider alternative cloud providers. This leverage proved effective. Microsoft, keen to keep the supplier’s growing Azure business, signaled willingness to provide custom pricing under the MCA. Additionally, the supplier negotiated to retain billing in local currency (EUR) to avoid exchange-rate risk, and gained assurance that any future Azure list price increases would be communicated well in advance, allowing them to adjust usage or pre-purchase Azure credits if needed.
- Transition Planning: With a tentative agreement in hand, Redress guided the company through an orderly transition plan. Unlike an EA which has a set end date, the MCA is an evergreen contract – so the team established internal governance to periodically review license and cloud service usage. They set up quarterly audits of Azure consumption and Microsoft 365 subscriptions to continually right-size their needs (essentially adopting an agile Software Asset Management practice in lieu of the EA’s annual true-up cycle). Redress also ensured that all necessary contractual protections were documented – for example, the negotiated Azure discount rates were locked in for a certain period, and an addendum allowed the company to later add Microsoft 365 licenses via a partner if needed, without requiring a new EA.
- Execution of Switch: As the EA term expired, the supplier seamlessly switched to the MCA. Azure billing transitioned to the new agreement without downtime, and the remaining Microsoft 365 licenses were moved to a monthly subscription model through a cloud solution provider. Redress Compliance oversaw the timing and compliance aspects, ensuring there was no gap in coverage. All departments were briefed on the new processes (such as how requesting new Azure resources worked under the MCA’s self-service portal). The result was a smooth cutover: users and engineers noticed no difference in service, but the company now had a leaner, more flexible contract in place.
Results:
- Cost Savings and Avoided Increases: By negotiating bespoke terms under the MCA, the company kept its Azure costs well under control. In fact, compared to Microsoft’s EA renewal quote, the supplier is projected to save over €10 million in the next three years. This figure accounts for both the negotiated discounts and the ability to trim excess Azure spend over time. Importantly, the feared “10–30% cost surge” from an unmanaged switch to MCA was completely avoided – the company’s IT spend on Microsoft will grow only in line with actual usage, not because of contract inefficiencies.
- Greater Flexibility: The move to an MCA brought new flexibility. The company is no longer locked into a rigid 3-year volume commitment. They can scale Azure resources up or down as needed and adjust Microsoft 365 licenses on an as-needed basis. This agility is crucial in the fast-changing automotive supply sector, where business needs can shift rapidly. If a project is retired or paused, the associated cloud services can be downsized the next month, immediately reducing costs (a stark contrast to the old EA, where they would have paid for the full term).
- Simplified Contract Management: The MCA’s simplified, evergreen nature has reduced administrative overhead. There’s no complex triennial renewal cycle or True-Up drama each year. Procurement and IT now have a single transparent billing account for Azure, with clear visibility into consumption and costs. While the team remains vigilant through quarterly reviews, managing the Microsoft relationship has become more straightforward.
- Maintained Compliance & Support: Despite no longer having an EA, the company remains fully compliant with all Microsoft licensing rules. All necessary licenses for Microsoft 365 were purchased through authorized channels, and Azure usage is automatically tracked under the MCA. The company also found that support is seamless – they continue to receive enterprise-level support for Azure. In fact, by involving a cloud solution partner for some services, they gained an extra layer of support without additional cost.
Quote from the Procurement Lead:
“Moving off the EA was a leap into new territory for us, and frankly, we were concerned about cost overruns. Redress Compliance proved to be an invaluable partner in this transition. They helped us negotiate terms with Microsoft that protected us from the usual cost spikes, and they guided our team on how to manage an evergreen agreement. We’ve ended up with a modern contract that fits our cloud-first strategy – without paying a penny more than necessary. This flexibility and efficiency would have been impossible if we’d simply accepted Microsoft’s initial terms.”
Key Results:
- Savings Achieved: Over €10 million saved (projected over 3 years) versus the costs of a status-quo EA renewal.
- Flexible Cloud Usage: No more fixed commitment – the company can adjust Azure and Microsoft 365 usage monthly, aligning costs directly with actual needs.
- Custom Discounts Secured: Obtained Azure pricing and discounts comparable to former EA levels, mitigating the loss of standard volume discounts.
- Strategic Alignment: The new agreement is fully aligned to the company’s Azure-only, cloud-first direction, proving that licensing strategy can evolve with technological change rather than hinder it.
This case demonstrates Redress Compliance’s expertise in navigating complex Microsoft contract transitions for clients in the automotive and manufacturing sector. By replacing a one-size-fits-all EA with a tailored MCA approach, the company achieved significant cost savings and agility. Redress’s guidance ensured that an Azure-only consumption model became a financial advantage instead of a liability, empowering the German automotive supplier to drive its cloud innovation on its own terms.
