Microsoft EA Renewal Decision Tree: Renew, Downsize, or Exit?
How to Use This Decision Framework
Renewing a Microsoft Enterprise Agreement (EA) is a strategic decision, not just a routine task. This framework serves as a Microsoft EA renewal decision tree to guide CIOs, CFOs, and IT leaders through a clear, logical flow.
By answering a series of yes/no questions about your organization’s needs and usage, you can determine whether to renew or cancel your EA.
For a complete overview, read our guide to Microsoft EA renewals.
Rather than defaulting to renewal, use this guide as an EA vs. alternative decision-making tool to explore all paths: a full renewal, strategic downsizing, or an exit to a different licensing model.
It’s a quick, directional playbook to ensure everyone – from IT to finance – is on the same page about the plan before you talk terms with Microsoft.
Step 1 — Assess Key Business Indicators
Begin with an honest assessment of a few key indicators. These questions form the foundation of your EA renewal decision logic:
- Is your user or seat count significantly decreasing? A major drop in employees or devices (due to restructuring, divestiture, etc.) suggests you may not need the same volume of licenses. If yes, a full EA renewal could mean overcommitting – consider downsizing or even exiting. If no (your user base is stable or growing), renewing the EA might be the sensible path to secure the best pricing for your scale.
- Are all current EA products and services still in active use? Take inventory. Are there Microsoft 365 plans, Azure services, or other licenses in your EA that sit unused or under-utilized? If yes, identify those as targets to cut. If you find significant “shelfware” (unused licenses), it’s a signal to downsize the agreement by removing or reducing those products. If no (you actively use everything you’re paying for), a renewal or an optimized renewal could be the right move, since the EA is aligned with your needs.
- Do you expect major growth, stability, or contraction in the next 3 years? An EA is a three-year commitment. Forecast your organization’s trajectory: if you anticipate growth or consistent stability, maintaining an EA can lock in discounts for that expansion. If you expect contraction or highly variable needs (e.g. project-based fluctuations, seasonal workforce), a traditional EA may become a poor fit – you might look at downsizing or exiting to avoid paying for future unused capacity. Align this outlook with your decision: a growth outlook leans toward renewal (or even expansion), while a shrinking outlook favors reducing commitments.
By assessing these indicators, you set the stage for the decision. The answers will point you toward one of three paths.
In the sections below, follow the branch that fits your situation: Renew, Downsize, or Exit. This is how you decide whether to renew, adjust, or cancel your EA using a structured approach that compares renewing, downsizing, and exiting EA options.
Learn about Microsoft EA Renewals and M&A.
Decision Point A — Renew if…
After the self-assessment, choose the Renew path if most of these conditions apply:
- Usage is stable or growing: Your workforce and IT needs are not shrinking. You plan to continue using Microsoft’s services at the same level or a higher level. In this case, renewing the Enterprise Agreement ensures a predictable path forward. You won’t be paying for large numbers of unused licenses; in fact, you might need more licenses over time. A renewal secures the volume discounts for your expected growth.
- The EA still offers the best value (in terms of price and terms): Evaluate alternative licensing models (such as Cloud Solution Provider or pay-as-you-go plans) and compare the costs. If the EA’s volume discounts and fixed pricing still yield the lowest total cost for your usage, renewing makes financial sense. Similarly, if you heavily utilize Software Assurance benefits (such as training vouchers, support, and upgrade rights), the EA provides these as part of the deal — renewing preserves those perks.
- You need predictability and long-term support: Many organizations favor the EA for its budget certainty. A three-year EA locks in pricing and provides a consolidated agreement covering all major Microsoft products. If your leadership prioritizes stable, predictable costs and a strong support relationship with Microsoft, a renewal aligns well. It simplifies vendor management (with a single agreement to manage) and ensures continued enterprise-level support and services from Microsoft.
Path if Renewing:
Proceed with a full EA renewal, potentially even expanding it if new needs are on the horizon. For example, you might add new Microsoft services (like Power Platform, additional security features, or new cloud services) into the renewed EA to take advantage of bundled pricing.
In this EA renewal strategy decision, you’re reaffirming your commitment — leverage that by negotiating the best terms possible for the next term (such as locking in discounts or adding value-added services). Renewing doesn’t mean accepting the status quo; it means recommitting on your terms with an optimized contract.
