Microsoft Customer Agreement (MCA) Guide for Enterprises

Microsoft Customer Agreement (MCA) Guide for Enterprises

Large organizations are re-evaluating how they purchase Microsoft software and cloud services. Microsoft’s traditional Enterprise Agreement (EA) has long been the go-to licensing vehicle for enterprises, but Microsoft is introducing the Microsoft Customer Agreement (MCA) as a flexible alternative.

This guide provides an advisory overview of the MCA in a format similar to a Gartner report. It is aimed at sourcing professionals, CIOs, and IT leaders managing Microsoft licensing.

We outline the MCA, how it differs from an EA, key terms and structures, cost optimization approaches, risks to watch for, negotiation tips, and scenarios where enterprises might adopt the MCA.

Finally, we provide strategic recommendations in What Enterprises Should Do Now.

What is the Microsoft Customer Agreement (MCA)?

The Microsoft Customer Agreement (MCA) is a modern licensing contract designed to simplify and streamline organizations’ purchases of Microsoft cloud products and services.

Unlike legacy volume licensing contracts, the MCA is transactional and evergreen; it does not expire or require a multi-year commitment.

Enterprises accept a digital agreement that covers the terms and conditions for Microsoft offerings they consume. The agreement automatically updates as new services are added. This modular approach means you only agree to terms relevant to the products you use.

Key characteristics of the MCA include:

• Flexible Purchasing: The MCA allows pay-as-you-go purchasing of cloud services like Azure, Microsoft 365 (Office 365), Dynamics 365, Power Platform, and more. You pay only for what you use or subscribe to without a mandated upfront purchase. It was introduced to replace more rigid agreements (such as the Microsoft Online Subscription Agreement and Microsoft Products & Services Agreement) with a nimbler model.
• No Fixed Term: An MCA does not have a fixed contract duration. It’s an evergreen agreement that continues until terminated, unlike an EA’s fixed three-year term. Customers can start or stop services as needed, subject to the cancellation rules of each service (for example, certain subscriptions may require a full month or year commitment once provisioned).
• Digital and Streamlined: The entire agreement process is digital. Enterprises can accept the MCA online in minutes. As they add new services (e.g., adding Dynamics 365 licenses or spinning up a new Azure service), the relevant terms for those services are appended to their agreement automatically. Compared to negotiating lengthy EA documents and amendments, this reduces paperwork and administrative overhead.
• Scope of Services: The MCA initially covered cloud subscriptions and services. As of 2024, organizations can procure Azure services and seat-based cloud subscriptions (Microsoft 365, Dynamics 365, etc.) through the MCA. Microsoft has been gradually expanding the MCA to cover a broader range of products; over time, it is expected to encompass most Microsoft offerings, aligning with Microsoft’s push to simplify purchasing under one umbrella agreement. (The MCA available via partners already supports purchasing on-premises software licenses, such as perpetual licenses, but these often come without Software Assurance benefits, a point we discuss later.)

The MCA represents Microsoft’s move toward a more flexible, cloud-centric purchasing experience. It’s especially attractive to organizations that want agility in scaling their licenses and cloud consumption without being locked into a multi-year volume contract.

Read Microsoft MCA Pitfalls to Avoid: Common Mistakes in Azure Agreements.

How the MCA Differs from a Traditional Enterprise Agreement (EA)

For enterprises accustomed to the EA, understanding the differences in structure and commitments is crucial.

The EA and MCA take very different approaches to licensing:

• Contract Length & Commitment: An EA is a three-year commitment (with an optional extension year or renewal at the end) where the customer commits to a certain suite of products enterprise-wide. The MCA has no fixed term – it’s open-ended, with services added or removed as needed. This means MCA customers aren’t locked into a long-term contract; they can adjust their usage more fluidly.
• Minimum Requirements: The EA is geared toward large enterprises – it typically requires at least 500 user or device licenses (and in some cases 2,400 users for certain programs or geographies). Under an EA, customers often must cover all “qualified” users or devices with certain enterprise products. In contrast, the MCA has no minimum seat requirement or all-or-nothing coverage rule. It’s viable for any size, from one user to tens of thousands, and you buy only what you need.
• Upfront Costs vs. Pay-as-You-Go: EA customers often negotiate volume pricing and make an upfront financial commitment (such as an annual license payment or an Azure monetary commitment). The EA can provide volume discounts if you commit to a large quantity. The MCA operates on pay-as-you-go pricing with no upfront purchase commitment for most services. Costs under MCA are incurred as subscriptions are provisioned or as Azure consumption accrues. This can lower the barrier to entry (you don’t pay upfront for unused capacity). However, discounts under MCA are typically smaller unless you voluntarily commit to certain spending levels (e.g., an Azure consumption commitment).
• Pricing and Discounts: In an EA, pricing is negotiated typically based on volume (tiered price levels) and fixed for the term, providing price protection for 3 years on the products you’ve committed to. Under the MCA, pricing is generally at Microsoft’s standard rates (“web pricing”) for cloud services, which Microsoft can adjust periodically. Large enterprises moving to an MCA might not automatically get the same deep discounts they had under an EA. However, custom discounts under MCA can be arranged in certain cases (often tied to committing to a certain cloud spend or growth target). For example, an organization might negotiate an Azure consumption discount if it commits to spending a specific amount over a year. Still, these are case-by-case and not as formalized as EA volume discounts.
• Billing Cadence: With an EA, enterprises usually pay annually (or even all three years upfront in some cases). True-ups for over-usage are done yearly, and any additional costs are settled at the anniversary. With the MCA, billing is more frequent and usage-based, typically monthly billing for what was consumed or subscribed to in the prior month. Annual billing options exist for certain subscriptions (you can be billed annually for an annual term license under MCA if preferred), but the key point is that the timing is flexible. This monthly cadence can help manage cash flow and provide immediate spending insight.
• Ability to Scale Up or Down: One of the biggest differences is the flexibility to adjust license counts. Under an EA, you can increase licenses during the year but generally cannot reduce your license count until the EA term expires (and even then, reductions might be limited for certain products). Your true-up increases annually (paying retroactively for added use), and then those additions become part of your baseline in the future. Under the MCA, you can often scale licenses up and down dynamically. If you only need 100 Azure virtual machines this month instead of 150 last month, you pay for 100; if an employee leaves and no longer needs their Microsoft 365 license, you can cancel that subscription (effective at the end of the current billing period). The EA provides flexibility within a structured annual true-up, but the MCA allows real-time or month-to-month adjustments, which is a boon for organizations with fluctuating needs.
• Enterprise-Wide Coverage: The EA’s ethos is standardization – typically, an EA covers all users for certain key software (for example, an “Enterprise” product like Office or Windows Enterprise must be assigned to all qualified PCs). The MCA does not require enterprise-wide coverage. You can purchase the number of licenses for each service you require for a subset of users or projects. This granularity is helpful if only parts of your organization need a certain product.
• Product Coverage: Historically, EAs covered both cloud services and on-premises software, often bundled with Software Assurance (SA) benefits for upgrades, support, etc. The MCA is cloud-focused. It easily covers Microsoft’s cloud service subscriptions. If you need traditional on-premises licenses with Software Assurance (for example, Windows Server or SQL Server with upgrade rights), the MCA alone won’t provide SA; you might need a separate purchasing route (like a legacy MPSA or select agreement) for those or purchase perpetual licenses via a CSP without SA. Microsoft is transitioning on this point, as it has started offering perpetual licenses through CSP partners (under the MCA framework) but without SA, meaning no guaranteed upgrades or rights to run older/newer versions. In short, EA is still the primary vehicle for on-premises software with SA, whereas MCA is oriented to cloud subscriptions (and perpetual without SA).
• Support & Services: The EA often involves a Licensing Solution Provider (LSP) and a Microsoft account team. In contrast, support (like Premier/Unified Support) is a separate offering; EA customers typically work closely with Microsoft or their LSP for planning and support issues. Under an MCA, standard support is not included by default. If you buy through a partner (CSP), that partner may bundle basic support or managed services. If you buy directly from Microsoft under MCA, you must purchase a support plan (such as Microsoft Unified Support) separately – support is “unbundled” from the licensing agreement. Additionally, without an LSP managing your account, as in an EA, enterprises may need to be more self-sufficient or engage independent experts for licensing guidance.
• Custom Terms & Negotiation: The EA is a negotiated contract – large enterprises often add custom terms or additional clauses via amendments (for example, special transition rights, pricing protections, or merger/acquisition-related terms). The MCA is a standardized agreement with limited room for customization. Microsoft has designed it as a click-through contract; only a narrow set of predefined amendments (mostly for regulatory compliance needs like HIPAA or GDPR-specific assurances) can be attached. There isn’t an opportunity to negotiate the contract language as heavily as possible with an EA. This means enterprises with unique requirements might find the MCA less accommodating. Also, negotiation leverage works differently: in an EA, the renewal event every 3 years is a big negotiation moment. An MCA’s continuous model has no equivalent renewal deadline, which can diminish an enterprise’s perceived leverage to negotiate discounts or concessions. Enterprises must find other triggers (such as planning a major increase in cloud usage or a competitive alternative) to initiate negotiations under an MCA.

