Microsoft EA Negotiation Best Practices – A CIO’s Guide (2025 Renewal Edition)
Renewing a Microsoft Enterprise Agreement (EA) is a high-stakes milestone that can define your IT costs and capabilities for the next several years.
In 2025, preparation is more critical than ever.
Microsoft’s sales teams are aggressively pushing cloud-first deals and new AI add-ons (like Microsoft 365 Copilot), and organizations that approach an EA renewal without a solid plan often overspend or get stuck with inflexible terms that don’t align with their needs.
This guide provides a step-by-step playbook of best practices for CIOs, CFOs, IT procurement leaders, and enterprise IT asset managers facing an EA renewal in 2025.
The goal is to help you optimize costs, eliminate unused licenses (also known as “shelfware”), and enter negotiations with confidence and leverage.
By treating the renewal as a strategic project and following these best practices, you can secure a better deal that supports your business strategy and avoids common pitfalls.
Read our Microsoft EA Renewal Negotiation Strategies for 2025.
Why Preparation Matters in Microsoft EA Renewals
Treating an EA renewal as a routine administrative task is a common mistake. Without proactive planning, you risk letting Microsoft dictate the terms – leading to unnecessary purchases, costly upsells, or restrictive conditions.
Microsoft will happily push the highest-tier licenses for all users and bundle new products into your agreement. If you haven’t done your homework, it’s easy to agree to expensive features or additional services that aren’t truly needed.
Proper preparation flips the script. By starting early and setting clear objectives, you create leverage for yourself.
You’ll identify what you actually need (and what you don’t), clean up wasted spend ahead of time, and establish firm goals for the renewal.
Early action also gives you time to consider alternatives and benchmark Microsoft’s offer against market standards. In short, preparation means you negotiate from a position of strength rather than reacting to Microsoft’s agenda and timeline.
Don’t go in blind. Benchmarking Microsoft EA Discounts: Are You Getting a Good Deal?.
Step 1 – Start Planning Early (12–18 Months Ahead)
Don’t wait until the last minute. Begin your EA renewal planning 12–18 months before the contract expiration. Enterprise Agreements cover a wide range of products (Office 365, Windows, Azure, etc.), so you need ample time to analyze usage and strategize.
Starting early ensures deadlines won’t catch you by surprise and allows you to methodically optimize your position.
Here’s a high-level timeline for early planning:
- 18–12 Months Before Renewal: Assemble a cross-functional renewal task force. Include stakeholders from IT, procurement, finance, and legal. Assign an executive sponsor (often the CIO or CFO) to champion the effort. Begin collecting data on current license usage, costs, and pain points. Set initial high-level goals (e.g. “reduce EA costs by 15%” or “increase flexibility for cloud services”). If you anticipate needing external expertise, this is a good time to engage an independent licensing consultant or advisor to help with strategy and benchmarks.
- 12–9 Months Before Renewal: Refine your objectives and requirements. Define clear success criteria for the renewal, such as specific cost savings targets, flexibility needs (for example, the ability to reduce license counts if headcount drops), and alignment with your technology roadmap. Determine what “must-have” outcomes look like – is success purely measured in cost reduction, or do you also need new capabilities? Begin to educate internal leadership about these goals so that everyone is on the same page. If using a consultant, start incorporating their benchmark data and recommendations.
- 9–6 Months Before Renewal: Conduct in-depth internal analysis (see Steps 2 and 3 below for details). Complete a thorough audit of current license usage and identify opportunities to eliminate waste (Step 2). Start scenario modeling different renewal options (Step 3) – for instance, the impact of shifting more users to a lower license tier, or varying your cloud commitments. Identify any major strategic decisions (e.g., migrating certain services to the cloud, adopting or dropping products) that will affect what you negotiate. During this phase, communicate with senior executives about potential budget impacts and get alignment on the emerging strategy.
