Microsoft EA Renewal Strategies for Cost Savings
Executive Summary:
Enterprise Agreements (EAs) with Microsoft are comprehensive, large-scale contracts that encompass Microsoft 365, Azure, Dynamics 365, Windows Server, SQL Server, and additional services.
If armed with the right strategies, renewing an EA is a prime opportunity for CIOs and procurement teams to reduce costs.
This advisory outlines actionable steps to optimize licensing, plan cloud usage, audit software consumption, negotiate better terms, manage compliance, and effectively engage with Microsoft (and advisors).
Each section below outlines actions to take, key considerations, and the practical impact on major Microsoft product areas and negotiation domains, enabling you to achieve significant cost savings while meeting organizational needs.
For a full overview of negotiations, read our Ultimate Guide to Microsoft Contract Negotiations.
Preparation: Audit Usage and Plan Needs Early
Renewal success begins long before the contract end date. Proper preparation ensures you enter negotiations with clear data and objectives.
Start by auditing current usage and aligning future needs:
- Start Early: Initiate EA renewal planning 8–12 months before the expiration. This lead time prevents last-minute scrambling and lets you leverage timing (e.g., end-of-quarter Microsoft sales incentives).
- Conduct a Comprehensive License Audit: Inventory all Microsoft licenses and cloud subscriptions. Identify unused or under-utilized licenses (“shelfware”) across Microsoft 365, Azure, Dynamics, and server products.
- Forecast Future Requirements: Work with business units to project user counts, cloud resource needs, and new software requirements for the next 3 years. Plan for organizational changes (expansions, contractions, acquisitions) that could affect license needs.
- Stakeholder Alignment: Involve IT, finance, procurement, and user representatives in the planning process. Ensure everyone agrees on goals (cost reduction targets, technology adoption plans) and speaks with one voice to Microsoft.
Action:
Audit and true-down your entitlements before renewal. Make a checklist of licenses by product and compare it to actual usage. For example, if 1,000 Office 365 E5 licenses are allocated but only 800 active users are expected, plan to reduce the allocation by 200 licenses at renewal. Removing this “shelfware” ensures you aren’t renewing unnecessary capacity.
Considerations:
Be thorough and data-driven. Use admin portals and tools (e.g., Microsoft 365 usage analytics, Azure Cost Management) to gather accurate usage data. Engage each department to confirm if certain software is still needed. Also forecast any new needs – for instance, a planned move to Azure PaaS services might mean adding Azure credits, which you can negotiate alongside cutting unused on-premises licenses.
Impact:
A detailed pre-renewal audit often reveals potential savings of 10–30% by trimming unnecessary expenses. You avoid paying dormant licenses in the new term and enter negotiations confidently about what you do (and don’t) need.
Early planning also positions you to negotiate on your timeline, not Microsoft’s, maximizing leverage.
Preparation Checklist: Ensure these steps are completed well before your EA renewal:
- Usage Inventory Completed: All Microsoft 365 accounts, Azure resources, Dynamics 365 users, and on-prem servers inventoried and matched to licenses. Unused licenses identified.
- Future Needs Assessed: Growth or reduction in headcount quantified; cloud migration plans documented (which on-prem systems may move to Azure or be retired).
- Internal Consensus: Stakeholders agree on priorities (e.g. “reduce EA cost by 15%” or “migrate email to cloud by Q2”) and support the negotiation strategy.
- Cleanup Actions Identified: List of licenses to drop or downgrade at renewal (true-down) is prepared, and any critical new additions (with justification) are noted.
By fully understanding your current and future software usage, you set the stage for targeted cost-saving measures in each product area, which we explore next.
Microsoft 365: Optimizing User Licensing and Bundles
Microsoft 365 (Office 365 suite, Windows Enterprise, and EMS security suite) often constitutes a significant portion of the EA spend. It offers bundles like E3 and E5 plans that include a wide array of services.
Optimization here focuses on rightsizing plans, eliminating extras, and leveraging the right bundles or add-ons.
Action:
Right-Size License Plans (E3 vs E5 vs F3): Evaluate each user’s needs and assign the most cost-effective Microsoft 365 plan. Downgrade users who don’t require premium features. For example, not everyone needs an M365 E5 license – if a department doesn’t use the advanced security, analytics, or voice features of E5, those users can be moved to E3 at renewal. Similarly, frontline or kiosk workers might be adequately served by an F3 (Frontline) plan rather than an E3 plan.
Considerations:
Use Microsoft 365 usage reports to see which E5-only features (like Advanced Threat Protection, Power BI Pro, Audio Conferencing, or Phone System) are utilized and by whom. This helps identify candidates for downgrading. Plan to provide add-ons for specific users if needed—for instance, if you downgrade someone to E3 but still require Power BI Pro, you can purchase a standalone Power BI license for significantly less than the cost of the E5 bundle.
When shifting plans, ensure compliance with Microsoft’s licensing rules (e.g., users can be upgraded at any time, but downgrades typically occur at renewal). Also consider plans: if you intend to deploy an E5 feature broadly in the next year, factor that in (you may want to retain more E5 licenses for the eventual rollout to lock in pricing now).
Impact:
Optimizing M365 licensing can dramatically cut costs while meeting user requirements. For example, a company with 5,000 users moved 40% of them from M365 E5 to E3 when they discovered that only IT admins and certain analysts were using the E5-exclusive features.
This change yielded over $1 million in annual savings (E5 is roughly 50% more expensive than E3 per user). The users experienced no loss in productivity, as their core Office apps and collaboration tools remained intact. The organization reduced its Microsoft 365 spend by about 30% by tailoring license levels to actual needs.
Action:
Eliminate Unused Services and Add-Ons: Beyond the core Office plans, companies often purchase add-on licenses (such as Visio, Project, Power BI, and Audio Conferencing) or additional security products that may overlap with Microsoft 365 capabilities. Identify any such redundant or underutilized subscriptions.
For instance, if you bought 1,000 Visio Plan licenses but only 600 people actively used Visio in the last year, plan to renew only 600 and drop the rest. Similarly, if every user was given the full EMS E5 security suite but only a fraction needs advanced capabilities like Cloud App Security, consider licensing most users with the cheaper EMS E3 (or relying on built-in Windows security) and only a subset with EMS E5.
Considerations:
Check the usage metrics for each extra service. Microsoft 365 admin center and audit logs can show how many users launched Visio, Project, Power BI, etc. For overlapping functionalities, consider third-party tools: are you paying for Zoom or Cisco Webex while also having Microsoft Teams as part of M365?
Are you using a separate mobile device management tool when Intune is included? Decide which service to consolidate onto to avoid paying twice. If you have external solutions that duplicate an E5 feature and prefer a third-party solution, you might downgrade from E5 and remove that overlapping Microsoft component. Conversely, you can eliminate third-party subscription costs by standardizing on Microsoft’s solution.
Impact:
Cutting out unused or redundant services yields immediate savings and simplifies your IT environment. For example, one firm discovered hundreds of unused Project Online licenses (thousands of dollars per month wasted) and a redundant enterprise videoconferencing subscription despite already having Teams.
At renewal, they eliminated the unused Project licenses and fully embraced Teams (dropping the other conferencing service), resulting in a streamlined toolset and saving over 20% on collaboration software costs. Removing unnecessary add-ons also reduces complexity in license management and lowers the risk of non-compliance (since every license has a clear purpose and user).