Table: EA vs. MCA – Key Differences

Aspect	Enterprise Agreement (EA)	Microsoft Customer Agreement (MCA)
Contract Term	3-year fixed term (commitment)	No fixed term; evergreen agreement
Minimum Purchase	Typically >=500 users/devices; enterprise-wide coverage for core products	No minimum requirement; buy only what you need (no organization-wide mandate)
Financial Commitment	Upfront/annual commitment to set quantities or spend (locked-in volume)	No upfront commitment; pay-as-you-go for usage (option to commit for discounts)
Payment Schedule	Annual payments (or upfront for the entire term); true-ups for overuse yearly	Monthly billing by default (with options for annual billing on certain subscriptions)
Pricing & Discounts	Discounted volume pricing, price locked for term	Standard pricing (potentially higher unit cost); discounts only for agreed high spend or growth; price protection only for the duration of a subscription term (e.g. 1-year)
Ability to Reduce Licenses	Limited – reductions only at renewal (except cloud subs with cancellation rights)	High – can reduce or cancel subscriptions at the next billing cycle (monthly or end-of-term for annual subscriptions)
Product Scope	Broad: cloud services + on-prem licenses (with Software Assurance for upgrades)	Focused on cloud services; on-premises perpetual licenses available via CSP, but no Software Assurance included
License Management	Managed via Volume Licensing Service Center (VLSC) and EA portal; true-up reports annually.	Managed in real-time via Microsoft 365/Azure portals; consolidated billing account with self-service management
Support & Advisory	LSP and Microsoft account rep provide licensing advice; support is not included (sold separately), but EA customers often have Premier/Unified support aligned	No LSP by default (unless buying through a partner); if direct, must manage licensing internally or with consultants; support must be added separately or obtained via a partner in a CSP scenario
Contract Customization	Possible to negotiate custom terms/amendments in the contract (pricing, legal terms, etc.)	Little to no customization; standard terms except a few predefined regulatory clauses. Negotiation mainly on discounts/incentives outside the boilerplate contract.
Renewal Cycle	Renewal every 3 years is a major negotiation point	No set renewal – the contract is continuous. Must proactively manage and renegotiate aspects (e.g. new discounts) on an ongoing basis.

Implications: In essence, the EA favours stability, predictability, and volume-based economics, whereas the MCA emphasizes flexibility, agility, and simplicity.

An EA might offer better unit pricing and long-term predictability for a static or growing environment.

At the same time, an MCA can reduce waste and improve agility for organizations with changing needs. Enterprises should weigh these differences against their business priorities.

For example, a fast-scaling startup division may thrive under MCA’s flexibility, while a stable, large workforce might prefer the known costs of an EA.

The next sections delve deeper into how the MCA is structured, the purchasing channels, and how to optimize costs under this new model.

Read Microsoft EA vs MCA.

Structure and Key Terms of the MCA

Understanding the structure, scope, and key terms of the Microsoft Customer Agreement is critical before adopting it. The MCA’s framework differs from a traditional negotiated volume license contract.

Key elements of the MCA’s structure include:

