Cost Optimization Strategies Under the Microsoft Customer Agreement
The Microsoft Customer Agreement (MCA) offers enterprises the necessary flexibility to purchase and utilize Microsoft cloud services.
However, this flexibility can be a double-edged sword. Without proper oversight and optimization, organizations may experience cloud sprawl and unexpected budget spikes.
MCA cost optimization matters because it ensures that agility doesn’t come at the expense of financial discipline. Read our complete guide to Microsoft MCA.
In this guide, we’ll explore how CFOs, CIOs, IT procurement leaders, and licensing managers can reduce costs and control spend under an MCA, covering pricing dynamics, license optimization tactics, governance frameworks, and negotiation levers.
Why MCA Cost Optimization Matters
MCA’s flexibility can drive agility, but also lead to overspending if not properly managed. For this reason, MCA cost control has become a top priority for finance and IT leaders.
Here’s why optimizing costs under MCA is crucial:
- Cloud sprawl: Without governance, departments may over-provision cloud resources or subscriptions, leading to unnecessary waste.
- Budget surprises: Pay-as-you-go billing means monthly costs can spike unexpectedly when usage grows unchecked.
- Shelfware licenses: Unused licenses (“shelfware”) can linger without the forced true-up of an EA, quietly draining budgets.
Understanding MCA Pricing Dynamics
The MCA pricing model differs from traditional Enterprise Agreements, so companies must adapt their cost strategies:
- No automatic volume discounts: Unlike EAs with tiered pricing, MCA pricing is often at list rates by default. There are no built-in volume discounts, so you must negotiate or commit to a specific usage level to secure better pricing.
- Flexible billing vs. commitments: MCA allows month-to-month subscriptions for flexibility or annual terms for lower rates. Using monthly licenses for temporary needs and annual licenses for steady usage can strike a balance between agility and savings.
- Consumption can skyrocket: The ease of adding services under MCA means spending can grow quickly. Watch out for hidden costs like underutilized VMs or unnecessary add-ons — without careful monitoring, these can quietly inflate your cloud bill.
License Optimization Under MCA
Optimizing licenses is a primary lever for achieving cost savings under the Microsoft Customer Agreement.
Tactics include:
- Eliminate unused licenses: Regularly audit and remove or reassign licenses that employees aren’t using.
- Scale with your workforce: Increase or decrease license counts in sync with hiring or project turnover so you’re not paying for idle seats.
- Right-size license types: Match each user to the appropriate license level (not everyone needs the most expensive tier). Use more affordable plans for users with lighter needs.
- Trim add-ons: Monitor extra add-on modules (such as security, compliance, and analytics) and disable any that aren’t truly needed.
To understand how it differs from EA, refer to the Microsoft Customer Agreement vs. the Enterprise Agreement.
Procurement Strategies for MCA Cost Savings
Cost optimization under MCA isn’t just about usage – how you buy matters too. Smart procurement moves include:
- Leverage total spend: Consolidate your Azure, Microsoft 365, and other Microsoft usage when negotiating. A higher combined spend can give you leverage to ask for better pricing or credits (a core MCA pricing strategy).
- Utilize Azure cost-saving options: Leverage Azure Reserved Instances and Hybrid Benefit to minimize cloud costs. Committing to one- or three-year reservations for key workloads, and reusing existing on-premises licenses in Azure, can yield substantial savings.
- Consider CSP for niche needs: In some cases, purchasing certain subscriptions through a Cloud Solution Provider (CSP) partner can be cost-effective and may include added services. If a CSP offers a special deal for a specific project, weigh it – just keep governance centralized to avoid complexity.
- Benchmark and push back: Regularly compare your rates and usage with industry benchmarks to ensure you’re getting the best value. If you find that you’re paying above market or not fully utilizing a service, use that data in discussions with Microsoft to seek adjustments or identify areas where you can cut waste.
Read more Microsoft Customer Agreement Negotiation Trends and Tactics.
Governance and Financial Controls
With an MCA, proactive governance replaces the rigid structure of an EA. Put strong financial governance and cost controls in place:
- Adopt FinOps practices: Treat cloud spend like a continuously managed budget. Establish a team or process (FinOps) to continuously monitor and optimize costs across departments.
- Centralize oversight: Establish a central group to track all Microsoft cloud spending. Establish policies (such as approval for large deployments or license orders) to prevent siloed teams from overspending without proper scrutiny.
- Budgeting, tagging, and alerts: Utilize Azure Cost Management tools to set budgets and receive alerts for any cost spikes. Enforce tagging of resources by project or department to hold owners accountable for their usage.