Action:
Leverage Bundling Strategically: Microsoft 365 bundles (such as E5) can be expensive, but in some cases, bundling can save money if you truly need all the components. Assess whether separate licenses would be more expensive than the bundle.
For instance, if an employee requires Office apps, Enterprise Mobility + Security, Power BI, and Phone System, the M365 E5 bundle may be more cost-effective than purchasing E3, EMS E5, Power BI, and Phone System individually.
Additionally, consider Microsoft’s new bundle promotions at renewal – Microsoft often offers promotional discounts on upgrades (e.g., moving from E3 to E5) or the addition of new products. Negotiating them as a bundle in the EA can provide cost advantages if you genuinely plan to adopt those features.
Considerations:
Carefully calculate the break-even point between bundled vs. unbundled licensing. Microsoft provides pricing for individual components; compare your negotiated price list. Only upgrade to a bigger bundle if the incremental features deliver business value. Negotiate any bundle upgrade; do not accept the list price.
If Microsoft wants you on E5, request a significant discount or credits in return (perhaps citing that you’d otherwise stick with E3). Ensure that bundling doesn’t lock you into paying for something you won’t use; it should align with an internal plan to utilize those features.
Impact:
Strategic bundling or selective upgrades can yield cost-per-value improvements. For example, a company planned to implement a Teams Phone System for all 2,000 employees. Instead of buying a third-party phone solution, they negotiated a deal to add the Phone System and Audio Conferencing as part of their Microsoft 365 E5 upgrade at renewal, with a 20% promotional discount.
The result: they got a fully integrated calling solution for a modest increase per user (far less than an external PBX service). This saved them the cost of a separate telephony contract and simplified user experience. T
The key is that they only upgraded because they had a clear plan to use those E5 features; otherwise, they would have overspent.
In summary, optimization in Microsoft 365 licensing is about precision – give each user only what they need, no more, no less.
By doing so, enterprises commonly shave a significant portion off their EA renewal costs for Office and productivity services, without hampering any functionality required by the business.
Azure: Cloud Cost Management and Planning Strategies
Azure usage under an EA can be a significant cost center, but it also presents some of the largest opportunities for cost savings through careful planning and technical optimization.
Since Azure is usage-based, renewal aims to secure the best pricing for your expected consumption and manage that consumption efficiently.
Action: Optimize Cloud Commitments and Consumption:
Most EAs include an Azure monetary commitment (a pre-paid amount or forecasted spend over the term). Analyze your actual Azure consumption vs. committed spend in the current term.
If you consistently under-use your commitment (leaving money on the table), consider reducing the committed amount in the renewal so you only pay for what you need. Conversely, if your Azure usage exceeds the commitment and you incur significant overage charges, consider negotiating a higher base commitment with a volume discount for the new term.
Microsoft rewards larger upfront commitments with better per-unit rates. For instance, committing to $2 million per year in Azure spend might yield higher discounts than committing to $1 million per year.
The key is to align the commitment to realistic usage: avoid overcommitment (paying for capacity you won’t use), but ensure it’s high enough to cover planned growth (so you benefit from lower pricing on that growth).
Considerations:
Review Azure Cost Management reports for the last 6-12 months to identify usage trends. Break down spending by service (VMs, storage, databases, etc.) to identify where the majority of spending occurs and forecast how those expenses might change (e.g., new projects, decommissioning of data centers, etc.).
If you anticipate migrating major workloads to Azure (e.g., moving on-prem servers or adopting Azure SQL), factor that in – it could justify a bigger commitment, and you should negotiate corresponding discounts.
On the other hand, if exploring multi-cloud or scaling back, be conservative in your commit. Also consider the commitment form: Azure Savings Plans or Reserved Instances can lock in savings for specific services without an upfront monetary commitment in the EA; ensure your strategy accounts for using those vehicles alongside your EA agreement.
Impact:
A well-calibrated Azure commitment ensures you pay for actual needs at the best rate. If a company has $ 500,000 of Azure services left unused each year due to over-commitment, lowering the commitment in the new EA directly saves that $ 500,000 annually.
Alternatively, increasing the commitment in line with growth but getting a 5% better discount on $2M of Azure spend saves $100K/year versus no discount on pay-as-you-go rates. In short, aligning contract terms with usage optimizes spending efficiency and prevents waste and unexpected overage costs.
Action:
Leverage Azure Reserved Instances and Hybrid Benefits:
Use Microsoft’s technical cost optimization programs. Azure Reserved Instances (RI) allow you to pre-pay or commit to VM and database capacity for 1 or 3 years in exchange for deep discounts (up to ~72% off vs. pay-as-you-go for 3-year RIs).
Azure Hybrid Benefit (AHB) lets you apply existing Windows Server or SQL Server licenses (with Software Assurance or qualifying subscriptions) to Azure VMs or Azure SQL databases, avoiding the “license included” cost in Azure (which can be 30-50% of the VM’s price).
At renewal, plan to utilize these benefits: ensure you maintain Software Assurance on the on-prem licenses you’ll use for AHB, and consider shifting steady-state workloads to Reserved Instances.
Considerations:
Identify which Azure workloads are steady and long-term – prime candidates for RIs or Savings Plans (e.g., a web application running 24/7 at a consistent load).
Ensure you have a budget to pre-pay or the commitment to use RIs; if you’re uncertain a VM will be needed for 3 years, you can opt for a 1-year RI or Azure Savings Plan (which is more flexible across resources). For AHB, inventory Windows/SQL licenses with SA that you have available.
Plan your Azure deployment to utilize those (e.g., if you have 20 Windows Server Datacenter licenses with SA, you can cover up to 40 CPUs in Azure with AHB—deploy up to that limit with AHB applied). Include any needed SA true-ups in your renewal to cover planned AHB usage.
Also, coordinate with your technical teams to implement cost-saving best practices, such as right-sizing VMs (choosing appropriate VM sizes to avoid over-provisioning CPU/RAM), scheduling non-production VMs to shut down after hours, and cleaning up unused resources (orphaned storage, old snapshots, etc.). These operational tactics complement the licensing benefits to reduce Azure spend.
Impact:
Smart use of Azure cost levers can dramatically lower cloud expenditures. For example, a company moved 50 virtual machines to 3-year Reserved Instances – their cost for those VMs dropped by ~65%, saving hundreds of thousands of dollars over the term.
Another organization applied Azure Hybrid Benefit to all eligible VMs, cutting Azure costs by roughly 40% on those workloads (since they were no longer paying Microsoft again for Windows Server licenses they already owned).
These are real, sizeable savings that directly reduce your EA spend.
Additionally, by implementing governance measures (such as turning off idle resources), companies can often reduce their Azure bills by 10-20%. Azure optimization can be one of the highest-impact cost-saving areas in an EA renewal.
Action:
Monitor and Adjust Cloud Usage Continuously: Azure operates on a consumption-based model, unlike traditional software licenses. Establish a practice of regularly reviewing and adjusting cloud costs throughout the EA term. Treat the EA renewal as a checkpoint to enforce good cloud cost management in the future.
Considerations:
Use Azure’s cost management tools or third-party cloud cost management solutions. Set budgets or alerts for each department’s Azure usage. As part of the EA negotiations, you might also ask for access to Microsoft’s FastTrack or cloud solution architects to help optimize workloads (Microsoft may offer guidance as a value-add).