• Evergreen Agreement Structure: When an enterprise signs up to an MCA (often by simply clicking acceptance online via the Microsoft portal or with a Microsoft representative), that agreement becomes the master contract for all future purchases. It has no expiration date. The relationship is “open-ended” until either party (customer or Microsoft) terminates the agreement. This evergreen nature means there isn’t a regular renewal event to renegotiate terms; instead, the agreement is continually active, and you add or remove products under it over time. The MCA is modular – it references Microsoft’s standard Product Terms and Online Services Terms documents for the legal details of each product. As Microsoft updates product terms or adds new services, your agreement dynamically includes those updated terms. Practically, this means less paperwork for you and that you must stay updated on Microsoft’s published terms (since they can evolve and will apply to you automatically).
• Billing Accounts and Profiles: Under the MCA, an enterprise typically gets a Billing Account in the Microsoft commerce system when purchasing directly from Microsoft. Within this account, you can set up billing profiles (for example, to have separate invoices for different departments or regions). All your Azure and other service subscriptions roll up to this billing account. The invoicing is consolidated across all Microsoft cloud services you consume under the MCA, simplifying accounts payable. The invoice will show charges per service or subscription, and enterprises can often customize how charges are grouped (e.g., by project or department) using billing profiles and tagging of resources (particularly in Azure). This is an improvement in billing transparency and flexibility compared to the older EA invoice format.
• Service Subscription Terms: The MCA is just the overarching purchasing agreement; the services you consume each have their subscription terms. For instance, if you purchase Microsoft 365 E5 licenses under the MCA, you will typically choose a subscription term for those licenses (monthly or annual). In Microsoft’s new commerce system, seat-based subscriptions (Microsoft 365, Dynamics 365, etc.) can be monthly-term (month-to-month) or annual-term (one-year commitment), or even a 3-year term for certain products. If you choose a monthly term, you have full flexibility to decrease or cancel those licenses any month (those subscriptions renew automatically each month). If you choose an annual term, you are committing to paying for those licenses for the full year (even if you drop users mid-year, you generally cannot reduce the license count until the end of that annual term). The benefit of an annual term is usually a lower price (Microsoft incentivizes longer commitments with discounting compared to month-to-month pricing). This mix-and-match approach lets enterprises decide how flexible or cost-efficient they want per workload. For example, you might put your permanent staff’s Office 365 licenses on annual commitments for cost savings, but use monthly terms for contingent staff or project-based needs so you can scale down when projects end.
• Azure Billing and Commitments: If your organization uses Azure, the MCA structure handles Azure differently than an EA would. Under an EA, Azure was often handled via an upfront monetary commitment (you commit to spend a certain amount on Azure over 3 years, often with an upfront monetary prepayment that you draw down). Under the MCA, when buying Azure services, you typically create an Azure Plan under your MCA’s billing account. By default, this Azure Plan is pay-as-you-go – you incur charges for Azure usage each month at published rates, and Microsoft bills you monthly for the actual usage. However, enterprises can enter a Microsoft Azure Consumption Commitment (MACC) even under an MCA. A MACC is essentially a deal where you commit to spending $X on Azure over a certain period (e.g., over 1 year or 3 years) in exchange for an Azure commitment discount (ACD) or other benefits (like Azure credits or funds for services). With an MCA, Azure commitments are more flexible in length. Microsoft might allow 1-year or 3-year Azure commitments that overlay onto the MCA. It’s important to note that a MACC under MCA is not the same as an EA monetary commitment because it doesn’t require an EA contract; it’s a purchase order commitment under your MCA billing account. If you do commit, you will be charged upfront (or periodically) for that committed amount and receive discounted rates or credits. If you don’t consume the full commitment, typically, those funds are “use it or lose it”, – so committing requires careful forecasting.
• Cancellation and Modifications: The MCA terms permit cancellation of services, but the rules depend on the service type. There’s no cancellation for perpetual software purchases made via MCA (through a CSP channel) – you bought a license outright. For Azure consumption, you stop using the resource to stop charges (there’s no “cancel Azure” needed beyond turning off services). For subscription licenses (M365, Dynamics, etc.), Microsoft’s cancellation policy under new commerce is that annual term subscriptions can be cancelled only within a short window (typically 72 hours) after purchase or renewal; otherwise, you are locked in for the term, whereas monthly term subscriptions can be cancelled at the end of any month. This is a critical detail for enterprises to understand. While MCA is flexible, if you opted for a longer subscription term to save money, you can’t just back out without penalty until that term is complete. In practice, this is still far more flexible than an EA because you have opportunities every month or year to adjust different sets of licenses rather than a single 3-year lock-in.
• Cloud Marketplace Purchases: Another aspect of the MCA framework is that it can encompass purchases via marketplaces. For example, if you buy a third-party software SaaS subscription through the Azure Marketplace or Microsoft AppSource, those charges appear on your MCA billing and invoice. The MCA also covers the terms for marketplace purchases (usually incorporating the publisher’s terms). This means your cloud spend is consolidated, but enterprises should govern marketplace purchases to avoid sprawl since it’s easy for departments to click and buy solutions that then show up on the bill.
• Terms and Conditions: The MCA’s legal terms are standardized. They cover liability, data protection (Microsoft’s Data Protection Addendum covers GDPR, etc., and can be appended), compliance verification rights for Microsoft (we will discuss compliance later), and other standard clauses. Unlike an EA, where you might negotiate liability caps or custom clauses, the MCA generally doesn’t allow altering these terms (Microsoft uses the same core agreement for everyone, with perhaps slight variations for the public sector or region). One noteworthy element is that Microsoft’s audit and compliance rights are part of the MCA. Customers agree that Microsoft can verify compliance and request audits by signing it. In practice, this was also true in EA, but Microsoft emphasizes that moving to an MCA doesn’t remove their ability to hold customers accountable for licensing misuse.
• Software Assurance and Legacy Benefits: Traditional EAs often included Software Assurance benefits (like training vouchers, planning services, upgrade rights, and license mobility for servers). With an MCA, there is no Software Assurance program. You will not get those through MCA purchases if you require new version rights for on-prem software or license mobility to move licenses to the cloud. Some cloud subscriptions inherently include similar benefits (for example, Microsoft 365 includes ongoing updates, and certain Azure-based services have hybrid use rights if you bring licenses). But suppose your enterprise relies on specific SA benefits (like spreading payments annually for perpetual licenses or getting step-up licensing). In that case, you will need to plan for how to manage that, potentially by retaining a small volume licensing agreement or shifting to subscription equivalents. Microsoft’s strategy is to phase out SA in favour of subscription models or separate support offerings, but this is a gap to be aware of during the transition.

In summary, the MCA’s structure revolves around flexible service subscriptions under a continuous agreement, with self-service billing and service management. Enterprises will find it a very different experience from the EA administrative process.

The next section will examine how to enter an MCA via different channels—either through Microsoft Direct or a partner—and what that means for your organization.

MCA via Cloud Solution Provider (CSP) vs. Other Purchasing Channels

Enterprises considering the MCA will encounter two main avenues to sign onto this agreement: directly with Microsoft (often called MCA-E for “Enterprise” motion) or indirectly via a Cloud Solution Provider (CSP) partner.

The MCA framework is largely the same in both cases regarding legal agreement, but the purchasing experience and some terms differ.

Here’s what to consider:

