How to Optimize Costs in Your Microsoft EA: Eliminating Shelfware and Rightsizing Licenses
Microsoft EA Cost Optimization in 2025
In 2025, cutting unnecessary spend in your Microsoft Enterprise Agreement (EA) is a top priority for IT and finance leaders. Microsoft licensing costs are rising, and new add-ons (like the AI-powered Copilot) are tempting but expensive. Azure cloud usage is surging, often resulting in unexpected overruns.
Cost optimization isn’t just an IT concern anymore – it’s a CFO-level initiative. For a comprehensive overview of Microsoft Enterprise Agreement negotiations, see our ultimate guide to EA strategy and cost optimization.”
By taking a strategic approach to your EA renewal, you can reduce overspend without hindering productivity or digital transformation.
This guide will show you how to identify shelfware, rightsize your licenses, and avoid common cost traps in Microsoft’s cloud and licensing models.
Why Cost Optimization Matters Now
Rising Microsoft Costs: Microsoft has steadily increased prices and introduced premium offerings. For example, Microsoft 365 Copilot (the new AI assistant) can add around $30 per user, per month on top of existing licenses.
On the Azure side, cloud spend often grows faster than budgets. Many organizations face year-over-year cost increases in their EA proposals, even for the same set of products. This trend is pressuring CIOs and CFOs to scrutinize every line item.
Economic Pressures:
In 2025, economic uncertainty and margin pressures mean CFOs demand clear ROI on tech spend. Boards and executives are asking IT to “do more with less”. Optimizing your EA helps free up funds that can be reinvested in innovation or simply improve the bottom line.
Microsoft’s Sales Push:
Microsoft’s sales teams are aggressively upselling bundles and add-ons (security suites, advanced analytics, telephony, etc.). They often propose the most expensive license tiers for all users. Without an optimization strategy, you might over-buy capabilities that go unused. A proactive cost optimization plan helps you push back with data and negotiate a better fit.
New Licensing Changes:
Microsoft is also changing its licensing programs (moving towards the Microsoft Customer Agreement and cloud subscriptions). Volume discounts are being flattened, meaning large enterprises may lose some of their bulk pricing benefits. This makes it even more important to eliminate waste, as you can’t rely solely on high-volume discounts to save money. In short, 2025 is the year to take Microsoft EA cost optimization seriously, staying within budget while empowering your workforce.
Learn about Microsoft EA Negotiation Strategies.
Identify and Eliminate Shelfware
One of the biggest cost drains in Enterprise Agreements is shelfware – licenses you’re paying for but not using.
Identifying shelfware is the first step to cutting costs. Common areas where shelfware hides include:
- Unused Microsoft 365 Seats: It’s common to find users with an expensive Office 365 E5 license who only ever use email and Teams. Or licenses assigned to employees who have left the company. These inactive or over-provisioned subscriptions add up quickly.
- Underutilized Apps and Add-ons: Many organizations have enterprise-wide entitlements for apps such as Visio, Project, Power BI Pro, or Dynamics modules, but only a fraction of users utilize them. For example, if you gave everyone Power BI Pro by default but only the BI team creates reports, that’s shelfware. Similarly, check for Teams Phone or Audio Conferencing licenses assigned to users who don’t need those features.
- Dormant Azure Resources: While Azure isn’t “licensed” in the same way, you can have cloud resources running that nobody uses. VMs left on, orphaned storage, or oversized databases can be considered shelfware in terms of cost. If you committed to a certain Azure spend, unused services are effectively wasted money.
How to eliminate shelfware: Run detailed usage audits across Microsoft 365, Dynamics 365, and Azure:
- Use the Microsoft 365 admin center reports to see active users and feature usage by license type. Identify E5 users with low usage of E5-only features.
- Cross-check HR records to find licenses assigned to former employees or duplicate accounts.
- In Azure, leverage Azure Cost Management tools to find idle resources or low-utilization VMs.
- For each unused or underused license, plan to remove it or downgrade it at the next opportunity (true-up or renewal). Reclaim those costs instead of renewing them for another term.