- 6–3 Months Before Renewal: Develop your formal negotiation strategy (Steps 4 and 5 will cover leverage and key negotiation points). This is the time to engage in preliminary discussions with your Microsoft account team or reseller without committing to anything. Use these early conversations to gather intelligence on Microsoft’s priorities: Are they pushing an upgrade to all-in Microsoft 365 E5? Seeking a big Azure spending commitment? Promoting new products like Copilot AI across the enterprise? Collect this information quietly, but keep your own plans guarded. Internally, firm up your negotiation “walk-away” points (the conditions under which you would refuse the deal or pursue alternatives) and ensure you have executive buy-in for those boundaries.
- Final 3 Months: Enter formal negotiations with Microsoft, armed with a well-documented plan. By now, you should have a clean license inventory, benchmark data, a clear target proposal, and a unified team (with executive support). Be ready for multiple rounds of offers and counter-offers. Have your core team review all Microsoft proposals and model their impact against your goals. Maintain regular updates to C-level sponsors. If needed, plan for high-level discussions (e.g., CIO-to-Microsoft VP or CEO-to-Microsoft executive) to resolve any major sticking points or to push for final concessions as the deadline approaches.
Starting the renewal process early is the foundation of a successful negotiation. With a year or more lead time, you gain freedom to clean house, explore options, and build internal consensus.
Microsoft’s sales reps often try to introduce urgency as the expiration date approaches (“sign now or lose this discount”). Still, if you’ve been preparing for months, you won’t be pressured by artificial deadlines. Early planning means you control the timeline and agenda – not Microsoft.
Step 2 – License Cleanup and Shelfware Reduction
One of the fastest ways to optimize your EA renewal is to eliminate wasted licenses before negotiations begin.
Over a 3-year EA term, it’s common to accumulate “shelfware” – licenses for products that aren’t being used, or expensive subscriptions that are under-utilized. Before signing a new agreement, take a hard look at what you’re currently paying for and remove the dead weight.
Key actions include:
- Run an Internal License Audit: Inventory every license and subscription under your EA and check actual usage for each. Use all available tools and reports (Microsoft 365 admin center usage reports, Azure usage analytics, and any software asset management tools your company uses) to get data on which services are actively used and which are sitting idle. This audit gives you visibility into your real needs.
- Identify Unused or Under-Used Licenses: Look for clear candidates to cut or downgrade. Common examples:
- Microsoft 365 E5 vs E3: If you’ve been giving all users the full E5 suite, determine who really uses the advanced E5-only features (e.g., advanced security, telephony, analytics). Many organizations find that only a subset of power users need E5, and the majority can be perfectly well-served with E3 licenses. Plan to renew with a lower ratio of E5 to E3 – for example, only high-need users on E5 and everyone else on E3. This immediately lowers cost without harming productivity.
- Add-ons like Teams Phone or Power BI Pro: Perhaps you bought extra add-ons (Teams Phone System, lots of Power BI Pro licenses, etc.,) but adoption turned out low. If only a small group actively needs these services, scale back the quantities for renewal or cut them entirely for now. You can always buy more later if demand increases, but don’t continue paying for capabilities that few people use.
- Legacy or Redundant Products: Identify older software or services that you no longer require. For instance, Visio or Project licenses assigned to users who never log into those tools, or on-premises server licenses for workloads that you’ve already moved to the cloud. Removing or reducing these in the new EA frees budget for more relevant needs (or contributes directly to savings).
- True-Down Before True-Up: If your current agreement allows annual adjustments, use the period leading up to renewal to right-size license counts downward wherever possible. Many EAs only focus on “true-up” (adding licenses) when you grow, but savvy customers also negotiate the ability to reduce quantities at renewal time. Take full advantage of the renewal to reset your baseline. If over the last few years your user count dropped or certain licenses proved unnecessary, remove them now so you’re not carrying that cost into the new term. This “true-down” means your renewal quote will be based on a leaner, more accurate footprint.