Decision Point B — Downsize if…
Choose the Downsize path if you find a mix of continued need but with clear excess or inefficiencies in your current EA:
- Usage is declining or has areas of overspend: Perhaps your overall headcount is smaller than when you first signed the EA, or certain offices or departments no longer require specific licenses. Perhaps you’ve moved some workloads off Microsoft (for example, by dropping a Dynamics 365 module or reducing Azure usage through optimization). If parts of your Microsoft footprint are shrinking, but you still rely on other parts, downsizing is a smart compromise.
- You want to reduce scope but remain in an EA: You may value the EA’s benefits and relationship, but not at the current scale. Downscoping can mean renewing the EA for only the products you fully use or for a smaller number of total seats. For instance, you might keep Microsoft 365 and Windows in the EA, but move Azure to a consumption-based agreement if Azure usage becomes unpredictable. This way, you trim the EA’s license footprint and cost, yet continue to enjoy volume pricing on the core elements you retain.
- Unused licenses or services are identified: Through your audit, if you discover significant unused licenses (shelfware) or underutilized services, those are prime candidates for cutting. True-down rights at renewal allow you to remove or reduce licenses without penalty at the end of the term. A downsizing decision often comes from recognizing overspend: you pay for 1,000 seats of a product but only actively need 800. At renewal, you would renew only the 800 needed, immediately cutting cost. You remain in the EA program, but right-size it to meet your current needs.
Path if Downsizing: Execute a strategic downsizing of your Enterprise Agreement. This involves using the renewal point to true-down license counts and possibly remove entire product sets that are no longer needed. You’ll negotiate a renewal that is smaller in scope – for example, a reduced seat count or fewer product bundles.
Be aware that a smaller EA might move you to a lower discount tier (since Microsoft’s EA pricing levels are volume-based), so part of your decision is balancing slightly higher unit prices against the savings of not overbuying.
In the end, a downsized EA keeps what works for you and cuts out what doesn’t, achieving cost savings while maintaining an EA relationship and its associated benefits for the licenses you do renew.
Decision Point C — Exit if…
Follow the Exit path if your analysis shows that the traditional EA model no longer aligns with your needs:
- Usage is highly variable or unpredictable: If your organization’s license needs fluctuate or you cannot confidently forecast user counts, a three-year fixed commitment can result in paying for capacity you don’t use. For example, organizations with high seasonality or those in fast-changing industries might find an EA too rigid. In such cases, the flexibility of month-to-month licensing via cloud subscriptions is more valuable than a locked-in discount. When variability is the norm, exiting the EA prevents overcommitment and allows you to scale licenses on demand.
- Flexibility outweighs volume discounts: Consider whether the EA’s discounts truly save you money relative to your actual usage. If you’re routinely over-licensed, the effective cost per used license might be higher under the EA than it would be if you only purchased what you need via alternative channels. Exiting makes sense when leadership prioritizes agility – the ability to start or stop services freely – over the guarantee of a discount on a large pre-committed volume. In other words, you’re willing to potentially pay a bit more per license in exchange for not being tied into a three-year contract with rigid terms.
- Your organization is a good fit for CSP, MCA, or other models: Microsoft’s ecosystem offers other licensing avenues. Many enterprises transitioning out of an EA shift to the Cloud Solution Provider (CSP) program, where licenses are purchased through a reseller on a subscription basis, or to the Microsoft Customer Agreement (MCA) for Azure and other services, which offers a direct pay-as-you-go model. If you’ve determined that these models suit your future strategy better (for example, if you want to only pay for Azure resources consumed, or add/remove M365 licenses monthly as staff join or leave), it’s a strong signal that it may be time to exit the Enterprise Agreement. Microsoft has been evolving its programs and often encourages mid-sized customers toward these modern purchase models. If you fall into this category, you may find incentives or simplified transitions to help you move off the EA.
Path if Exiting:
Plan to let your EA license lapse at the end of the term and migrate to an alternative licensing option. This requires coordination: you’ll need to ensure every software or service currently under the EA is accounted for in the new model (so you’re properly licensed and compliant post-EA).
The transition may involve signing a Microsoft Customer Agreement for Azure usage, collaborating with a CSP partner for Microsoft 365 subscriptions, or exploring other vendors’ solutions if they better meet your needs.
Exiting an EA is a significant change, but it can lead to substantial improvements in cost agility. Just prepare for the trade-offs: once out of the EA, you lose those built-in volume discounts and some Software Assurance perks like free training days or version upgrade rights.
Many organizations that exist allocate a separate budget for these purposes, or accept the risk for greater flexibility. In sum, choose to exit when the freedom to re-align your licenses on-the-fly is worth more than the benefits of staying in Microsoft’s traditional contract.