• Direct with Microsoft (MCA-E): Larger enterprises (typically those with direct EA customers with Microsoft or those above a certain size threshold, such as ~2,400 users) may be offered an MCA through a direct Microsoft relationship. In this scenario, you work with a Microsoft account representative to set up your MCA. Microsoft bills you directly and manages the account. This is often called the “Enterprise Motion” of MCA (hence MCA-E). The advantage of going directly is maintaining a direct line with Microsoft for sales and potentially negotiating custom deals (for example, an Azure consumption commitment with a discount or some incentive funds) more directly. However, because the MCA-E bypasses the traditional Licensing Solution Provider (LSP) partner, you do not have a partner automatically providing licensing advisory services. Many enterprises have leaned on LSPs to help with compliance, true-ups, and optimization during EA cycles. Under a direct MCA, that support is not included – your organization must either have internal licensing expertise or seek help from independent licensing consultants. Microsoft’s account team may assist with quoting and onboarding. Still, they will not provide the same level of licensing optimization advice as an independent party might have, since Microsoft’s interest is in selling more services. This lack of a built-in partner means enterprises should be prepared to manage more day-to-day licensing decisions under MCA-E.
• Via a Cloud Solution Provider (CSP): Small and mid-sized organizations, and even some larger ones that prefer partner support, can consume Microsoft services under the CSP program. CSP is an indirect channel where a certified Microsoft partner (such as a global systems integrator, reseller, or MSP) sells you Microsoft subscriptions and cloud services. When you buy through a CSP, you typically still sign a Microsoft Customer Agreement (the partner facilitates your acceptance of it digitally). Still, the partner handles the billing and front-line support. The partner can often offer value-added services: they might have a portal for managing licenses, provide consolidated billing for multiple vendors (if they also resell other software), or include advisory services to help optimize your Microsoft spend. The CSP Model under MCA is essentially the “Breadth Motion” for customers under roughly 2,400 users or those not considered large enterprise accounts by Microsoft. In CSP, the partner controls the pricing to some extent – Microsoft sets a wholesale price, and the partner adds their margin, which means you might see pricing variability. Some CSP partners offer discounts off Microsoft’s list prices (especially for large deals or competitive situations) or bundle in free services, whereas others charge list prices but promise better service. An enterprise can choose a CSP partner that aligns with its needs (for example, a partner specialized in Azure cost optimization if that’s a priority).
• Quality of Licensing Expertise: The partner’s capability is a critical consideration in the CSP route. Partners vary in expertise; a top-tier global partner or a specialist licensing advisor can guide you well on license compliance and optimization, but a less experienced reseller might not fully understand complex Microsoft licensing nuances. If you move from an EA with Microsoft to a CSP partner, you are effectively outsourcing a lot of licensing management to that partner, so due diligence is needed. Check their certifications, experience with large clients, and whether they have dedicated Microsoft licensing specialists. Remember that under CSP, missteps in licensing (like misconfiguring subscriptions or not understanding a licensing rule) are ultimately the customer’s responsibility, even if the partner manages the account.
• Differences in Terms or Benefits: Whether you buy directly or via CSP, the core MCA terms (like no contract expiration, etc.) remain the same, but there are some differences:
  • Pricing & Discounts: In direct MCA-E, Microsoft typically charges you standard prices (though you might negotiate a deal for certain items). The partner could give you a better license deal in CSP if they reduce their margin or have promotions. Conversely, a partner could charge slightly more than Microsoft’s list price if they bundle services. It’s a more open market. Enterprises may leverage this by soliciting bids from multiple CSPs for their business.
  • Support: In direct MCA, you need a Microsoft support plan (or pay per support incident). In CSP, the partner is required to provide at least basic support for the services they sell you. Many CSPs include 24/7 cloud support or even dedicated support engineers as part of their offering. CSP might offer that convenience if your internal IT team wants to offload user support or cloud management to a partner. Conversely, if you have a strong internal team, you may not need partner support and prefer to go directly to avoid an intermediary.
  • Billing and Payment Flexibility: Microsoft’s direct billing under MCA is typically net 30-day payment terms on invoices (for qualified customers) or credit cards for smaller purchases. Some enterprises might find Microsoft’s billing options somewhat rigid (monthly invoice by default). A CSP might offer more flexible billing arrangements – for example, quarterly invoicing, alignment with your fiscal calendar, or custom invoice formats that allocate costs by department for you. They may also allow payment in local currencies or consolidated billing for multi-national operations that a single Microsoft invoice might not accommodate easily. These value-adds could be important for your procurement and finance processes.
  • Access to Ancillary Services: Certain programs or benefits tied to volume licensing might not be available in MCA, but a partner could recreate them. For instance, training or adoption services that Microsoft used to provide as part of EA incentives might be offered by a CSP as part of their package. Also, consider that Microsoft frequently provides investment funds or incentives to partners to drive customer adoption; a good CSP might funnel some of that value back to you (like free workshops or credits).
  • Eligibility and Selection: Microsoft has made MCA-E available only in certain markets and for certain customer sizes (the list of countries with direct MCA availability is expanding). If your enterprise is in a location or segment where direct MCA isn’t offered yet, CSP might be your only route in the short term. On the other hand, if you are a very large strategic account for Microsoft, they may prefer you to go direct so they can manage the relationship closely, in which case, they might not allow a CSP to handle your main licenses. In some cases, enterprises use a hybrid approach: e.g., purchasing Azure via an MCA-E (direct) to negotiate a big consumption commitment, but using CSP for some smaller subsidiaries or specific smaller products where a partner offers better terms.

In summary, choosing between direct MCA-E and CSP comes down to control versus support. Direct gives you more control and a direct vendor relationship (and possibly keeps the door open for special treatment if you are large), but requires self-sufficiency.

CSP hands off many responsibilities to a partner, which can be a relief to your IT procurement team, but you must pick the right partner and understand their role.

Enterprises should evaluate internal capabilities and the complexity of their licensing when deciding on the channel. Many find that engaging an independent licensing advisor alongside their chosen route yields the best results.

For example, working with a licensing expert (such as Redress Compliance or similar specialists) can provide objective guidance on whether you buy via Microsoft or a CSP.

Cost Control and Optimization Tactics Under the MCA

One touted advantage of the MCA model is the ability to better control costs by aligning licensing with actual usage. However, achieving cost optimization under MCA requires active management.

Here are key tactics and considerations for controlling costs and optimizing your Microsoft spending under an MCA:

1. Leverage License Flexibility to Eliminate Waste:

With the MCA’s ability to adjust licenses monthly, enterprises should implement processes to routinely right-size license counts. For instance, it was common to purchase licenses for anticipated growth under an EA or cover seasonal peaks (since you’d lock in a number for the year and true-up later).

This often led to “shelfware” – paid-for licenses that sit unused. Under MCA, you can start with only what you need and add licenses as new employees join or new projects start.

Likewise, you can reduce licenses when they are no longer needed (e.g., when a contractor’s 3-month assignment ends – you drop their license for the following month).

To capitalize on this, establish a quarterly or monthly audit of license assignments: identify users who haven’t been using their assigned licenses or any de-provisioned employees, and promptly remove those licenses from your subscriptions so you’re not billed in the next cycle.

This practice ensures you “pay for what you use” in the truest sense. Many enterprises find significant savings by regularly cleaning up unused Office 365 or Dynamics seats–something harder to do mid-term in an EA.

2. Optimize Subscription Terms (Monthly vs Annual):

The MCA allows choosing different billing terms for different needs. For stable, core workforce licenses, consider annual subscriptions – they usually come at a lower per-month price (for example, Microsoft 365 may be ~20% cheaper on an annual term vs. month-to-month).

Locking a portion of your predictable usage into annual terms can yield savings akin to volume discounts. Conversely, for any portion of licensing that is uncertain or likely to fluctuate, use month-to-month terms despite their higher unit cost.

The cost premium for monthly flexibility might be far cheaper than overbuying annual licenses and not using them. The key is segmentation: categorize your licenses/users into tiers (critical/stable vs. flexible) and apply the appropriate term to each.

Revisit these decisions periodically; for example, if a project stabilizes into ongoing work, you might shift those users from monthly to annual to save money.

3. Utilize Azure Cost Management Tools and Practices:

If you have significant Azure consumption under MCA, you no longer have an EA’s upfront monetary cap, which means, theoretically, spending is unlimited – a double-edged sword. Implement cloud cost management (FinOps) discipline. Use Azure’s built-in Cost Management and Budget features to set budgets and alerts for your Azure subscriptions.

Take advantage of Azure Reservations and Savings Plans for predictable workloads (e.g., reserve instances for VMs or databases to get 1-year or 3-year discounted rates). These options work within the MCA pay-go model and can dramatically cut costs (reservations can save 30 %+ on VMs, for example).

The MCA doesn’t automatically give you discounts, but Microsoft’s Azure savings offers are self-service tools that can mimic some EA cost advantages.

Also, enforce resource tagging and regularly identify idle/orphaned resources to shut down, since you’re being billed continuously, quick action to turn off unused services directly saves money.

4. Exploit Hybrid Benefits and Existing Licenses:

Many enterprises have existing on-premises licenses with Software Assurance (SA) or subscription licenses that confer hybrid use benefits.