- Address Compliance Gaps Proactively: During your audit, if you discover any compliance issues – for example, usage exceeding entitlements (unlicensed users or extra installations that weren’t covered) – fix it before Microsoft brings it up. It’s far better to quietly purchase the needed licenses or reallocate resources now than to have Microsoft discover a shortfall during an official audit or the renewal process. An unexpected compliance penalty or true-up demand at negotiation time will erode your leverage and could distract from the renewal discussion. By resolving any compliance gaps and cleaning up unused licenses, you show Microsoft that your house is in order. This positions you as a responsible customer and strengthens your case when asking for discounts or special terms.
By cleaning up your licensing environment in advance, you optimize costs on two fronts. First, you reduce wasteful spending, which directly lowers the baseline that Microsoft will use to calculate your renewal pricing.
Second, you remove potential ammunition from Microsoft’s sales or audit teams; they can’t pressure you with findings of unused licenses or compliance issues if you’ve already taken care of them.
You’ll enter negotiations with a lean, well-documented license position, meaning you only plan to renew what you truly need. This disciplined approach prevents overspending and sets the stage for more productive negotiations.
Step 3 – Benchmarking and Scenario Modeling
With a clean understanding of your current usage, the next best practice is to benchmark costs and model different renewal scenarios.
Microsoft’s pricing and discount structures can be opaque, and you should never assume that its first quote is a fair deal. By researching market benchmarks and exploring various what-if scenarios, you can determine what you should be paying and identify the optimal mix of products for your business in the future.
Leverage Independent Benchmarks:
Microsoft’s initial renewal offer might claim to give you a generous discount – but how do you know if it’s truly competitive? Investigate what similar enterprises are paying for their EAs. If possible, leverage peer networking, industry user groups, or engage a third-party advisor who tracks Microsoft EA pricing benchmarks.
Understanding the typical discounts or price per user that organizations of your size and industry receive provides a target for your negotiation.
For example, if companies comparable to yours usually get ~20% off the list price on certain licenses, and Microsoft is only offering you 10% off, you know there’s likely more room to push.
Solid benchmark data arms you with facts to counter Microsoft’s claims. You can confidently say, “We know what the market rate is, and we expect a similar or better discount given our commitment.”
Perform Scenario Modeling: Don’t automatically renew the exact bundle of products you had last time. Use scenario modeling to test different combinations of licenses and services, and how each would impact your costs and capabilities.
Consider modeling scenarios such as:
- Mix of License Tiers (E3 vs E5, etc.): Evaluate a scenario where more users are assigned to a lower-cost license tier (like Microsoft 365 E3) and only specific users get the premium tier (E5). What functionality would the broader user base actually lose, and could those needs be met with a smaller number of add-on licenses for the few who require them? Often, this exercise reveals substantial savings. For instance, 1,000 E5 licenses might cost significantly more than 1,000 E3 licenses plus 100 specialty add-ons for security or compliance – and if only 100 people truly need those extra features, the mostly-E3 scenario delivers the same business value at a far lower cost.
- Adopting or Dropping Products: Model the impact of introducing new technologies or removing ones that aren’t pulling their weight. For example, if you currently pay for an on-premises software product with Software Assurance, what if you switched to its cloud equivalent (or vice versa)? Would it save money or offer more flexibility? Likewise, consider if any product in your EA could be removed entirely and perhaps purchased separately for a smaller group that actually uses it. For example, an analytics tool or project management software could be licensed for just the departments that need it, rather than being enterprise-wide. Compare the 3-year total cost of ownership for keeping it in the EA vs. alternative approaches.
- Azure Consumption Commitments: If Azure spending is part of your EA, carefully model your expected Azure consumption under different growth assumptions. Microsoft often pushes customers to make a big upfront Azure commitment (e.g., committing to spend $X over the next 3 years). Weigh the scenarios of committing to a certain spend versus staying more pay-as-you-go (or even allocating some workloads to other cloud providers). The goal is to size any Azure commitment realistically. Overcommitting can lead to wasted budget (having to “use it or lose it”). It might be wiser to commit conservatively, with the option to increase later, than to lock in a giant Azure spend that you can’t fully utilize.