Comparing the Paths at a Glance
Sometimes it helps to see the three options side by side. The table below compares the key benefits and potential drawbacks of Renew vs. Downsize vs. Exit:
| Path | Key Benefits | Risks / Drawbacks |
|---|---|---|
| Renew | – Predictability in budget and planning (fixed 3-year terms). – Highest volume discounts and locked-in pricing for growing usage. – Consolidated support and coverage under one agreement. | – Potential overcommitment if needs shrink (you pay for unused licenses). – Lower agility to adjust mid-term; tied to 3-year contract. – Could perpetuate paying for shelfware if not carefully right-sized. |
| Downsize | – Immediate cost savings by shedding unused licenses. – Still maintain EA benefits (volume pricing on what you keep, Software Assurance for core products). – Shows Microsoft your intent to optimize, which can improve negotiation leverage on the remaining scope. | – Reduced discount tiers if volume drops (per-license cost might rise somewhat). – Some added complexity in management (mix of EA and possibly other licensing for what you removed). – If needs rebound unexpectedly, you might have to add licenses later at higher rates outside the EA. |
| Exit | – Maximum flexibility: scale licenses up or down as needed, or stop services without contractual lock-in. – Pay only for what you truly use; aligns costs directly with consumption. – No long-term obligations — freedom to explore alternative solutions or vendors over time. | – Loss of EA volume discounts means higher unit prices for licenses/services. – Forfeiture of bundled Software Assurance benefits (training, support, upgrades), which might require separate purchase if needed. – Transition effort required to new licensing model; potential learning curve for IT and procurement. |
Each path serves different priorities. This EA renewal decision guide highlights that the decision between renewing, downsizing, or exiting is about balancing cost, flexibility, and risk.
For instance, renewing locks in predictable costs but could overshoot your needs; exiting gives agility but could increase unit costs. There is no one-size-fits-all answer — it depends on your business’s unique situation and strategy.
What to Do Next After Choosing Your Path
Once you’ve used the decision framework and selected a direction, it’s time to act on that choice:
- If you plan to renew, Begin preparations to maximize the value of your renewal. Internally, compile a negotiation checklist – list your desired outcomes, such as better pricing, added services (e.g., including new product licenses or more flexible terms), and any contractual improvements. Align your stakeholders (IT, procurement, finance) on these goals so you present a united front to Microsoft. Leverage the fact that you’ve considered alternatives: even if you’re set on renewing, Microsoft should not assume it’s a given. Use your due diligence (e.g., knowledge of CSP pricing or competitor offerings) as leverage to secure a more favorable renewal deal. Essentially, make renewing an EA a strategic move with clear asks, not just a rubber stamp on the old contract.
- If you plan to downsize, Execute a detailed usage audit in preparation for the true-down. Pinpoint exactly which licenses and services will be reduced or removed. Engage with your Microsoft account team or reseller early, communicating that you intend to renew a smaller EA. This can prompt Microsoft to sharpen its pencil on pricing for the remaining scope, as it’ll want to retain your business even in a reduced capacity. Formulate a true-down plan: for example, “We will renew only 800 of our 1,000 seats of Product X, and drop Product Y entirely.” Ensure you’ve accounted for any dependencies (if you drop a product, do users have an alternative?). By the time renewal paperwork is drafted, all stakeholders should know exactly what the new, learner EA looks like. Additionally, prepare for any operational adjustments, such as fewer licenses or products. Confirm that your IT team is ready to support the environment with these changes.
- If you plan to exit, Start planning the transition well before the EA expiration. Map out which products and services you currently have under the EA and decide how each will be handled post-exit. For Microsoft 365 or other user licenses, engage a Cloud Solution Provider to arrange equivalent subscriptions beginning the day after your EA ends, so there’s no service interruption. For Azure, work with Microsoft or your partner to move to a Microsoft Customer Agreement or other arrangement for continuous cloud access. It’s crucial to model the costs of these alternatives so there are no surprises – often this means monthly forecasting since charges will be pay-as-you-go. Identify any risk gaps: for instance, if leaving the EA means losing 24/7 support from Microsoft, have a plan to obtain support elsewhere or budget for support incidents. You should also communicate your decision internally, as exiting an EA can change how departments obtain licenses (more on-demand purchasing). Finally, notify Microsoft in advance, as per your contract requirements (many EAs require written notice if you choose not to renew). A well-planned exit can strengthen your negotiation positio,n too – if Microsoft comes back with a late offer to entice you to stay, you’ll be in a great spot to compare it against your independent plan.
Read about our Microsoft EA Optimization Service.