Ensure that any Azure credits you negotiate (sometimes Microsoft offers one-time credits as incentives) are planned for use in the first year so they don’t expire. Define internal accountability for cloud spend: for example, each application team should report monthly on their Azure spend versus budget.
Impact:
By optimizing Azure spend throughout, you prevent overages that could accumulate and hit you at the next renewal. If you successfully manage Azure consumption and even come under budget, you are in a strong position to negotiate a lower commitment or better rates next time.
Continuous optimization could mean millions saved over the 3 years and no nasty surprises. It also ensures your IT budget is spent on actual value (compute power used) rather than inefficiencies.
In summary, Azure cost savings require both contractual and operational strategies. At renewal, secure the best pricing structure (commit appropriately, get discounts) and plan to exploit all Microsoft cost-reduction programs (RIs, AHB).
Then, keep a close eye on usage. Enterprises that do this have transformed Azure from a budget buster into an area of controlled, optimized spend that still delivers on the needed capabilities.
Dynamics 365: Aligning License Types with Business Use
Dynamics 365 (D365) encompasses CRM and ERP applications (Sales, Customer Service, Finance, Supply Chain, etc.) and often carries a high per-user cost. In an EA renewal, scrutinizing Dynamics 365 licenses is crucial because these are subscription licenses that can be tailored to meet the specific needs of each user role.
The goal is to ensure you’re not overpaying for premium licenses where a lower tier would suffice, and that you’re not holding licenses for users or modules that aren’t active.
Action:
Match Users to the Appropriate License Level: Dynamics 365 offers different license types for different needs – full application licenses (Enterprise licenses for power users of Sales, Finance, etc.), lighter use licenses (often called Team Member licenses), and attach licenses (discounted licenses for users who already have a base license in another D365 app). Conduct a role-based analysis of your D365 users:
- Identify light users who only consume data or do minor updates. These users could likely use Team Member licenses (which cost a fraction of a full license). For example, someone who only needs to view reports and update a few fields in CRM does not need the full Sales Enterprise license.
- Ensure users needing multiple Dynamics modules take advantage of the Attach licenses. If a user needs both Sales and Customer Service, they should not be paying full price for both – one should be the base license, and the other an add-on (which is cheaper).
- Consider whether any users can move to a lower-tier product (e.g., Dynamics 365 Sales Professional vs. Sales Enterprise) if their requirements are basic. The Professional tier is more affordable but has some functionality limitations; it may suffice for some groups.
Considerations:
Review each D365 application’s usage metrics: How many logins per user are there, and which features are they using? Dynamics’ admin center can show active user counts and access frequency.
Consult with business owners of each module to determine if the current license count accurately reflects the actual staff using the system. Check if some departments have shrunk or if certain Dynamics features were piloted but never fully adopted (you might have bought licenses for a project that didn’t roll out).
Also, review licensing guides – Microsoft frequently updates Dynamics licensing rules; ensure you’re using any new license types that could lower your costs. For instance, Microsoft introduced an “Activity” license (Team Member) for light use – ensure you leverage it for eligible users. Suppose some users or business units barely use Dynamics.
In that case, you might even consider removing those licenses entirely and not renewing that component (or exploring alternative solutions that are more cost-effective for their needs).
Impact:
Aligning license types can yield substantial savings in Dynamics 365 spend. For example, suppose you have 500 users on a Customer Service Enterprise license ($95/user/month). After analysis, 100 of them are tier-1 support staff who only read cases and escalate, which could be done with a Team Member license ($ 8 per user per month).
By switching those 100 to Team Member, you save roughly $87 per user per month, over $100,000 annually, with minimal impact on user functionality.
Similarly, using attached licenses for multi-module users can save 50% or more on the secondary license. These optimizations ensure you’re not paying enterprise prices for casual users.
Action: Evaluate Module and Feature Usage:
Dynamics 365 is modular – you might be licensed for multiple modules (Sales, Field Service, Finance, etc.) as part of your EA.
Over a 3-year term, it’s common for some modules to become underutilized or for certain add-ons (such as AI features or customer voice) to go unused.
Review which D365 modules you’re using and at what scale:
- If a module (or specific add-on feature) is barely used or a project using it was canceled, consider dropping it at renewal.
- Check if the number of environments/instances you have (which often incur additional costs for extra sandbox or production instances) is still needed. You may be able to consolidate and reduce instance add-on costs.
- Ensure you’re not double-paying for functionality between Dynamics and other systems. For example, if you use a third-party marketing automation tool, you may no longer need the Dynamics Marketing module (or vice versa).
Considerations:
Dynamics 365 licensing can be complex, and certain modules (like storage and marketing contacts) might be licensed via capacity instead of per user. Check your usage against those entitlements as well—e.g., are you paying for 100K marketing contacts when you only use 20K? Align those numbers at renewal.
Also, if you anticipate replacing a Dynamics module with another solution or if a business unit was acquired that uses something else, factor that in (you might reduce D365 licenses accordingly). Engage Dynamics application owners to confirm if all licensed functionality is delivering value.
Impact:
Pruning unused Dynamics modules or capacities ensures you only pay for the business value received. If you drop a little-used module, you could save tens of thousands of dollars per year (depending on the module costs).
One organization discovered that they had retained 50 licenses of Dynamics 365 Project Service from an old deployment that had been phased out; removing those in the renewal saved approximately $ 30,000 per year with no impact on users. They also reduced the number of additional sandbox instances they weren’t using, saving $ 10,000.
These may not always be as large as some Microsoft 365 or Azure savings, but they add up and avoid waste. Moreover, focusing spending on the modules you do use could give you leverage to negotiate those prices better (rather than spreading budget thin on unused pieces).
Action: Consider Alternatives for High-Cost Scenarios:
If certain Dynamics 365 components are very expensive and you have lighter needs, consider if alternative licensing or solutions could be more cost-effective. For instance, some companies with basic CRM needs for a large population opt to use Power Apps or a custom app instead of licensing full Dynamics for everyone. While this is a strategic decision beyond just the EA, renewal time is when you can shift some users off costly Dynamics licenses if a simpler solution suffices.
Considerations:
This is a bigger decision that requires weighing the cost of building or licensing something else against the convenience of Dynamics 365. If Dynamics 365 is core to your operations, you likely stick with it but optimize within it.
However, if you have peripheral use cases – e.g., a small subsidiary only needing basic contact management – you might license them on a cheaper CRM or a Dynamics 365 Professional plan outside the EA.
Also consider Microsoft’s bundling offers: sometimes they bundle Dynamics 365 with other products at a discount if you adopt it widely. If you consider dropping it, Microsoft may be willing to negotiate pricing to keep you on Dynamics.
Impact: Any users or groups shifted to cheaper alternatives reduce the EA cost. Be cautious: The impact should be measured in terms of both cost and capability. Ideally, you save money without losing the functionality you need.
For example, moving 200 field workers from full Dynamics licenses to a lighter Power Apps-built solution could save a large sum, but only if their needs are indeed basic. If done correctly, you can maintain efficiency and possibly simplify the user experience while reducing licensing fees.
In summary, treat Dynamics 365 licensing like a scalpel, not a sledgehammer: finely tune who gets what license and eliminate what isn’t used. Because D365 licenses are expensive, even small adjustments (such as adding dozens of users or a module here and there) can have a notable budget impact.