- Incorporate Support Costs: Remember that Microsoft’s Unified Support fees for enterprises are often calculated as a percentage of your EA’s total spend. When comparing scenarios, include the support cost implications for each. A scenario where you license more and spend more on Azure will not only have higher direct costs, but also higher support fees (since, for example, support might run ~10% of your EA value). A learner licensing scenario will also reduce those support fees. Sometimes, after adding support, a seemingly cheaper licensing plan may turn out to be more expensive overall, or vice versa. Ensure you’re comparing apples to apples by considering the full picture of costs.
Through this scenario modeling process, you can pinpoint the optimal renewal plan for your organization.
By the end, you should have a data-driven target in mind – for example: “For the next EA, we intend to renew with 5,000 E3 licenses and 2,000 E5 licenses, drop these specific low-value products, commit $Y to Azure over three years, and based on benchmarks, we expect the total 3-year cost to be $Z.”
Having this clear picture enables you to approach Microsoft with a well-reasoned proposal. It effectively forces Microsoft to respond to your well-supported terms rather than you simply reacting to their quote.
In negotiations, this transforms the discussion into a fact-based review of why your proposal is reasonable, rather than a sales-driven push of whatever Microsoft initially offers.
Step 4 – Securing Negotiation Leverage
No matter how thoroughly you prepare internally, how you negotiate with Microsoft will greatly influence the outcome.
Step 4 is about strengthening your bargaining position – creating leverage so that Microsoft feels pressure to meet your requirements (or risk losing your business).
Here are key tactics to tip the scales in your favor:
- Time Negotiations with Microsoft’s Fiscal Calendar: Leverage Microsoft’s own sales incentives. Microsoft’s fiscal year ends June 30, and their sales teams face heavy pressure to close deals by quarter-end and especially year-end. If your renewal timing is flexible (or if it naturally falls in Q2 or Q4 of Microsoft’s fiscal year), use that to your advantage. A renewal negotiation that comes to fruition in Microsoft’s Q4 (April–June) can often yield extra discounts or concessions, because the account team is eager to book the revenue before year-end. Even Q2 (Oct–Dec) and Q3 (Jan–Mar) quarter-ends can provide leverage. Some organizations have even negotiated a short extension of their current EA to align the final signing with a quarter-end, thereby maximizing Microsoft’s motivation to complete the deal. The key is to make Microsoft’s timing work for you: when they need the deal by a certain date for their goals, you gain negotiating power to ask for a sweeter deal.
- Present Credible Alternatives (Real or Perceived): One of your strongest bargaining chips is the credible threat of taking your business elsewhere, even if only in part. Identify areas where you have or could develop viable alternatives to Microsoft’s offerings, and subtly make Microsoft aware of them:
- If Microsoft is pushing a large Azure commitment, it should
- or they could lose that workload.If you’re negotiating Microsoft 365 (Office apps, email, Teams), mention that you’ve looked at other productivity and collaboration suites (like Google Workspace, Zoom, Slack, etc.). Even if a full switch is unlikely, the fact that you’ve done due diligence on alternatives makes Microsoft more inclined to protect those seats with better terms.For costly Microsoft add-ons in areas like security or compliance (think Enterprise Mobility + Security E5, or advanced compliance tools like Purview), note that you’re considering other industry solutions. If Microsoft realizes you might go with a third-party security vendor rather than an overpriced bundle of theirs, they may respond with improved pricing or bundle options to change your mind.
- Establish Clear Walk-Away Points: Before formal negotiations, decide what your “no deal” plan is – and be ready to execute it if necessary. This means defining the conditions under which you would refuse to renew on Microsoft’s terms and pursue an alternative strategy. Examples:
- Be willing to let the EA lapse temporarily and use month-to-month licensing if needed (for instance, via Microsoft’s Cloud Solution Provider (CSP) program or the newer Microsoft Customer Agreement). While this might be more expensive month-to-month, it can serve as a short-term safety net rather than signing a bad three-year contract.