For example, Azure Hybrid Benefit allows you to use your Windows Server or SQL Server licenses (with active SA or subscription) to cover the cost of those software components in Azure VMs or Azure SQL, significantly reducing Azure VM rates.

Under an EA, this was often planned via license entitlements; applying those benefits in the Azure portal is up to you under MCA. Ensure you take full advantage of any eligible hybrid benefits—they can be one of the largest cost savers for cloud workloads. Suppose you plan to continue running hybrid on-prem and cloud setups.

In that case, you might maintain a minimal agreement (or use CSP) to keep a certain number of Windows Server Datacenter licenses with SA active to maximize Hybrid Benefit usage in Azure.

This kind of cross-agreement optimization requires careful tracking, but for any heavy Windows/SQL usage in Azure, it’s essential to avoid paying double for licenses.

5. Monitor and Manage Sprawl:

The ease of procurement under MCA (especially with self-service and marketplace) can lead to cost sprawl if unchecked. It’s easier than ever for a department to start a new SaaS subscription or spin up Azure services without central oversight.

Implement internal governance: Require the tagging of cloud resources by project/owner and have a governance team review new subscription purchases (e.g., a new Dynamics 365 module a team might subscribe to) to ensure they’re truly needed and correctly licensed.

Periodic spend reviews are useful because, under MCA, you see fresh billing data every month and set a cadence (monthly or quarterly) to review the spending by service and department.

This helps catch anomalies (like a test workload left running over a weekend, incurring costs, or a department paying for a Power BI Pro license for all 500 employees when only 100 use it). The goal is to use MCA’s real-time billing to enforce a culture of continuous optimization rather than the old EA model of “buy a bunch, then forget until true-up.”

6. Take Advantage of Consolidated Billing and Analytics:

Because the MCA consolidates all your cloud charges, you can analyze and optimize holistically. Use the billing data to calculate the cost per user or product and identify trends. For example, you might find that certain projects use far more Azure resources than budgeted, prompting a re-architecture to be more efficient.

You might also discover overlapping subscriptions (perhaps two departments each pay for separate Power Platform capacities that could be merged).

Many enterprises integrate billing data into their financial systems or use a Power BI dashboard for transparency.

The more visibility stakeholders have into usage and cost, the more likely they are to adjust their behaviours to save money.

7. Partner and Program Incentives:

Even under MCA, Microsoft offers various incentive programs, and partners have promotions. Keep informed about Microsoft Azure credits, free trials, or transition offers. For instance, if you’re transitioning from EA, Microsoft might provide some one-time credits to your Azure account or a discount for the first year under MCA to encourage the shift, but you have to ask and negotiate for these.

Similarly, some CSP partners might offer a percentage of your spending back as service credits (for consulting or support) if you go with them. Optimizing cost isn’t just about reducing usage; it’s also about capturing available discounts and incentives in the ecosystem.

8. Mind the Loss of True-Up = Mind your Growth:

In an EA, one hidden benefit was that you could deploy a bunch of software mid-year and not pay until the next anniversary, effectively giving a short “float” or delay on payment for new usage.

Under MCA’s immediate billing, you pay for growth as it happens. This is more financially transparent, but from a budgeting perspective, be cautious. The costs will hit immediately if your company grows rapidly or does a big IT rollout. Ensure Finance is aware that there’s no year-end true-up buffer.

The positive spin is that you won’t get a giant surprise bill at year-end; the flip side is that you need to continuously forecast and monitor growth-related costs.

Some enterprises set internal budgets by quarter for cloud spend to align with this and avoid overshooting annual budgets.

By employing these tactics, enterprises can turn the MCA’s flexibility into a cost-saving and efficiency advantage. However, that flexibility can lead to uncontrolled spending without the right processes. Thus, proactive management is the recurring theme in cost optimization under the MCA.

Potential Risks and Gaps with the MCA Model

The Microsoft Customer Agreement offers many benefits, but enterprises should also know its potential pitfalls and limitations. Adopting the MCA model introduces new risks that need to be managed:

Compliance Monitoring and License Enforcement:

Moving to cloud subscriptions under MCA might give a false sense that “we’re always compliant because we’re paying for what we use.”

In reality, license compliance remains a critical issue. Under an EA, the annual true-up and the involvement of an LSP provided structured checkpoints to catch any licensing shortfalls or misuse.

Under MCA, those formal checks disappear. Microsoft, however, still expects compliance with product terms (e.g., a user not licensed for a feature should not be using it, or an on-prem server without proper licenses shouldn’t be running).

With the MCA, Microsoft has included strong audit and verification rights in the agreement. They can request an audit or conduct a compliance verification at any time (with notice).

Suppose an audit finds you have been using more than you’re licensed for (for example, using Power BI Premium capacity beyond what you purchased or allowing unlicensed third-party users access to your systems in violation of licensing terms).

In that case, Microsoft can charge you for the unlicensed use and potentially backdate charges (often at full list price, potentially with interest, per standard compliance remedies). The risk is that without the structure of an EA, some organizations might slack off on internal compliance tracking.

It’s easy to spin up new services under MCA, but you must also ensure they’re properly licensed (which generally means simply adding the needed subscription — but someone has to remember to do that!).

“Feature bleed” is a specific risk in cloud services: Microsoft might technically allow users to access a feature they’re not licensed for (due to a configuration oversight), which could lead to non-compliance if not caught.

Under MCA, Microsoft is less involved day-to-day, so it falls on the enterprise to police its usage. A strong Software Asset Management (SAM) practice and regular internal license reconciliations are essential.

Additionally, training admins and users about license policies (e.g., you can’t just give a temp worker access using someone else’s login) remains important to avoid inadvertent compliance breaches.

Cost Variability and Budgeting Challenges:

The flip side of pay-as-you-go flexibility is variable monthly costs. With an EA, you had a predictable spending profile – the same bill each year (aside from any true-up adjustments) and a clear three-year cost projection. Under MCA, your spending can fluctuate widely from month to month if usage does.

This can complicate IT budgeting. There is a risk that business units might consume more cloud resources than expected, driving costs over budget. For example, costs will spike immediately if a development team suddenly starts a large Azure project.

Uncontrolled consumption is a potential gap without the “permission gate” of obtaining licenses or resources via procurement (since under MCA, teams might have direct access to add services).

To mitigate this, enterprises should implement budget alerts and governance as mentioned, and perhaps institute internal policies requiring significant usage increases to require financial approval. Another related risk is price changes.

Microsoft has the right to adjust pricing on cloud services, and in recent years, they have made periodic global price adjustments (often tied to currency fluctuations or inflation).

EA customers typically are shielded from price hikes on the products they have already licensed until renewal. MCA customers on pay-go will feel price increases immediately once effective.

For example, if Microsoft raises the price of a Microsoft 365 plan by 5%, an EA customer would only see that after their EA term ends and they renew; an MCA customer would see it on their next bill for that subscription (unless they had locked an annual term just before the increase).

This means the customer partly carries inflation and currency risk under MCA. Keeping an eye on Microsoft announcements and perhaps pre-purchasing or extending terms before a known price increase can be important strategies.

Limited Customization and Negotiation Ability:

As discussed, the MCA is largely a take-it-or-leave-it standard agreement. This rigidity poses risks for organizations that previously relied on custom contractual clauses.