Ensuring each license has a justified purpose means you can maximize your Dynamics investment and avoid overspending on this segment of the Microsoft portfolio.
Windows Server & SQL Server: Maximizing On-Premises and Hybrid Value
Many enterprises still maintain significant on-premises infrastructure or run hybrid environments. Windows Server, SQL Server, and related Client Access Licenses (CALs) under the EA can be another area for cost optimization.
The key strategies here involve optimizing edition choices, fully utilizing virtualization rights, leveraging hybrid use, and wisely managing Software Assurance.
Action:
Consolidate and Virtualize to Optimize Server Licensing: Microsoft’s server licensing (especially Windows and SQL) often allows one license to cover multiple workloads if consolidated. For example, Windows Server Datacenter edition (with Software Assurance) permits unlimited VMs on a licensed host. If you have many Windows Server Standard licenses spread across dozens of lightly loaded servers, consider consolidating those VMs onto fewer physical hosts and licensing those hosts with Datacenter edition.
This can reduce the total number of licenses needed. Similarly, assess the usage of the Standard versus Enterprise editions of SQL Server: Enterprise is more expensive but allows unlimited virtualization with SA and includes high-performance features; Standard is less expensive but has limited capabilities.
Ensure you’re not using Enterprise licenses where Standard would suffice (if your workloads don’t need Enterprise-only features). Similarly, if you have many Standard licenses on a single server farm, it may be more cost-effective to use one Enterprise license on the host with virtualization rights.
Considerations:
Perform an infrastructure audit: How many physical cores are you licensing for Windows and SQL? Are they under- or over-utilized? Work with your cloud/virtualization team to identify if workloads can be consolidated (especially with virtualization or containerization).
Check if you follow Microsoft’s licensing rules in virtual environments – you might discover you’ve been over-provisioning licenses “just in case.”
For instance, if a host has 16 cores and you run 8 VMs on it, the Standard edition would require licensing those 16 cores for each set of two VMs (due to its 2-VM per license limit without SA), meaning effectively four copies of 16-core licenses.
However, one Datacenter license covering 16 cores would cover all VMs.
The cost difference can be huge. If those 8 VMs could be spread across multiple hosts for redundancy, you must factor in failover rights (which usually require SA). Ensure that any consolidation plan maintains the necessary performance and resiliency.
Impact:
Optimizing server licensing through consolidation can significantly cut costs while maintaining capacity. For example, an organization was licensing 100 VMs with Windows Server Standard across numerous hosts, amounting to ~50 Standard licenses.
By consolidating onto fewer hosts and switching to 10 Datacenter licenses, they covered the same VMs with far fewer licenses, resulting in a savings of around 20-25% on Windows Server licensing costs.
Additionally, by tracking SQL Server usage, another company discovered that only a few databases truly required the Enterprise edition for optimal performance; they downgraded others to SQL Standard, resulting in a 30% reduction in SQL licensing spend without affecting service levels.
These changes leverage the “bang for buck” of higher editions in the right places and the economies of scale of virtualization.
Action:
Use the Azure Hybrid Benefit for On-Prem/Cloud Flexibility: If you maintain Software Assurance on Windows Server and SQL Server, you can use those licenses either on-premises or in Azure (or other eligible clouds) under the Hybrid Use Benefit.
This means you can migrate workloads to Azure without incurring double payments for licenses. Even if you plan to stay on-premises, SA provides license mobility to move VMs across hosts or to a third-party cloud.
Ensure you capitalize on these rights:
- If you are migrating some servers to Azure as part of a cloud strategy, keep those licenses with SA at renewal and apply them in Azure (we discussed in the Azure section how this lowers cloud costs).
- If you have more on-prem licenses than you currently use (due to downsizing), you might repurpose some in Azure or even consider downsizing the count at renewal (but be careful if you need them later).
- Conversely, if you plan to retire a datacenter and go full cloud, you might not need to renew SA on certain servers because you’ll switch to Azure subscription licensing. Or you might shift those SA funds into the Azure commit.
Considerations:
Map out your 3-year plan for each major server workload: will it remain on-prem, move to Azure, or be decommissioned? Maintain SA for those that need upgrades, mobility, or will be used in the cloud (AHB).
Evaluate whether SA is worth it for static, legacy, and non-moving ones. Without SA, you lose upgrade and cloud use rights.
However, if you don’t upgrade or move them, you can save costs by dropping SA (or even the license if the server is being turned off).
If you let SA lapse on a perpetual license, you still own the last version you were entitled to; however, you’d have to rebuy licenses if you later need a newer version or cloud-based use. So it’s a trade-off: short-term savings vs. long-term flexibility.
Additionally, review Microsoft’s policies, as some licensing rules have recently been updated to be more cloud-friendly with SA (e.g., passive failover rights for SQL are now included with SA).
Impact:
Properly leveraging hybrid rights and SA can save money or avoid future costs. For instance, using your existing licenses in Azure (via AHB) might save you tens of thousands on cloud VM licensing fees (as noted earlier). Deciding not to renew SA on a set of 50 older Windows Server licenses you intend to keep running as-is could cut 25% off the renewal cost for those licenses (since SA roughly adds that annually).
That could be $50k/year saved; however, you forego upgrades. If those servers stay in use without issues, it’s pure savings. If you need to upgrade in year 2, you might have to spend more later, so carefully weigh the decision.
The overarching impact is ensuring you’re paying only for the value you plan to use: keep investments (like SA) where they enable something tangible (cloud use, upgrades) and trim them where they don’t.
Action:
Recount and Recalibrate Client Access Licenses (CALs) and Other Server Entitlements:
In an EA, many on-prem products (Exchange, SharePoint, Windows Server, etc.) require CALs for users or devices. Over three years, your user count or device count may have changed (e.g., workforce reductions or shifts to cloud services). Use renewal time to adjust CAL quantities to match the current reality.
If you moved workloads to Microsoft 365 cloud services, you might no longer need certain CALs (for example, if all mailboxes moved to Exchange Online, you don’t need Exchange Server CALs on-prem). Review other infrastructure licenses like developer tools (Visual Studio subscriptions), Remote Desktop Services CALs, etc. Align them with current usage or upcoming changes.
Considerations:
CALs are tricky because EA often had an “enterprise” commitment to cover all users for certain products. However, suppose you have formalized that certain on-premises servers are decommissioned or all users have transitioned to cloud equivalents.
In that case, you can potentially not renew those CALs or reduce their count. Be sure you won’t suddenly need to use that on-premises software again (some companies keep a few on-premises servers as backups; if so, consider keeping minimal CALs).
Also, check if your Microsoft 365 licenses already cover the necessary access rights to on-premises servers (e.g., M365 E3/E5 includes CAL rights for Windows Server, Exchange, SharePoint, etc., when you have a hybrid scenario). If so, you may no longer need to license those CALs separately for those users. Use Microsoft’s Product Terms to confirm rights.
Impact:
Adjusting CALs and ancillary licenses can yield incremental savings and prevent paying for phantom users. For example, a company had 10,000 Windows Server CALs on their EA when they had 10k employees.
After moving many systems to cloud services, only 6,000 employees still accessed any on-prem Windows servers, so they reduced the number of CALs to 6,000, saving the cost of 4,000 CALs (a significant cut in that line item).