- bringing in a higher-level Microsoft executive or invoking a competing offer can break a stalemate. For instance, have your CIO ready to call Microsoft’s sales VP to insist on a fair deal, or let Microsoft know that your board is willing to invest in alternative solutions if the EA isn’t satisfactory. These tactics underscore that you mean business.
- Control the Narrative and Pace: Come to the negotiating table armed with your analysis and drive the conversation. Rather than passively listening to Microsoft’s pitch, present your findings and requirements early on. For example, you might outline: “We have discovered 15% of our current licenses are unused and will be eliminated. Our benchmarks show market pricing is X, and our executive team has set a firm budget cap of Y for this renewal.” By sharing that you’ve done the math and are willing to walk away from an unsatisfactory deal, you put Microsoft on notice that typical sales tactics won’t work. Also, manage the pace: if Microsoft’s team tries to rush you with expiring discounts or “limited-time” offers, be prepared to hold your ground or calmly call their bluff. Often, those deadlines are sales pressure tactics that disappear once they see you won’t be swayed. You set the timeline, not them.
By executing these leverage tactics, you make Microsoft compete for your business even though they are the incumbent vendor.
It’s about changing the psychology of the negotiation: you want Microsoft to feel that they need to earn your renewal on your terms. Challenge assumptions, show you have alternatives, and time your moves for maximum impact.
Combined with the solid data and preparation from Steps 2 and 3, this approach puts you in a powerful position to negotiate the best possible EA renewal.
Step 5 – Renewal Negotiation Checklist
When the formal negotiation discussions begin, it’s crucial to have a comprehensive checklist of negotiation items to cover.
Price per license is just one aspect; many other terms in an EA can significantly affect your total cost and flexibility over the next three years.
Prepare a checklist (literally a document or list) and ensure each point is addressed in the negotiation and reflected in the contract.
Key items on your EA negotiation checklist should include:
- ✅ Price Protections and Caps: Don’t focus only on the upfront price – also negotiate how prices may (or may not) change over the term. Aim to lock in unit pricing for the full duration of the EA. For example, stipulate that Year 1, 2, and 3 prices per user are fixed at a certain rate, or at least cap any annual increase to a very small percentage. If you anticipate needing to add new product licenses mid-term, negotiate that those future additions will be at the same discounted rate you’re getting now, not at full list price. These price protections safeguard you from Microsoft’s routine annual price hikes and currency fluctuations. Without them, you might face unexpected cost increases each year.
- ✅ True-Down Flexibility: Standard EAs require you to commit to a set number of licenses for the term (you can add, but generally cannot reduce during the term). This rigidity can be problematic if your organization needs to change. Push for the right to reduce license counts (a “true-down”) at certain intervals without penalty. Even if Microsoft is reluctant to allow a mid-term reduction for all products, negotiate specific concessions – for instance, the ability to reduce a certain percentage of seats at the yearly anniversary, or flexibility to swap licenses between products if you decrease one as you increase another. Ensuring you have some true-down rights means you won’t be stuck paying for licenses you no longer need due to layoffs, divestitures, or shifting strategies.
- ✅ Unified Support Cost Alignment: If you have Microsoft Unified Support tied to your EA, bring it into the negotiation. Unified Support fees are often calculated as a percentage of your EA spend. Negotiate caps or adjustments so that support costs align with actual usage and savings. For example, if you significantly reduce your license spend, the support fee percentage should drop accordingly – or negotiate an absolute “not to exceed” dollar figure for support each year. In some cases, it may make sense to decouple the support agreement from the EA entirely and negotiate it separately, thereby avoiding an automatic tie between rising license spend and rising support fees. The goal is to prevent a scenario where you save money on licenses only to lose those savings in support costs.