After the audit, you may discover your organization has 10–30% more licenses than it needs. That insight allows you to reset your EA baseline at a lower level at renewal.
By eliminating shelfware, you stop paying for capacity you don’t use. Not only does this immediately reduce spend, but it also sends a message to Microsoft that you are aware of your environment and won’t pay for unused licenses.
Rightsizing Licenses for Real User Needs
The next optimization step is rightsizing – ensuring each employee has the appropriate level of license for their actual needs.
Microsoft offers a range of license tiers (E5, E3, E1, F3, etc., for Microsoft 365; various Dynamics 365 plans; different Azure SKUs), and the cost differences are significant. Don’t let the one-size-fits-all EA mentality trick you into buying the most expensive option for all users.
Key areas to rightsize:
- Microsoft 365 E5 vs E3 (or E1/F3): Microsoft 365 E5 includes advanced security, compliance, analytics, and voice features, but it costs considerably more than E3. Many organizations find that only a subset of power users or IT staff truly need E5 capabilities, while the average information worker is fine with E3. Some staff, such as frontline or part-time workers, may be satisfied with an F3 (Frontline) license or Office 365 E1 if they only require email and intranet access. By downgrading users who don’t need premium features, you can save $ 20 or more per user per month for each E5 to E3 change. Multiply that by hundreds or thousands of users, and the savings are huge.
- Power BI and Analytics: If your enterprise subscribed to Power BI Premium capacity but only a handful of people produce reports, consider if those users could use individual Power BI Pro licenses instead. Premium gives organization-wide capacity (useful for broad distribution and large data models) but comes at a high monthly cost. Rightsizing might mean switching from a flat capacity fee to per-user licensing, or vice versa, depending on usage patterns. The goal is to match the license model to your actual usage scale.
- Teams and Phone Plans: Not everyone needs a full Teams Phone with a Calling Plan or advanced meeting add-ons. Audit which employees use PSTN calling or webinar features. You may be able to purchase a smaller set of Concurrent Calling resources or leverage alternatives for occasional users, rather than licensing everyone.
- Security and Compliance Add-ons: Rather than purchasing the top-tier license for every user to gain advanced security, consider a mix-and-match licensing approach. For example, you could license just your security team or high-risk roles with the full EMS E5 or Microsoft 365 E5 Security suite, and provide others with a lower tier plus selective add-ons, such as Azure AD Premium P1/P2 or Microsoft Defender licenses, where needed. Microsoft’s licensing allows combining plans, though it can be complex – the effort is worth it to avoid overpaying for features that only certain roles require.
Steps to rightsize effectively:
- Profile your users: Categorize users by role, department, and technical needs. Who uses advanced analytics? Who needs voice or phone system features? Who requires top-tier security? Many organizations create personas or profiles (e.g., Basic Office Worker, Power User, Frontline Staff, Developer, etc.).
- Map licenses to profiles: For each profile, determine the most cost-effective license that meets their needs. For instance, a “Basic Office Worker” might only need Microsoft 365 E3, with perhaps a Teams Phone Standard add-on if they require calling, whereas a “Security Analyst” might justify an E5 or an E3 with a Security add-on.
- Pilot and validate: If unsure, run a pilot by downgrading a small group to the proposed lower license to ensure they don’t lose essential functionality. Most users won’t notice the difference if you plan correctly (for example, a user going from E5 to E3 will lose some advanced features, but if they never used them, it won’t impact their work).
- Execute at true-up or renewal: Implement the rightsizing changes at your next contract milestone. This could be an annual true-up (where you can usually adjust counts upward, and sometimes remove unused licenses) or at the EA renewal. Ensure your new EA quote reflects the new mix of licenses.
- Ongoing monitoring: Establish a process to review license utilization regularly (quarterly or biannually). As roles change or new features roll out, continually realign licenses. Rightsizing is not a one-time task – it’s an ongoing discipline.
By aligning licenses with actual needs, you avoid paying for premium features that go unused. The result is an EA that delivers the same business value at a much lower cost. Rightsizing typically yields some of the largest savings in Microsoft EA optimization efforts.