While CALs have lower costs per unit than server licenses, the savings are meaningful in large volumes. Additionally, ensuring your license counts accurately reflect the actual user counts helps avoid compliance issues, such as over-licensing (wasteful) or under-licensing (risk). It’s part of keeping your EA lean.
In summary, for Windows Server, SQL Server, and related on-prem licensing, efficiency is the name of the game:
- Use the highest-value license types (e.g., Datacenter, Enterprise), which cover multiple uses and avoid paying for licenses individually.
- Don’t pay for idle capacity—if servers or licenses aren’t being used, consider cutting them or repurposing them through hybrid use.
- Maintain SA only where it truly benefits you (cloud rights, upgrades); don’t blindly renew everything.
- Adjust user/device counts to current needs.
By doing so, companies can maintain their necessary on-prem and hybrid capabilities at a much lower cost footprint. This often translates to hundreds of thousands in savings over the EA term and a cleaner, more justifiable license position.
Table: Sample Cost Savings from License Optimization by Category
| Area | Optimization Example | Estimated Cost Impact (per year) |
|---|---|---|
| Microsoft 365 | Downgrade 1,000 users from M365 E5 to E3 | Save ~30-40% per user (≈$25/user/month) = $300K+ saved annually, while preserving core Office capabilities for those users. |
| Azure Cloud | Convert steady workloads to 3-year Reserved Instances and apply Hybrid Benefit on 20 VMs | 50-70% cost reduction on those Azure resources. E.g., a $500K/year VM workload drops to $200K with RIs+AHB, saving $300K/year. |
| Dynamics 365 | Switch 100 users from Full licenses ($95) to Team Member ($8) | >90% lower cost for those users. Approx $100K annual savings, with minimal impact on read/update access for light users. |
| Windows/SQL | Consolidate VMs onto Datacenter-licensed hosts (replacing 30 Standard licenses) | 20-30% reduction in Windows Server licensing costs (e.g., save $50K/year) by using fewer but more efficient licenses; maintain capacity with fewer licenses. |
| On-Prem CALs | Remove 4,000 unused CALs (due to cloud migration) | Eliminate waste, saving 100% of those CAL costs (e.g., if a CAL is $30, that’s $120K/year saved) with no loss of coverage for active users. |
Illustrative examples: Actual savings will vary by organization; however, these scenarios demonstrate how targeted optimizations result in tangible cost reductions. Each dollar not spent on unnecessary licensing is freed for other IT investments (or bottom-line savings).
Negotiation and Contract Term Strategies
Optimizing licenses and usage gives you a baseline, but strong negotiation tactics and savvy handling of contract terms can further drive cost savings.
Microsoft expects enterprise customers to negotiate their EAs, and those who come prepared can secure better discounts and more flexible terms.
This section outlines the approach to the negotiation phase, including when to engage, what to negotiate, and how to create leverage.
Action: Engage Early and Control the Timeline:
Begin formal negotiation discussions months in advance of the EA expiration. Aim to prepare your requirements and initial counter-proposals well ahead of Microsoft’s internal deadlines. Microsoft sales reps have quarterly and annual targets – they become most flexible as those targets loom.
Starting early, you can time the final deal-making to align with Microsoft’s end-of-quarter or fiscal year-end, when they are eager to close deals. For example, if your EA expires in July, starting in January allows you to iterate and then ideally close in late June (end of Microsoft’s Q4) when the sales team is motivated to meet quota.
Considerations:
Don’t wait until the last week before expiration; if you do, the leverage shifts to Microsoft because you’re under the gun to renew. Also, be aware of Microsoft’s processing deadlines – they often require paperwork to be completed a few weeks before quarter-end due to internal workload.
Starting early lets you set the pace. You can signal that you can delay or explore alternatives if needed. Be mindful of aligning internal approvals, too – ensure your leadership is ready to sign off at the optimal time so you can capitalize on any last-minute discount offers from Microsoft.
Impact:
Customers who negotiate on their schedule often achieve greater concessions. By managing timing, you may be able to secure an extra few points of discount or some freebies when Microsoft is eager to close.
You avoid the risk of a rushed renewal with subpar terms. In short, you turn time pressure into Microsoft’s problem, not yours, which usually results in a better deal financially.
Action:
Present a Unified Front and Strong Justification: Microsoft’s team will include sales, technical, and licensing specialists who are skilled negotiators. They sometimes try to “divide and conquer” – for instance, pitching technical staff on the cool features of an upgrade while separately pressing procurement on pricing.
Counter this by unifying your team. Decide internally who will lead the negotiation, who will handle pricing discussions, and who will discuss the technical scope, and stick to that plan.
Internally, everyone should agree on the walk-away points and target outcomes. When engaging Microsoft, be factual and firm in your requirements, backing them up with data. For instance, communicate: “Our analysis shows we have 20% more licenses than needed, so we will decrease our counts. Additionally, our budget cannot exceed $X—we will need pricing at or below that level.” Provide justifications for any requests (usage data, industry benchmarks, alternative options you have).
Considerations:
Train your team to avoid offhand comments that could undermine your position (e.g., an IT manager musing to the MS rep, “We might eventually upgrade everyone to E5,” which weakens your stance if you’re trying to resist an upsell). Keep all communications coordinated. It can help to have regular internal debriefs after each vendor meeting to adjust tactics. Using data as a negotiation tool is critical: share your usage audit results to push back on Microsoft’s attempts to sell you more.
If Microsoft says, “You need 1000 of X,” show them, “We only have 800 active users, so we will license 800.”
Also, do your homework on pricing – if you have access to benchmark pricing (maybe through peers or an independent advisor), use that: “We believe a fair discount for this volume is 20%, not the 10% in the proposal.” You need not reveal sources, just indicate that you are familiar with the market.
Impact:
A united, well-prepared customer can negotiate from a position of strength, often securing more favorable terms. Microsoft will realize it cannot exploit internal disagreements or ignorance.
For example, by pushing back with data, one company successfully persuaded Microsoft to remove a $ 200,000 charge for licenses that Microsoft had assumed were needed, but the company proved were not.
Another achieved a 5-10% better discount than initially offered by showing competitive intel and emphasizing their firm’s budget cap. Solidarity and evidence transform negotiations into a fact-based discussion, rather than a sales pitch, leading to a leaner contract that aligns with your needs.
Action:
Negotiate Discounts Aggressively – Everything is on the Table:
Microsoft’s first offer is rarely its best. Treat the initial quote as a starting point for further discussion. Scrutinize every line item in their proposal and identify where to push for a discount or a better term.
Key areas to negotiate:
- Unit Price Discounts: Look at the percentage discount off the list price for each major product (M365, Azure rate, Dynamics, etc.). If you see 0% or a low discount, ask for a better one. Use your volume and any competitive context as leverage (“We are a major account with X thousand users; we expect a more aggressive volume discount on Office 365.”).
- Total Contract Value: If Microsoft proposes $Y million over 3 years, set a target to reduce that by a certain amount (through a combination of price cuts and scope adjustments). Don’t reveal your full budget, but indicate you have limits and other priorities.
- Benchmark Against Peers: If possible, mention that you’re aware of industry peers (of similar size) paying less. Microsoft typically won’t disclose others’ deals, but letting them know you’re educated can pressure them to avoid being too high.