- ✅ Optionality for New Products/Features (e.g., AI add-ons): Microsoft will likely promote new offerings like AI-powered features (Copilot) or enhanced security bundles during your renewal. While these may be attractive, be careful about committing enterprise-wide without proven value. Negotiate these as optional or pilot components. For example, rather than paying for Copilot for every user from day one, you could agree to a discounted pilot program (say, 300 users for 6 months) with an option to expand later. Or simply leave such add-ons out of the EA with the understanding that you can add them in the future once your organization is ready. This keeps your EA lean and cost-effective, and avoids inflating your agreement with untested technology. In negotiations, it’s perfectly acceptable to tell Microsoft, “We’re interested in new technologies like Copilot, but we will evaluate them on our own schedule – let’s exclude them (or keep them minimal) in this renewal.”
Tip: As you negotiate these points, insist that all agreed changes and concessions are documented in writing in the EA contract or as amendments.
Verbal assurances from a sales rep are not enough – you need the final paperwork to reflect every commitment (whether it’s a fixed price, a discount percentage, a flexibility clause, etc.).
A thorough negotiation checklist helps ensure nothing falls through the cracks and that the final signed agreement contains the terms you fought for.
Step 6 – Governance and Internal Alignment
Success in an EA renewal negotiation also depends on your own organization’s unity and discipline. Microsoft’s sales tactics often involve working different angles within a customer – for example, talking up technical benefits to IT managers while separately discussing financial concerns with the CFO.
To avoid any “divide and conquer” strategy, treat the EA renewal as a major internal project with strong governance and executive alignment.
Here’s how to keep your team coordinated:
- Build a United Front: Establish a core negotiation team (as noted in Step 1, include IT, procurement, finance, legal, etc.) and hold regular strategy meetings. Agree on roles and responsibilities early: for instance, procurement may lead the price and contract discussions, IT defines technical requirements and usage forecasts, finance sets budget limits, and legal reviews all terms. Importantly, make sure that any communication from Microsoft to various people in your organization gets funneled back to this core team. If a Microsoft account manager calls up one of your IT directors claiming “this new product is a must-have,” that director should know to refer them back to the negotiating team rather than making side agreements. Consistent internal communication ensures that Microsoft hears a single, aligned message about your priorities and constraints, regardless of whom they speak to.
- Executive Sponsorship and Backup: Ensure your C-level executives (CIO, CFO, and, if necessary, even the CEO) are aware of the negotiation strategy and support it. Microsoft may attempt high-level outreach – it’s not uncommon for Microsoft executives to call your CEO or board members touting the importance of a deal or warning of dire consequences if not signed. If your leadership is already on board with the plan (including the possibility of saying no if terms aren’t right), those tactics will fail. Ideally, your CIO or CFO is actively sponsoring the initiative and can engage directly with Microsoft’s senior management when needed to reinforce your stance. This might mean the CIO joins a negotiation meeting to state, “We need these terms to align with our strategy,” or the CFO backs the procurement lead in holding the budget line. High-level unity makes it clear to Microsoft that they can’t bypass the negotiation team by appealing to someone above.
- Plan Your Escalation Path: Despite best efforts, negotiations can hit roadblocks – a discount approval might stall, or Microsoft might claim they can’t grant a certain term. Decide in advance how you will escalate issues. For example, determine when it’s time to involve your CEO to talk to Microsoft’s regional general manager, or when to demand a meeting with Microsoft’s top negotiator or product specialist to resolve a specific impasse. Sometimes, a polite but firm note from your CEO to Microsoft’s executive, such as “We need Microsoft’s partnership to get this done, or we will explore other options,” can unlock a stubborn situation. Having an escalation game plan prevents panic and internal disagreement under pressure, because everyone knows how far you’re willing to go and who will take the lead if higher-stakes conversations are required.