Leverage Software Assurance Benefits
If your organization has Software Assurance (SA) as part of your Microsoft volume licensing, make sure you’re getting every benefit you’ve paid for. Software Assurance is an add-on program (often 25% of the license cost per year) that provides extra rights and perks. Too often, companies buy SA and then forget to utilize the benefits, effectively wasting money or paying for things separately that SA already covers.
Key Software Assurance benefits to leverage in 2025 include:
- Training Vouchers and Learning Resources: SA traditionally offers training vouchers that can be converted into instructor-led training days or workshops for your IT staff. Microsoft has been transitioning these into enterprise Skilling Initiatives and Microsoft Learn credits, but the core idea remains: you have pre-paid training hours. Use them to upskill your team on the Microsoft technologies you already own. This ensures you fully utilize product capabilities (getting more value for the license cost) and avoids spending additional budget on external training.
- Planning Services / Advisory Days: Many EA customers are entitled to planning services days (now often rolled into FastTrack or other programs) where Microsoft or a partner will help you plan deployments or migrations. Don’t ignore these; use them for tasks such as cloud migration plans, SharePoint deployment guidance, or Dynamics CRM optimization. It’s expertise you’d otherwise pay consultants for – but it’s included with your SA.
- License Mobility and Hybrid Rights: SA provides you with flexible use rights that can help save significant costs in cloud scenarios. For example, License Mobility through SA lets you take certain server licenses (like SQL Server or Exchange) and run them on cloud infrastructure (Azure or even AWS) without buying new licenses. Similarly, the Azure Hybrid Benefit allows you to use your on-premises Windows Server or SQL Server licenses (with active SA) to cover Azure VM instances, often cutting cloud VM costs by 40-50%. These benefits mean you’re not paying twice for the same software – one of the biggest cost traps to avoid.
- Failover and Disaster Recovery Rights: With SA, you typically have the right to set up passive secondary instances of servers (for example, a backup database server or a failover SharePoint farm) without additional licenses. If you’re not using this, you might be over-licensing your DR environment. Ensure your architecture takes advantage of this benefit to avoid double payment for standby systems.
- New Version Rights and Upgrades: SA ensures you can upgrade to new versions of on-premises software (Windows, SQL, Office, etc.) without needing to purchase new licenses. This is a cost-saving over buying upgrades outright. Even if you’re cloud-focused, you may still have legacy systems – use SA to keep them up-to-date and secure without incurring additional expenses.
The key principle is: don’t pay for something separately if it’s already bundled into your EA via Software Assurance.
Review the benefits your organization is eligible for (Microsoft provides a Software Assurance Benefits report for your agreement).
Assign internal owners to each benefit (for example, an IT training lead to use vouchers, or an infrastructure lead to implement Hybrid Benefits). By fully leveraging SA, you squeeze maximum value from the licenses you’ve bought and trim down any redundant expenses.
Explore Alternatives – CSP and MPSA
An EA is not the only way to buy Microsoft licenses and cloud services. In fact, depending on your organization’s size and needs, alternative licensing channels like the Cloud Solution Provider (CSP) program or the Microsoft Products and Services Agreement (MPSA) might save you money or offer more flexibility.
Even if you ultimately stick with an EA, exploring these options gives you leverage in negotiations.
Cloud Solution Provider (CSP):
CSP lets you buy Microsoft subscriptions (like Microsoft 365 or Azure) through a Microsoft partner on a pay-as-you-go basis, typically with monthly billing.
The advantages for cost optimization include:
- No Long-Term Commitment: You can increase or decrease license counts on a month-to-month basis. This flexibility means you only pay for what you use. If you have seasonal staff or are unsure about a product’s adoption, CSP can prevent the over-purchase that happens in a fixed three-year EA.
- Granular Purchases: In CSP, you can buy services in smaller quantities or even one-off, which is useful if your organization is below EA minimums for certain products or if you only need a handful of a certain license for a short time.
- Potential Cost Savings: While CSP per-unit prices can be slightly higher than a heavily discounted EA price, you save by not over-buying. Organizations that switch some workloads to CSP often find 10-20% overall savings by eliminating the “shelfware” inherent in overcommitment. Additionally, CSP providers may bundle in support or managed services that you’d pay extra for with an EA.