Considerations:
Microsoft sales representatives have some flexibility but often require approval from higher-level managers (the “business desk”) for deeper discounts.
To help them advocate for you internally, articulate reasons: budget constraints, a competitive alternative, a long relationship with Microsoft, willingness to serve as a reference, etc.
Also, consider the mix of products—sometimes, Microsoft will give more on one product if they get something else in the deal.
For example, they might heavily discount Dynamics if you’re also renewing a big Office 365 component to encourage you to keep everything with them.
Be tactical: decide where you want the biggest savings and where you have some flexibility, then aim your negotiation accordingly.
Impact:
Hard bargaining on price can produce substantial cost savings on the EA. For instance, pushing a discount from 10% to 15% on a $5 million component saves $250,000. Multiply that across several components, and you’ve freed a large sum.
By systematically challenging each quoted rate, one organization reduced its 3-year EA cost by $1.2 million (approximately 18%) compared to the initial quote, solely through better pricing and eliminating unnecessary items. Remember, any concession not asked for is a concession not received; those dollars go straight back into Microsoft’s pocket instead of your budget.
Action:
Secure Price Protections and Flexible Terms: In addition to upfront pricing, negotiate the terms that will govern your costs over the EA period:
- Price Holds/Caps: Ensure the per-unit pricing you negotiate is fixed for the term. If you add more users or Azure spend later (via true-up), they should be at the same discounted rate. Negotiate a cap on any list price increases for subscription services during the term (Microsoft sometimes raises SaaS prices; try to lock yours).
- Flexibility to Adjust: While Microsoft’s standard EA terms don’t allow reducing license counts mid-term, see if you can negotiate any flexibility given your situation. For example, if business needs change, a one-time reduction or the ability to swap certain licenses for others of equivalent value may be necessary. Large customers have occasionally been granted the right to reduce a portion (typically 5-10%) of their seats in the event of divestiture or downturn.
- Renewal options: If you anticipate uncertainty, you may even consider negotiating a shorter term or an option to extend for an additional year at the same rates. It’s not typical, but if Microsoft wants to keep your business locked in, they might be willing to make some accommodations.
Considerations:
Outline scenarios with Microsoft: “Our workforce might shrink by 15% next year due to spinoff – we need a clause to adjust licenses in that case.” They may or may not grant it, but it sets the stage for possibly more lenient treatment. At a minimum, ensure the contract explicitly states your negotiated discounts and that those apply to any additional licenses you add later.
Ask for a price lock on renewals, if possible – e.g., an agreement that states if you renew within 3 years, the prices won’t increase by more than a certain percentage. Microsoft often resists, but you may get a gentle person’s agreement or awareness to revisit this next time.
Additionally, clarify payment terms: by default, EA is billed annually. If you can pay upfront for three years and are willing to, ask if that yields an additional discount (sometimes 1-2%). Or, if you need more flexible billing (e.g., quarterly), negotiate that (although Microsoft typically prefers annual billing).
Impact:
Getting price protections in writing prevents future cost escalations that can erode your savings. If you negotiate that any added users get the same per-user price, and then your company acquires another with 500 new employees, you won’t pay a premium for those, potentially saving tens of thousands compared to if they charged higher rates for incremental licenses.
If that scenario comes true, a negotiated ability to reduce licenses in a specific scenario might save you from overpaying for unused licenses. Even if you only achieve a stable 3-year price with no increases, in an inflationary environment, that is a win (avoiding, say, a 5% annual hike saves a lot by year 3).
Action:
Use Strategic Roadmap Leverage (Bundling in Negotiations): Bring your plans and alternatives to the negotiation table.
Microsoft is very interested in capturing a larger share of your IT spending. Let Microsoft know if you plan to adopt new Microsoft services (e.g., rolling out Teams Phone, migrating an Oracle workload to Azure, implementing Dynamics within a division), but tie it to your specific needs.
For example: “We are considering Power BI company-wide, but to justify that, we need a discounted rate.” Or, “We’ll move these servers to Azure if we can get a commitment of $X Azure credits or a better unit price.” Essentially, you’re bundling your potential business in exchange for concessions now.
Conversely, if you have credible alternatives, subtly tell Microsoft: “We’re also piloting Google Workspace for a subset of users,” or “AWS gave us a competitive quote for these workloads.” You don’t need to threaten, but making them aware of competition encourages them to sweeten the deal to keep your full commitment.
Considerations:
Only promise what you intend to do – you want to maintain credibility. If you say you’ll adopt a product for a discount, be prepared to follow through, as Microsoft might include contractual commitments.
It’s fair to negotiate, for instance, a certain number of Dynamics licenses at a big discount if you add them. Microsoft loves seeing customers expand their usage, so use that to your advantage: get “first-time” pricing or extra services included.
Just be careful not to overload your organization with new technology just because it’s a good price—ensure it aligns with your strategy.
For alternatives, identify the areas where you could realistically switch (e.g., consider AWS for cloud computing or Zoom for meetings instead of Teams). Mentioning relevant areas can inject just a bit of competitive tension.
Microsoft knows most large customers have heterogeneous environments; letting them know you have options puts pressure on them not to take your account for granted.
Impact:
This leverage can result in additional discounts or value that pure haggling on existing usage might not achieve.
For example, an enterprise negotiated its EA and mentioned plans to eventually adopt Azure for its ERP systems, which were currently running on VMware. Microsoft, eager to displace VMware/AWS, included $ 200,000 in Azure credits and a 5% extra discount on Azure consumption if the migration occurs within 18 months.
That’s a tangible benefit, lowering their effective cost. Another customer secured 100 free Power Platform licenses for a year from Microsoft, which helped them get started and saved money in the first year, ultimately building a stronger business case.
On the other hand, by alluding to the possibility of moving some Office users to Google, the company received an increase in its Office 365 discount, as Microsoft didn’t want to lose any seats.
Essentially, you can unlock savings beyond the standard volume discount by aligning the negotiation with your IT roadmap (what you will do with Microsoft and what you could do elsewhere).
Action:
Consider Multi-Party Bids and Reseller Dynamics: If your EA is sold through a Licensing Solution Provider (LSP) rather than directly, remember that the LSP’s margin and fees are also at play.
Having two or more LSPs compete for your business (if your enterprise policies allow) can result in better pricing, as they might reduce their cut or offer incentives to win your account.
Even if you stick with the incumbent reseller for practical reasons, letting them know you’re price-checking their offer can motivate them to give you the best possible terms.
Additionally, sometimes large enterprises can negotiate certain aspects directly with Microsoft (like an extra concession) and then apply it via the reseller quote.
Considerations:
Be mindful of contractual rules—in some regions or scenarios, you might be tied to a particular LSP (e.g., if they hold a government contract). However, you generally have the freedom to switch at renewal. Evaluate the LSP’s service quality, too (license management support, portal tools, etc.). Since our focus is cost, ensure the quotes are apples-to-apples with the same Microsoft pricing.
The difference will usually be in how much discount the reseller passes through. Don’t be shy to ask your reseller what additional discount they can obtain from Microsoft’s business desk on your behalf – they might say “this is the maximum,” but if you have a competing quote, you can counter that.
Another angle: sometimes an LSP will offer added services (like software asset management assistance or training credits) at no extra cost to retain you, indirectly saving you money on those services.