- Document Everything: Maintain detailed notes and records of all interactions with Microsoft. Every quote, email, proposal change, and meeting outcome should be recorded. This thorough documentation ensures that you have a record of what was promised or discussed, which is invaluable if disputes arise later or if team members change. It also helps in the next renewal in a few years – you’ll have a clear record of how this deal was done, which pitfalls to avoid again, and what strategies worked.
By keeping your internal team aligned and disciplined, you present a united front to Microsoft. There will be no “weak link” for them to exploit.
Microsoft won’t be able to say, “But finance already agreed to this price” or “The IT team really wants Product X now” – because finance, IT, and all stakeholders are coordinating closely and sticking to the agreed plan. This unity greatly strengthens your negotiating position.
It allows you to adhere to your established best practices and objectives without being derailed by internal confusion or mixed messages.
Essentially, when your organization speaks with one voice, Microsoft has no choice but to deal with your terms and priorities directly.
Example Scenario – Renewal Preparedness Pays Off
To illustrate these best practices in action, consider a hypothetical enterprise (we’ll call it Contoso Inc.) with 10,000 users and an EA expiring in 2025.
Contoso’s CIO and team followed this playbook for their renewal:
- Started Early and Set Goals: 15 months before the EA’s end, Contoso formed a dedicated renewal team with leaders from IT, procurement, and finance. The CIO’s mandate to the team was clear: avoid any net cost increase in the new EA and find opportunities to save money if possible, even though Microsoft’s account reps had hinted that “everyone’s costs are going up” this cycle.
- Cleaned-up Licenses: The team conducted a detailed usage audit. They discovered that about 2,000 licenses were completely unused across various products. For example, many users had Power BI Pro and Project Online assigned despite not using those tools. They also noted that only roughly 30% of their employees actually leveraged the advanced features of the Microsoft 365 E5 license. Armed with these insights, Contoso decided to proactively eliminate all truly unused licenses and to downgrade a large portion of users from E5 to E3 before getting any renewal quotes. This house-cleaning significantly reduced their baseline spend.
- Benchmarked and Modeled Scenarios: Contoso engaged a third-party licensing advisor to obtain industry benchmark data. The benchmarks showed that similar companies were paying 15–20% less per user than Contoso was currently paying. Using this data, the team modeled a preferred renewal scenario: a mix of E3 and E5 that matched actual user needs, plus a realistic Azure commitment based on current cloud usage trends. The scenario indicated that Contoso could save millions compared to simply renewing all existing licenses at Microsoft’s initial rates. They set an aggressive internal target – aiming for about a 10% reduction in total EA cost compared to their last term – and calculated that target as a firm dollar cap for the negotiations.
- Built Negotiation Leverage: As discussions with Microsoft kicked off, Contoso made it subtly clear that they were evaluating all options. They obtained a quote from AWS for part of their infrastructure to compare against Azure pricing. They also analyzed how easily they could shift certain workloads to Microsoft’s CSP program or even other vendors if needed. Their message to Microsoft was: “We will do what makes the most financial and strategic sense for us – we hope that’s renewing fully with Microsoft, but we have other avenues if the deal isn’t right.” Additionally, they timed their negotiation milestones such that Microsoft knew key decisions would land in late Q4 of Microsoft’s fiscal year, adding extra pressure on the sales team to be accommodating.
- Negotiated Methodically: Contoso presented Microsoft with a detailed outline of their desired deal structure – including the adjusted license counts (fewer E5s, more E3s), the benchmark-based pricing they expected, and critical terms like price locks and the ability to reduce seats if needed in year 2. When Microsoft’s first offer came back higher than Contoso’s target, the team didn’t acquiesce. Instead, they countered using their data: “Our analysis shows we only need X licenses, not Y,” and “According to industry data, we should be closer to Z% off, not just the smaller discount you proposed.” They also signaled a willingness to escalate or delay signing if necessary to get a fair deal – leveraging the fact that Microsoft’s reps had year-end goals to meet. After several rounds of back-and-forth, Microsoft conceded on most major points. In the end, they matched the competitive pricing benchmarks and even included a special clause allowing Contoso to reduce up to 10% of licenses in the second year if business conditions changed.