- Negotiation Leverage: Showing Microsoft that you are willing to move to CSP (or already have moved certain projects to CSP) signals that you demand flexibility. Microsoft may respond with better EA concessions to keep your business under the EA.
MPSA (and Other Agreements):
The MPSA is a transactional licensing agreement for purchasing Microsoft software and cloud services, allowing organizations to avoid committing to an organization-wide contract. It’s often suited for mid-sized organizations or specific purchases:
- Buy Only What You Need: Under MPSA, you can purchase licenses (including cloud subscriptions or perpetual software) in the quantities you actually need, when you need them. This can avoid the EA practice of overestimating needs three years out.
- No EA Minimums: EAs typically require 500-user minimums (or 250 in the public sector) and enterprise-wide coverage of certain products. If your usage doesn’t fit those molds (e.g., you only want 100 seats of a certain product), MPSA or even direct Microsoft web purchase might be more cost-effective.
- Mix and Match: Some organizations keep an EA for core products and use CSP/MPSA for specific niche needs or pilot programs. For instance, if you want to try 50 licenses of a new Dynamics 365 module, using CSP on a month-to-month basis might be a smarter approach than adding it to your EA for three years.
When considering alternatives, also look at the Microsoft Customer Agreement (MCA), which is Microsoft’s newer direct purchasing program for Azure and other services (replacing the old EA for pure cloud buying).
The bottom line is to evaluate your options. Use quotes from CSP providers or the flexibility of MPSA as a bargaining chip in EA renewal talks.
Microsoft often prefers to keep you in an EA, so they might offer price matches or additional discounts if they know you have a viable alternative.
Avoid Costly Azure Overcommitments
Azure spend has become a major component of many EAs. Microsoft often encourages customers to make a large upfront commitment to Azure consumption in exchange for a discount or incentive.
While discounts are nice, an overcommitment on Azure can erode any savings if you end up paying for capacity you don’t use. It’s essentially shelfware in the cloud. Avoiding overcommitment is a crucial part of EA cost optimization.
The risk: If you commit to, say, $1 million of Azure usage per year but only consume $700k, you’ve effectively wasted $300k annually because you’ll still pay the committed amount.
Overcommitment typically occurs when organizations overestimate their cloud migration pace or scope, or when they purchase more Azure Reserved Instances and subscriptions than necessary.
How to optimize Azure costs in your EA:
- Analyze Current Usage Trends: Before signing a new EA or Azure consumption commitment, do a thorough analysis of your existing Azure usage. Use Azure Cost Management reports to identify your baseline spend and growth rate. Identify which workloads are steady vs. which are experimental or might be scaled down.
- Forecast Realistically: Work with your engineering teams to forecast the next 1-3 years of Azure needs based on project roadmaps. Be realistic and even a bit conservative. It’s usually easier to add more Azure services later than to get money back for unused commitments. If a big project is uncertain or late in the pipeline, don’t include it fully in the commit.
- Secure Flexible Terms: When negotiating the Azure component of your EA, ask for flexibility. For example, negotiate annual adjustments or checkpoints that allow you to revise your commitment up or down based on actual usage. If Microsoft wants your commitment, they might agree to clauses that allow carrying over unused funds to the next year or adjusting the commitment if consumption is lower than expected.
- Use Azure Hybrid Benefits and Reservations Wisely: As mentioned, utilize Hybrid Benefit for any eligible Windows/SQL workloads to reduce costs (and correspondingly reduce how much you need to commit). For predictable workloads, Azure Reserved Instances (RIs) or Savings Plans can provide discounts; however, purchase them in alignment with your actual needs. Don’t over-buy 3-year reserved instances for a workload that might be downsized or optimized next year.
- Monitor and Right-Size Continuously: Cloud environments change rapidly. Implement a governance process to review Azure spend monthly. Use automation to shut down or scale down resources during off-hours. The goal is to keep actual usage efficient so you’re never wildly under the commit. If you notice usage is far below expectations, engage with Microsoft early – sometimes they can convert some of your commitment to other services or offer services (like Azure credits for consulting) to make up for the value, rather than it going to waste.