For example, many large enterprises negotiate data privacy or security clauses into their EAs, specific carve-outs like extended transition time after a merger, or flexible billing arrangements in special cases.

Under MCA, your ability to accommodate unique business scenarios is limited. Microsoft has some standardized amendments (for instance, there are addenda for government or regulated customers ensuring compliance with laws like HIPAA).

Still, you cannot insert clauses around termination notice periods or bespoke pricing protections. If your industry or company policies require specific contract language (liability caps, indemnities, etc.), you may find the MCA insufficient, which could be a compliance risk on the legal side.

Additionally, negotiation leverage is challenging because there’s no expiration; one could argue that Microsoft has less incentive to proactively offer concessions.

You may need to create a negotiation event (e.g., evaluating a competitor or planning a major expansion where you invite Microsoft to bid for that new workload) to get their attention for discounts.

Enterprises could risk paying more over time if they don’t actively manage this, simply renewing subscriptions and adding services without periodically checking if they could secure a better deal.

Compliance with On-Premises Use and Hybrid Scenarios:

Be cautious if your MCA setup involves using on-prem software or hybrid rights (like using a license in Azure and on-prem concurrently under certain allowances).

Without software assurance in the MCA, any on-prem deployments must be handled via a separate purchase or license grant from a previous agreement.

Microsoft audits could extend to those scenarios. For example, do you have the proper hybrid server licenses if you use Exchange Server on-premises and have Office 365 under MCA? Under EA, hybrid use rights might have been granted; under EA, you must ensure you’re covered under MCA. These nuances can pose compliance gaps if overlooked.

Dependence on Internal Expertise or Third Parties:

With MCA, Microsoft shifts more responsibility to the customer to manage their licensing correctly. Many enterprises might not yet have the internal licensing expertise because they previously leaned on a partner or Microsoft’s licensing desk under an EA.

This knowledge gap is a risk; misinterpreting licensing rules could lead to unintentional compliance issues or overspending. For example, misunderstanding how to license a Power Apps application for external users could lead to a serious shortfall.

Organizations should consider investing in training for their procurement and IT asset management teams on Microsoft’s licensing (which is still complex under the hood, even if purchasing is easier).

Alternatively, factor in the cost of retaining independent licensing advisors to periodically review your usage and licenses for discrepancies. The cost of an advisory service is often far less than a potential compliance penalty or the cumulative waste of over-provisioned cloud resources.

Service Level and Support Differences:

While not a direct “risk” in financial or compliance, enterprises should note that under an MCA, they might not get the same level of proactive engagement from Microsoft that they did under an EA (especially if they shift to a CSP).

EA customers, especially large ones, often receive access to Microsoft-led account workshops, deployment planning services, or fast-tracked support escalations.

Under MCA, you might feel a difference in support quality unless you separately pay for Premier/Unified Support or have a top-tier CSP advocating for you.

This could translate into slower issue resolution or less guidance during rollouts, which can cause downtime or suboptimal deployments (incurring hidden costs).

Mitigate this by ensuring you have the right support plans and clarifying roles (who to call for what) after transitioning to MCA.

In summary, the MCA introduces more customer responsibility.

The risks can be managed, but they require awareness and new approaches. Compliance and cost control become continuous disciplines rather than periodic checks. Legal and negotiation strategies must adjust to a world without a fixed renewal timeline.

Organizationally, you may need to fill gaps in expertise and support. The next section will discuss strategies for negotiating under this new model and ensuring you still get the best deal from Microsoft.

Read When to Move from Microsoft EA to MCA.

Negotiation Strategies for the MCA Model

Negotiating under the MCA model differs from negotiating an EA, but enterprises can still employ smart strategies to obtain favourable terms and pricing.

Here are practical negotiation tactics and considerations specific to MCA:

• Bundle Commitments to Extract Discounts: Microsoft may not give volume discounts by default under MCA. However, if you’re a large customer, you can negotiate custom discounts or incentives by committing. One approach is to bundle a commitment across services – for instance, commit to a certain Azure spend AND a level of Microsoft 365 usage for the next year. While the MCA doesn’t lock you in, you can sign an agreement, addendum, or memorandum that outlines these commitments and associated discounts. Microsoft sellers are motivated by hitting consumption targets, so if you can forecast your needs, use that as leverage. For Azure in particular, consider negotiating an Azure Consumption Commitment (MACC) deal: the larger and longer the commitment, typically the better the discount rate on Azure, and potentially, Microsoft will throw in free Azure credits or support services funding. Take care that any commitment you agree to is realistic to avoid under-utilization.
• Time Your Negotiations Strategically: Even without a renewal cycle, timing can influence Microsoft’s willingness to negotiate. Microsoft’s fiscal year ends in June, and the end of quarters (especially Q4, April-June) are when sales teams push to close deals. If you plan a significant usage expansion or a move from EA to MCA, engage Microsoft at these times. For example, if your EA is ending in December but you know Microsoft is more eager to close deals by June, you might start negotiations earlier and leverage a June commitment to get extra concessions, even if you only fully transition at year-end. Creating a pseudo “deal cycle” is key – you might, for instance, stage an annual review every year with Microsoft where you discuss your projected needs and inquire what incentives they can offer for those, effectively mimicking an EA renewal negotiation each year.
• Pit Channels or Providers Against Each Other (Tactfully): As an enterprise, you have options: stay direct with Microsoft or use a CSP partner. This presents an opportunity to compare offers. Getting quotes from one or more CSPs and talking to Microsoft directly is possible, essentially running a competitive process. One CSP might offer a 5% discount on certain licenses or bundles in free migration services, while Microsoft might counter with some Azure credits if you stay direct. Be transparent to the extent appropriate – let Microsoft know you are considering going through a partner if their direct proposal isn’t compelling (Microsoft loses some margin if a partner is in the middle, so they have reason to convince you to stay direct for large accounts). Conversely, let partners know that you expect value beyond just being a billing conduit – this will push them to offer you more attractive terms or services. Note: Ensure you abide by any procurement rules in your organization when doing this, but essentially treat licensing as a competitive sourcing exercise.
• Negotiate Support and Services as Part of the Deal: Under MCA, support is separate, but you can bring it into the negotiation. For example, if you’re going directly and considering renewing or buying a Unified Support contract from Microsoft, negotiate them together. Ask for a reduced support cost or extended support hours as part of choosing MCA-E. Microsoft often calculates Unified Support fees as a percentage of your Microsoft spend; if your spend increases under MCA, push for a cap or fixed discount on support. If working with a CSP, clarify what support is included and consider negotiating premium support at little or no extra cost if you bring them significant business. Sometimes, a partner might include several consulting hours or training workshops per year if you ask for it during negotiation.
• Ensure All Necessary Amendments are in Place: While you cannot heavily customize the MCA, request any available standard amendments you need before signing or transitioning. For instance, if you operate in a regulated industry, ensure Microsoft’s HIPAA Business Associate Agreement (if you deal with health data) or similar is attached to your MCA. If you have data residency requirements, ensure those are documented via Microsoft’s online services terms or a separate rider. While these may not be “negotiated” in a custom sense, negotiating is also about ensuring nothing is missing. Microsoft might not volunteer these unless asked. A tip is to review the Microsoft terms repository for any product- or industry-specific terms and confirm with Microsoft that they will be honoured under your MCA. If Microsoft historically gave you a unique concession in your EA (e.g., a grandfathered product use right), raise this early. While they likely won’t just insert that into an MCA, they might offer an alternative solution (for example, if you had a special discount on a certain module, they could extend that as a separate pricing agreement outside the standard price list).
• Negotiate Flexibility on Commitments: If you opt for any commitment (like an annual subscription count or Azure spend), try to negotiate some flexibility clauses. For example, if you commit to 1000 licenses for a year, negotiate the ability to swap some of those for a different product if business conditions change (Microsoft sometimes allows “replacement rights” in EA; you could ask for a similar courtesy in writing, such as the ability to reduce 10% of your commitment and replace it with equivalent value in another service). Or if committing to Azure spend, ask for a clause that lets you carry over unused commitment for a short period or convert it to Azure credits for another service if you undershoot. Microsoft may not always agree, but if the alternative is you refusing to commit at all, they might compromise.
• Document Incentives and Promises: In EA negotiations, everything ends up in the contract. In MCA, many “deals” might be side agreements (e.g., an email stating you’ll get a certain discount or credit). Insist on formality for anything significant. If Microsoft offers 100 free Azure support hours from an architect as part of your deal, get it in writing in an official quote or agreement. If a CSP promises you can carry over a training credit balance, put it in the SOW. Because the MCA itself won’t contain these business terms, it’s up to you to ensure they’re captured in some enforceable form (even if it’s a sales order form or a side letter). This prevents misunderstandings later if personnel change on the partner or Microsoft side.
• Use Independent Expertise: Microsoft sales teams negotiate deals daily; most enterprises do this occasionally. Consider bringing in an independent licensing negotiator or consultant (for example, firms like Redress Compliance). These experts often know what discounts are feasible, what other clients are getting, and Microsoft’s pressure points. They can help you craft a negotiation strategy and even interface with Microsoft on your behalf or in tandem. Their fee is usually small relative to the potential savings or value gained, in the context of MCA, where the rules are newer and more Microsoft-driven, having an advocate who’s seen other MCA deals can be a big advantage. They might advise, for instance, that Microsoft has been giving 5% off to customers who commit to X – a detail you wouldn’t know on your own.
• Keep Options Open: Remember that the MCA’s lack of long-term lock-in also empowers you. If Microsoft isn’t accommodating your needs (be it pricing or contract terms), you can shift workloads elsewhere sooner than under an EA. While a wholesale move to a different vendor is not trivial (especially for M365, which might be deeply embedded), pointing out that you value the flexibility to move could influence Microsoft’s posture. For example, if negotiating Azure under MCA and not getting a satisfactory discount, gently remind Microsoft that nothing would prevent you from placing new workloads in AWS or Google Cloud instead, since you’re not contractually tied to Azure consumption. Microsoft is keenly aware of competition, so using that undercurrent as leverage is fair game. In an EA, Microsoft knew you were largely committed for 3 years; under MCA, you could downscale at will – use that as negotiating leverage by highlighting your intent to continually choose the best value for the business.