Result: Contoso Inc. achieved a stellar renewal outcome. They avoided any cost increase and actually reduced their total Microsoft spend by about 15% (roughly $5 million in savings) over the next 3-year term. They secured firm price locks on their core Office 365 licenses, ensuring no surprise hikes during the term.
They removed all identified shelfware, meaning every license in the new EA is there for a reason and provides value, boosting their ROI on Microsoft investments.
Furthermore, by addressing potential compliance issues and avoiding overcommitment, they maintained a comfortable compliance position throughout, which kept the negotiation focused on future value rather than distractions such as true-up penalties.
In summary, what could have been a painful and costly renewal became an opportunity for cost savings and better terms, thanks to early, strategic preparation and disciplined negotiation.
Summary of Best Practices
The table below summarizes the key EA renewal best practices, why each is important, and the risks if you ignore them:
| Best Practice | Why It Matters | Risk if Ignored |
|---|---|---|
| Start Planning Early (12–18 Months Ahead) | Gives you ample time to gather data, clean up licenses, explore alternatives, and align stakeholders. You control the timeline instead of scrambling to meet Microsoft’s deadlines. | Last-minute renewals favor Microsoft – you may rush into a vendor-driven deal, miss savings opportunities, or have no time to fix licensing issues, leading to higher costs. |
| Clean Up Licenses & Eliminate Shelfware | Reduces wasteful spending and lowers your renewal baseline. Ensures you’re only paying for what you actually use. Also removes any compliance gaps that Microsoft could leverage against you. | Carrying unused licenses means paying for unnecessary software for another 3 years. Unresolved compliance issues could surface during negotiations or audits, forcing you into expensive true-ups on Microsoft’s terms. |
| Benchmark Costs & Model Scenarios | Provides a fact-based target for pricing and an optimal mix of products. You know what a good deal looks like and can tailor the EA to your needs (e.g. right license mix, appropriate cloud commit). | Without benchmarks, you might accept an inflated price, not realizing you could do better. Not modeling scenarios could lock you into a suboptimal product bundle or oversized cloud commitment, resulting in overspending or unused services. |
| Create Negotiation Leverage | Puts pressure on Microsoft to compete for your business. By using timing and credible alternatives, you tilt the power balance in your favor and can negotiate deeper discounts and better terms. | If Microsoft believes you have no options and will renew no matter what, they have little incentive to offer concessions. You could end up with minimal discounts, vendor-biased terms, and an agreement largely on Microsoft’s terms. |
| Use a Detailed Negotiation Checklist | Ensures you cover all critical terms (price protections, flexibility, support costs, new tech options) in the contract. This proactive approach secures long-term value and safeguards, not just a low initial price. | Important terms might be overlooked – you could face steep annual price increases, be stuck with an inflexible contract (no ability to reduce licenses or adjust terms), or pay for extras like support or AI features that weren’t properly negotiated. |
| Align Internally with Strong Governance | Presents a united front to Microsoft and streamlines decision-making. All stakeholders support the strategy, so Microsoft hears one cohesive message and cannot divide-and-conquer. Internal approval processes are faster and smoother. | Internal disagreements or siloed communications can be exploited by Microsoft to undermine your negotiation position. Lack of executive alignment may lead to conceding on key issues or confusion, weakening your stance and potentially resulting in a poorer deal. |
By following these best practices, enterprise leaders can approach the 2025 Microsoft EA renewal with confidence. T
he renewal becomes an opportunity to secure better pricing, achieve more flexible terms, and align the agreement with your business strategy – instead of a painful cost increase.
With early preparation, data-driven negotiations, and a unified team, you can turn the EA renewal into a win for your organization.
Read about our Microsoft Negotiation Services.