Impact:
You might save a few extra percentage points off the EA by injecting a bit of competition on the channel side. For example, if one reseller is willing to accept a slimmer margin and comes in $ 100,000 lower on a $5 million deal, that’s $ 100,000 saved on the same Microsoft licenses.
At the very least, you ensure you’re not leaving money on the table due to reseller markup. In one case, an organization got its reseller to match a competitor’s offer to waive the first-year financing fee, saving them 3% of the first-year cost. These aren’t as large as the Microsoft direct discounts, but every bit contributes to the overall goal.
Action:
Document Everything and Review the Fine Print: As you push through negotiations, make sure every concession–a discount, a free service, a special condition, or a flexible term–is captured in writing and ends up in the final EA documentation. Insist on clarity in the contract regarding pricing, caps, and any promises made. Before signing, review the order forms and terms line by line against your understanding of the agreement.
Considerations:
Microsoft’s EA paperwork can be complex, and mistakes or omissions can happen. If you negotiated a discount, ensure the SKU pricing in the quote reflects it.
If you have special terms (such as extended use of a product for migration), ensure an amendment is included. It’s wise to involve your legal or procurement counsel to confirm everything is in order. Don’t rely on verbal assurances – people change roles, and memories fade.
Also, understand any buyer’s responsibilities that got added (e.g., a commitment to purchase a certain amount of Azure). You must be aware of following through, or you could incur penalties or lose the benefit.
Impact:
Proper documentation protects the savings you’ve worked hard for. There’s nothing worse than negotiating a great deal and then realizing later that a crucial clause was missing, resulting in a charge that’s more than expected.
By closing the loop on paperwork, you secure the financial benefits and establish a clear baseline for the next three years.
This avoids disputes and unexpected costs, ensuring the EA delivers the value you negotiated on day one, through day 1,095.
In summary, negotiation is where preparation pays off in dollars. A methodical, firm approach to EA negotiations can yield:
- Deeper discounts (often 5-15% better than the starting offer).
- Extra value (credits, services, trial licenses).
- More favorable terms (price locks, flexibility to adapt to change).
- A contract with fewer “grey areas” could cost you later.
Many organizations find that having a skilled negotiation team (including potentially an outside licensing expert to advise) more than pays for itself in the resulting savings. Next, we turn to compliance management, which, if neglected, can undo all these savings via unexpected costs.
Compliance Management and License True-Ups
Maintaining compliance with Microsoft’s licensing rules is not only about avoiding penalties—it’s also a cost issue. Non-compliance discovered at renewal or through an audit can lead to hefty, unplanned purchases that exceed your budget.
Conversely, over-compliance (licensing out of caution) is a waste of spending. The strategy is proactively managing compliance to avoid last-minute surprises and ensure you only buy what you need.
Action:
Perform an Internal Compliance Audit Before Renewal: Conduct a thorough internal license reconciliation before finalizing your renewal decisions.
Match deployments to entitlements: how many of each product are in use versus how many you have licensed? Identify any gaps (under-licensing) so you can address them on your terms.
For example, maybe an extra SQL Server instance was spun up over the last couple of years and not recorded—now is the time to catch that, rather than Microsoft catching it later.
Similarly, find any surplus (licenses purchased but not deployed, which we addressed in optimization). Essentially, establish your Effective License Position for all major products.
Considerations:
Ideally, perform this self-audit 3-6 months before renewal. This gives time to resolve any issues. Use available tools (Microsoft’s License Statement, SCCM or other inventory tools, cloud admin portals, etc.).
Focus on common trouble spots:
- Server licenses vs. installations: Ensure every SQL Server, Windows Server host, etc., is accounted for with enough core licenses and SA if required for its use (like virtualization or failover).
- CALs vs. user counts: Verify that every user or device accessing on-prem servers has a CAL (or is covered under a license-included scheme). This is often overlooked in favor of things like Exchange, SharePoint, and Windows Server file sharing, among others.
- Actual O365/M365 usage vs. licenses: It’s possible to assign more users than you bought licenses for if not managed carefully (especially if you had a leeway during early Covid, etc.). Ensure that your tenant’s active users do not exceed the purchased licenses, or plan to true up if they do.
- Dynamics and Power Platform usage limits: Check if any usage (such as Dynamics field count or Power Apps usage) exceeds what’s entitled, as this could trigger additional costs.
- Geographic use rights: If your EA is, say, with your HQ entity, ensure that licenses aren’t being used by affiliates not covered or in regions not allowed without proper assignment.
If you find under-licensing, you have choices: you can remediate by purchasing the necessary licenses as part of your renewal (often preferable, since you can negotiate them rather than pay full price later) or adjust usage (such as decommissioning a server or moving a workload to a licensed environment).
Being proactive allows you to budget for any true-up, rather than getting caught off guard.
Impact:
This internal audit approach means no costly surprises. Many organizations that skip this step end up facing a compliance bill at renewal – for instance, discovering they were 100 Windows CALs short or a cluster wasn’t licensed properly, resulting in an unplanned $100K true-up at Microsoft’s rates.
By finding out for yourself, you can either correct the usage or negotiate those licenses as part of the renewal (possibly at a discount). It keeps you in control financially.
In one case, a company discovered a shortfall of dozens of SQL core licenses for a secondary DR site; by identifying it early, they negotiated those into the EA with a discount and avoided an audit penalty that could have cost 30% more.
Ultimately, a clean self-audit can save you from compliance penalties and over-buying “just in case.” You’ll enter the renewal knowing exactly what you need to buy.
Action:
Manage True-Ups and True-Downs Methodically: You report additions via annual True-Ups during the EA term. While you generally can’t true-down mid-term, you effectively true-down to your new baseline at renewal.
It’s crucial to ensure all required True-Ups have been done accurately each year and to plan how any changes will be handled at renewal:
- Double-check that all license increases (new hires, new servers, additional Dynamics users, etc.) since the last annual order have been reported or will be accounted for now. If something was missed, include it in your renewal order to legitimize it, rather than leaving an unresolved compliance gap.
- Conversely, if you had a reduction during the term that you couldn’t remove, then be sure to remove it now (this is the truth-down). We covered this in optimization, but in compliance terms, ensure Microsoft doesn’t still have you on the books for those licenses. Your renewal paperwork should explicitly state that they are not required.
Considerations:
Look at your last EA’s true-up records. If you added 200 Office 365 licenses in year 2 and 300 in year 3, those should already be paid for. Ensure the renewal quote’s starting point doesn’t accidentally count them twice.
Also, if you suspect any changes weren’t reported properly (perhaps a department spun up servers without telling IT), reconcile that now. If something was used without being licensed, not addressing it could be considered a breach – it’s better to come forward as part of renewal negotiations to sort it out amicably. In renewal mode, Microsoft is often more conciliatory (since they want you to sign a new contract) than in audit mode.
Impact:
Proper true-up management ensures you start the new EA with a clean slate. It avoids back-billing later. If Microsoft finds unreported use later, they could charge at least the list price with no discount, possibly with back support fees.
That’s a very expensive way to pay for licenses. By handling it at renewal, any necessary additions become part of your standard EA (with discounts) – potentially saving 20-30% compared to an after-the-fact purchase.
Additionally, demonstrating good license hygiene can make Microsoft more comfortable in extending favorable terms, as you’re seen as a responsible customer, not one they need to monitor for compliance issues.