- Continuous “true-up”: Instead of a yearly true-up, perform frequent internal audits of licenses and cloud resources. For example, quarterly reviews can identify and eliminate unused resources, adjusting license counts to ensure spending is aligned with actual needs.
Negotiation Levers Under MCA
Even without a fixed renewal cycle, you can still negotiate with Microsoft to control costs. Key levers include:
- Schedule regular reviews: Create your own negotiation opportunities (e.g., annual or semi-annual business reviews with Microsoft). Discuss your growth plans and request discounts or credits in exchange for anticipated increases in usage.
- Ask for price protections: You may be able to secure price holds or caps on certain services for a specified period. Microsoft may agree to adjust the rate for a critical workload or offer a discount if you commit to a minimum baseline spend.
- Use available incentives: Microsoft often has programs to incentivize cloud adoption (like free Azure credits, funding assistance for migrations, or pilot programs). Always inquire about these – they can offset costs that you’d otherwise pay.
- Document every agreement: Ensure that any promised discount or special term is captured in writing (e.g., amendment, quote, email). This guarantees you receive the agreed-upon savings even if Microsoft personnel change.
Common Cost Optimization Mistakes
Avoid these common pitfalls that can cause overspending under MCA:
- Assuming an MCA works like an EA: Don’t expect automatic volume discounts or periodic true-ups to adjust costs. Under the MCA, costs won’t decrease unless you actively negotiate or optimize your usage.
- Decentralized spending: If every department buys cloud services on its own, you’ll likely pay for redundant or oversized resources. Maintain oversight and coordination to prevent overspending in silos.
- Over-committing on terms: Be cautious about locking into long-term (annual) subscriptions for everything. If you’re unsure whether you need a service for a full year, opt for a monthly plan. It’s better to pay a bit more for flexibility than to be stuck with unused months.
- Skipping usage audits: Without the EA’s enforced check-ins, it’s easy to let usage reviews slide. This leads to paying for things you don’t use. Schedule regular audits to catch idle VMs, orphaned storage, or licenses assigned to inactive users.
Strategic Recommendations for CFOs & Procurement Leaders
To ensure ongoing cost efficiency under MCA, executives should:
- Make optimization ongoing: Establish a recurring MCA optimization program (a dedicated team or regular process) to continually review and improve your Microsoft licensing and cloud usage. Treat cost optimization as a continuous process, not a one-time project.
- Embed finance in IT decisions: Ensure finance and procurement are involved when new cloud services are adopted or when licensing changes are made. Their oversight will keep cost considerations at the forefront.
- Leverage expert advice: Use external advisors or tools to benchmark your deals and ensure you’re optimizing Microsoft licensing costs. They can reveal if you’re overpaying or if others negotiate better terms – insights that strengthen your strategy and negotiation position.
- Think governance, not just contracts: Manage the MCA like a financial system that needs regular tuning. Set clear policies, track metrics (e.g. cost per user, percentage of unused licenses), and hold teams accountable for staying on budget. In short, treat the MCA as an ongoing financial governance effort, not a “set and forget” contract.
FAQ – MCA Cost Optimization
Q: Can I negotiate pricing under an MCA? A: Yes, you can. There are no preset discounts in an MCA so that any price breaks will come from negotiation. If your spend is significant, discuss enterprise discounts or credits with Microsoft – they often won’t offer them unprompted, so you must ask.
Q: How do I avoid overspending with MCA’s flexibility? A: Put guardrails in place. Implement strict cost monitoring (use budgets and alerts) and regular reviews of usage. By enforcing internal policies on who can provision resources and by promptly cleaning up unused assets, you prevent the “pay-as-you-go” freedom from turning into a free-for-all.
Q: Should I choose monthly or annual billing terms? A: Use a mix. Monthly subscriptions cost a bit more but let you drop them anytime – ideal for short-term needs or uncertain headcount. Annual subscriptions are more cost-effective per unit and ideal for stable needs. Evaluate each case: if you’re confident you need a service all year, save money with an annual; if not, stay flexible with a monthly.
Q: Can I combine an MCA with other Microsoft agreements? A: In some cases, yes. Large enterprises may maintain an Enterprise Agreement for certain legacy licenses or pre-negotiated discounts, while utilizing MCA for new cloud services. Others may use a CSP partner for specific solutions in addition to their MCA. This can yield savings, but it requires careful tracking to ensure the hybrid approach truly benefits you and doesn’t introduce complexity.
Q: What’s the most effective cost optimization lever under MCA? A: The biggest gains come from continuous management of your usage. Constantly find and eliminate waste – for example, remove idle resources, right-size workloads, and reassign unused licenses. This day-to-day diligence, coupled with negotiating discounts when you commit to a steady level of usage, delivers the most significant savings.
Read about our Microsoft Negotiation Services.