Avoiding overcommitment ensures that every dollar you spend on Azure is working effectively for your business.
It also keeps your finance team happy by preventing the dreaded scenario of writing a big check for cloud services that didn’t deliver business value.
In negotiations, it’s perfectly reasonable to start with a smaller Azure commitment and increase it later once you see actual usage growth, rather than the reverse.
FAQ – What to Do Next
Q1: When should we start preparing for EA cost optimization?
A: Ideally, start 12–18 months before your EA renewal. This gives you time to audit usage, identify shelfware, and plan license changes. Early preparation enables you to enter renewal discussions with clear data and a well-defined strategy. Even if your EA is mid-term, start now by tracking usage and identifying savings opportunities – you can often make mid-term adjustments (such as re-harvesting unused licenses) or at least be prepared when the renewal window opens. Early planning prevents last-minute scrambling and puts you in control of the timeline rather than rushing to meet Microsoft’s deadlines.
Q2: What’s the fastest way to find cost savings today?
A: Conduct a usage audit to uncover shelfware. This is the quickest win. Pull reports on Microsoft 365 and Dynamics 365 license assignment vs. actual usage. Identify users who haven’t logged in or are using only a tiny fraction of the services. Also review Azure for any obvious idle resources (e.g., VMs running at 5% CPU or storage that hasn’t been accessed in months). By turning off or reclaiming these unused licenses and resources, you can start saving money immediately – even before any formal EA negotiations. Many organizations can trim a substantial percentage of costs simply by optimizing what’s not being used.
Q3: How can we stop paying for features users don’t need?
A: Implement a rightsizing plan. This means matching each user to the correct license level and removing or downgrading any unnecessary items. Start by segmenting your users (by role, department, usage pattern). Then adjust licensing: if users don’t need advanced E5 features, place them on E3; if they don’t require desktop Office apps, perhaps Office E1 is sufficient; provide heavy Power BI or security users with the necessary add-ons, but don’t blanket everyone with the most expensive bundle. Education is key, too – communicate to department heads that not everyone should expect an E5 license by default. By tailoring licenses to needs, you stop paying for high-end features that most employees never touch.
Q4: What’s the smartest way to avoid Azure overcommitments?
A: Treat Azure like a utility – only commit to what you’ll realistically consume. To achieve this, establish a tight feedback loop between your cloud engineering team and those responsible for negotiating licenses. Utilize detailed metrics and dashboards to monitor current Azure usage and growth. When planning an EA or Azure agreement, break the commitment into smaller increments if possible (e.g., yearly commitment targets rather than one big three-year promise). Also, consider keeping some of your Azure usage on a pay-as-you-go basis (or in a CSP arrangement) for flexibility, rather than locking everything into a prepaid commitment. The smartest move is to base commitments on data and to push Microsoft for terms that allow for adjustments if reality differs from the forecast. Remember, it’s easier to scale up cloud spend than to deal with overcommitted waste.
Q5: If we only take one action now, what should it be?
A: Start with a comprehensive EA license audit. This single action lays the groundwork for all other optimizations. Get a detailed inventory of all Microsoft licenses and cloud services you’re paying for, and measure usage for each. This will highlight the biggest pain points – perhaps you discover 500 unused licenses, or that 20% of users could be downgraded from E5 to E3, or that your Azure dev/test environment is costing $ 50,000 a month in idle costs. An audit yields a prioritized list of cost-saving opportunities. With that insight, you can tackle the largest wastes first and quickly demonstrate savings. It also equips you with facts to bring to Microsoft or an expert consultant, so any further optimization or negotiation is based on your actual data. In short: shine a light on your current usage – you can’t optimize what you don’t measure.
By taking these steps, you’ll transform your Microsoft EA from a costly commitment into a lean, efficient investment that truly matches your organization’s needs. Cost optimization in Microsoft EAs is an ongoing journey, but with the right approach, you can achieve significant savings while still empowering your users with the tools they require.
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