By approaching the MCA with a strategic negotiation mindset, enterprises can still gain many of the benefits they enjoyed under a negotiated EA, such as competitive pricing, support, and incentives, while retaining the agility that the MCA provides.

The key is not to treat the MCA as a mere click-through formality but as a platform to build a new kind of vendor relationship that you actively manage.

Read Optimizing Azure Spend Under an MCA.

When to Transition to MCA or Use it Alongside an EA (Illustrative Examples)

Depending on the situation, an organization may move to an MCA, stay with an EA, or combine both.

Here are a few scenarios illustrating when an enterprise might choose one path or the other:

• Scenario 1: Flexibility Needed for Fluctuating Workforce – A large retail enterprise has a base of 5,000 corporate users on Microsoft 365 but an additional 2,000 seasonal staff who join during holiday seasons. Under a traditional EA, the company had to license all 7,000 users year-round (or at least true-up the peak usage, effectively paying for those users for the full year). This resulted in overspending during off-peak months. The company decides to transition its Microsoft 365 licensing to an MCA. It keeps 5,000 user licenses on annual term subscriptions (to secure a better rate) and uses month-to-month subscriptions for the extra 2,000 during the 3-month peak season, then scales those down to near zero for the rest of the year. This hybrid term approach was not possible under the EA but thrives under MCA, saving the company 15-20% on yearly licensing costs. In this scenario, MCA proves advantageous due to seasonal flexibility.
• Scenario 2: Cloud-Only Startup Division – An established financial services enterprise with an EA in place launches a new fintech subsidiary. This new division operates largely in the cloud and needs only a handful of Office 365 licenses. Still, it will heavily depend on Azure usage for its development and production environments. Instead of shoehorning this new division’s needs into the parent company’s EA (which would require a long-term commitment and perhaps unnecessary licenses), the enterprise sets up the new subsidiary with its own Microsoft Customer Agreement via a CSP. Through the CSP, the subsidiary gains Azure resources on pay-go and a few dozen Microsoft 365 licenses without a minimum commitment. The CSP also provides hands-on cloud cost management support.
  Meanwhile, the parent company retains its EA for core corporate needs. This scenario shows the use of MCA alongside an EA – the EA covers the stable, legacy environment, and MCA (through a partner) is used for the agile cloud-native team. This way, the company doesn’t disrupt its main EA but still gets the benefits of MCA for a specific context.
• Scenario 3: Post-Merger Harmonization – Two companies merge, each with their own Microsoft agreements: one had an EA, and the other was buying via CSP on an MCA. The merged enterprise needs to consolidate licensing. They analyze costs and realize that the combined user count would qualify for an EA, but a significant portion of their infrastructure is moving to Azure, which is very dynamic. They opt to negotiate a new EA for their Microsoft 365 enterprise-wide licensing (to get a maximum discount for 10,000+ users) and simultaneously move all Azure consumption to an MCA. They sign an MCA-E directly with Microsoft for Azure, committing to a yearly Azure spend (which Microsoft treats separately from the EA). This yields an Azure discount and investment funds without locking Azure into the EA structure. The result is a dual model: an EA for high-volume, relatively static licenses (ensuring the best pricing) and an MCA for cloud consumption, which needs flexibility and will be optimized with continuous FinOps. Over time, as more workloads shift to Azure, they can consider not renewing the EA for certain components, but for now, this combination maximizes their benefits.
• Scenario 4: EA Non-Renewal and Full MCA Adoption – A mid-market manufacturing company had an EA for 3 years, covering 600 users with Office 365 and some server licenses. Over the term, they migrated most servers to Azure and shrunk the employee count to 500. At renewal, Microsoft’s EA requirements (500 is just the minimum, and some on-prem products they used are now end-of-life) made the EA less attractive. They decide not to renew the EA. Instead, they sign an MCA through their licensing partner. Under the MCA, they continue with 500 Microsoft 365 licenses annually, purchase a few perpetual server licenses via the partner for their remaining on-prem needs, and put all Azure usage (which grew substantially) on pay-as-you-go. The partner assists in monitoring Azure costs. Initially, the company was nervous about losing the EA’s fixed pricing, but their overall spending remained in check with careful cost management. They appreciated no longer having true-up surprises or the pressure to forecast 3 years out. This example highlights a situation where an organization “graduates” from an EA into the MCA model, often when the EA’s advantages no longer outweigh its constraints (such as when cloud usage dominates and user count is smaller or volatile).
• Scenario 5: Compliance-Driven Considerations – A large healthcare organization is interested in the MCA for flexibility, but they have numerous BAA (Business Associate Agreement) requirements with vendors due to HIPAA. Under their EA, they had a negotiated BAA and specific data handling clauses. They examined the MCA and found that Microsoft’s standard Online Services Terms cover HIPAA in the same way across all customers, meeting their needs. However, they rely on specialized contract language around data deletion on the contract end – something not explicitly in the MCA. Their strategy is to stick with their EA for one more cycle (to not jeopardize compliance while they seek clarity), and in that time, work with Microsoft to see if that requirement can be met under MCA’s standard terms or if Microsoft will introduce new amendments. This scenario underscores that sometimes staying on EA a bit longer might make sense if you have extremely specific contract needs that are not yet addressable in MCA. It also suggests the importance of engaging Microsoft (and perhaps industry groups) to push for enhancements to the MCA program.

These examples demonstrate that the decision to move to MCA or remain on EA (or combine them) depends on factors like the volatility of your usage, your need for customization vs. standardization, and the balance of cloud vs. on-prem in your environment.

Many large enterprises are adopting a hybrid licensing strategy during Microsoft’s transition period: leveraging MCA flexibility for cloud growth and keeping an EA for the stable parts until they are comfortable shifting everything.

Read How to Manage Costs Under the Microsoft Customer Agreement (MCA).

What Enterprises Should Do Now

Given the insights above, enterprise IT and sourcing leaders should take proactive steps to adapt their Microsoft licensing strategy.

Below is a list of strategic recommendations based on today’s landscape:

• Assess Your Current Licensing Footprint: Perform a thorough review of your existing Microsoft licensing (EA or other agreements) and actual usage. Identify areas of over- or under-utilization. This baseline will inform whether the flexibility of MCA could save costs or if you’re benefiting from EA discounts that you’d want to retain.
• Evaluate the Suitability of MCA vs EA: Analyze your organization’s profile against the strengths of each model. If you have a stable user count and are heavily dependent on on-premises, an EA might still be cost-effective. If you experience frequent user changes or rapid cloud adoption, leaning towards MCA could provide agility and cost savings. Consider a pilot: e.g., move a specific department or workload to MCA (via CSP) while others remain on EA to measure the impact and learn the management nuances.
• Strengthen Internal License Management (SAM & FinOps): With the likely move toward more dynamic licensing, invest in your Software Asset Management (SAM) and Cloud Financial Management (FinOps) capabilities. Set up processes and tools to continuously monitor license assignments, cloud resource usage, and compliance with entitlements. Training your IT asset managers and cloud ops teams on Microsoft licensing (especially new cloud service rules) will pay off in preventing compliance issues and controlling spend. Prepare to be more self-reliant in managing licenses under an MCA – no more coasting until a true-up forces a check.
• Engage Independent Licensing Expertise: Consider consulting with independent Microsoft licensing experts (such as Redress Compliance, LicenseQ, SoftwareOne, or similar firms) as you plan your next steps. They can provide an unbiased analysis of your situation and help craft a transition or negotiation strategy. An expert advisor can also serve as a watchdog for compliance, ensuring you don’t overlook any fine print in the MCA that could pose risks. This is particularly valuable if you lose an LSP’s guidance by moving away from an EA – an independent advisor fills that gap and represents your interests.
• Compare Channel Options: If you proceed with the MCA model, choose how to buy directly or via a partner. Solicit proposals from qualified CSP partners and discuss options with Microsoft’s direct team. Weigh the trade-offs in cost, support, and services. A capable CSP partner can offer custom services and potentially better pricing for many enterprises, ensuring they have the scale and knowledge for your needs. On the other hand, if you value a direct relationship with Microsoft and are a large account, make that known and see what direct program (MCA-E) incentives they have. In short, do not default to any one approach without a comparison – leverage the competition to get the best overall value.
• Plan for Support and Ancillary Services: As you transition to an MCA model, plan for technical support, customer success services, and training that were either implicitly or explicitly part of your EA experience. This could mean budgeting for a Microsoft Unified Support agreement, ensuring a CSP provides adequate support SLAs, or contracting third-party support for certain products. Also, ensure any compliance/regulatory requirements (like data handling agreements) are addressed via Microsoft’s standard terms or additional agreements before you switch. Don’t assume they carry over – explicitly confirm them.
• Run Financial Projections: Work with Finance to project costs under different scenarios – e.g., “EA Renewal vs. MCA” over a 3-year horizon. Factor in things like potential Microsoft price increases, your expected growth or reduction in workforce, cloud projects in the pipeline, etc. This will help you justify the chosen path. If moving to MCA, align your budgeting process with more variable spending, possibly moving from a CapEx or fixed annual budget view to a quarterly or rolling forecast model for cloud spending. This can avoid surprises and ensure business leaders are prepared for how costs might ebb and flow.
• Negotiate Proactively: Start discussions early if your EA ends in the next 12-18 months. Microsoft’s transition to MCA is ongoing (with new products being added to MCA every few months). Early engagement allows you to possibly secure transition incentives. For example, Microsoft might offer price holds or credits if you agree to migrate certain workloads to MCA now. Be clear on must-haves for your organization (e.g., “we need X% off Azure if we are to move off our EA”). Use the negotiation strategies outlined earlier – don’t wait for Microsoft’s standard quote; push for a customized proposal that reflects your value as a customer.
• Pilot and Iterate: Treat this as an evolution. If uncertain, you might not shift everything at once. Perhaps move Azure to MCA first (since it’s highly flexible) while extending your EA one more year for other products, or vice versa. Learn from small moves – for instance, after a few months of managing licenses under MCA, do a retrospective: did costs behave as expected? Did any compliance issues arise? Use those lessons to refine your processes before migrating more critical workloads.
• Stay Informed: Keep abreast of Microsoft’s licensing announcements. The landscape is changing – Microsoft is expanding MCA availability to more regions and products, altering CSP policies (such as new commerce rules), and adjusting pricing (like the planned price increases tied to cloud inflation adjustments). Assign someone on your team or your advisory partner to monitor these changes. Being aware in advance will let you act (for example, if Microsoft announces a price hike in certain licenses next quarter, you might choose to lock in a 1-year subscription at the current price now). Additionally, track peer benchmarks – how are similar companies approaching this? User groups, webinars, and licensing forums can be valuable for real-world insight.

Read Microsoft MCA: Key Terms You Should Review Before Accepting.

In conclusion, enterprises should approach the Microsoft Customer Agreement proactively and strategically.

The MCA can unlock greater flexibility and potentially cost savings, but it shifts more responsibility onto customers to manage their licensing estate. The steps above will position your organization to take advantage of the MCA’s benefits while mitigating risks.

The goal is to turn Microsoft’s new licensing paradigm into an opportunity for agility and optimization in your IT environment rather than a source of uncertainty.

Planning and foresight now will pay off in smoother transitions and more control over your Microsoft investment in the long run.