Action: Educate and Implement Ongoing SAM Practices:
A renewed EA starts the next cycle. To sustain compliance (and cost-optimization) through the term, put strong Software Asset Management (SAM) practices in place:
- Maintain an accurate license repository: Keep records of what you bought (entitlements) and tie them to deployments. Microsoft provides a Microsoft License Statement – use it, and update it with each procurement.
- Regular internal audits: Schedule periodic internal reviews (e.g., annual or semi-annual) to detect any drift in usage versus licenses.
- Governance for new deployments: Establish a policy that IT cannot deploy a new server, spin up an Azure service, or assign a Power BI license without considering licensing implications and updating the relevant records. A simple request process can flag procurement whenever new licenses might be needed (or reallocation from the existing pool if available).
- Stay informed on licensing changes: Microsoft regularly updates product terms and usage rights. Ensure that someone on your team or an external advisor monitors those changes to alert you if anything affects your compliance or opportunities (e.g., a new benefit you can utilize, or a rule that requires action).
- Training and Awareness: Educate technical teams on the basics of Microsoft licensing that are relevant to their roles. They don’t need to be experts, but if system administrators know, for example, that every SQL instance requires a license or that every user added needs a CAL or cloud license, they are more likely to involve asset management at the right time. Sometimes, well-meaning IT staff spin things up, not realizing the cost impact.
Considerations:
You might leverage tools (SAM tools like FlexNet, Snow, or even Microsoft’s Azure Portal features) to automate tracking. Suppose you have an independent licensing consultant (like a Redress Compliance service). In that case, you can engage them for periodic check-ups or even an annual “mock audit” to ensure everything is in order.
It’s better to identify and resolve an issue internally than to have Microsoft or its auditors discover it. Also, be mindful of end-of-life products – e.g., if Windows Server 2012 is going out of support and you plan to upgrade to 2022, plan those license upgrades (with SA or a new purchase) rather than scrambling post-end-of-life under audit pressure.
Impact:
A proactive compliance regime means no unexpected bills and no need to panic if an audit letter arrives. It also positions you for the next EA renewal, as you will know your effective needs without the fog of compliance concerns.
This stability can save money indirectly by preventing risk-based overspending (organizations that are unsure often overbuy “just in case we’re out of compliance” – a self-imposed penalty you can avoid with confidence).
Moreover, good compliance management can avoid an audit entirely or make it quick and uneventful, saving significant internal time and resources that audits consume and avoiding potential penalties ranging in the hundreds of thousands or more.
Essentially, you’re ensuring your cost savings: all the negotiation and optimization work won’t be undone by a compliance lapse.
Action:
Be Aware of Microsoft’s Audit Approach and Mitigate Risks: Understand that Microsoft often uses Software Asset Management (SAM) engagements or audits as a tool, especially if an EA lapses or if they suspect under-licensing. By renewing your EA and maintaining SA where necessary, you reduce your audit attractiveness (Microsoft recognizes you as a compliant customer).
If you ever choose not to renew a part of the EA, be very careful with compliance on those items, as audit risk increases when you fall outside the umbrella of an EA/SA. If you suspect that Microsoft might audit, consider engaging expert help immediately to manage the process.
Considerations:
An audit typically provides a window (such as 30 days) to submit data. If you’ve done your homework, you’ll be ready. If not, you might scramble and overspend to settle quickly. Better to never get there. Keep documentation of Microsoft’s communications, and if audited, scope it tightly and respond formally.
Being on top of your compliance can often dissuade Microsoft from employing heavy-handed tactics, as they realize you will challenge incorrect findings.
Additionally, if Microsoft offers a free SAM assessment during your EA, be aware that its findings could be used to upsell or force purchases – treat it like an audit in disguise and ensure you validate any results.
Impact:
Mitigating audit risk and handling any that occur rigorously ensures you won’t have budget-busting outcomes. Companies that are naive about audits can end up paying huge sums in unplanned true-ups outside the EA (which come with no discount).
Those who manage it well often settle with minimal or no purchase if they were compliant, or negotiate any required purchase back into their next EA rather than as a one-off.
The difference can easily be a 50% cost reduction on audit findings (negotiated vs. list price, avoidance of back fees, etc.). And of course, not being audited because you’re a well-managed account is the best outcome.
In summary, compliance management is both a shield and a sword in cost terms: it shields you from penalties and gotchas and allows you to cut only the licenses you genuinely need to pay for.
Staying compliant means your cost-saving efforts are sustainable and you won’t lose savings through mistakes. It’s an integral part of the EA strategy for any cost-conscious CIO or procurement team.
Vendor Engagement and Independent Expertise
Dealing effectively with Microsoft and using external experts can significantly tilt the balance in your favor during an EA renewal. Microsoft is both a strategic partner and a seller with targets—how you manage the relationship can significantly influence the deal outcome.
Additionally, engaging independent licensing experts can uncover opportunities and pitfalls even experienced internal teams might miss, ensuring maximum savings and a smooth process.
Action:
Approach Microsoft as a Partner, but Be Willing to Push Back:
Foster a professional and transparent dialogue with your Microsoft account team. Share your business objectives and how Microsoft’s technology fits, but also be clear about your cost constraints and expectations.
Leverage the relationship for insights – often, account managers can provide guidance on upcoming product changes, promotions, or how to structure a deal to get approvals.
At the same time, don’t hesitate to push back on sales pressure. If Microsoft is pushing a product you’re not ready for (e.g., wanting you to adopt an E5 or Dynamics module widely), it’s okay to say, “not at this time, unless it can be justified with a solid business case and cost.”
Use your account team’s incentives: they want to close the deal and keep you as a long-term customer. If something is important to you (like a certain discount or a term), make it known that it’s a deal-maker/breaker. Often, they will go to bat for you internally if they understand the critical importance of the matter.
Considerations:
Maintain a single point of contact when communicating with Microsoft to avoid mixed messages. Also, escalate appropriately: if your rep isn’t empowered to give what you need, involve their management or a Microsoft enterprise negotiator.
Sometimes, having an executive sponsor from your company speak to a Microsoft executive sponsor can resolve impasses or gain exceptions.
Always remain courteous and firm – a collaborative tone (“we’re in this together to find a win-win”) generally works better than an adversarial one, but you must still assert your requirements.
Remember, Microsoft values customer retention and satisfaction – if you can articulate how a certain deal structure will make you a happy referenceable customer, they are more likely to comply.
Impact:
Managing the vendor relationship effectively can yield better outcomes than relying solely on hard-nosed negotiation.
For example, by expressing strategic commitment (“we see Microsoft as a key platform for us, but we need your help on cost to make this sustainable”), one company got Microsoft to approve an unusual concession: a mid-term license pool transfer flexibility when they divested a division, because the account team understood the business context and wanted to keep goodwill.
Another organization’s respectful but firm negotiation led the Microsoft team to provide free onsite training sessions as an add-on, which saved them money on user adoption. Essentially, treating Microsoft as a partner in problem-solving (while still advocating for your interests) can yield creative solutions that reduce cost or add value.
Action: Don’t Rely Solely on Microsoft’s Guidance—Seek Independent Advice: Microsoft and its resellers will provide you with information and recommendations, but remember that their goal is to maximize revenue (within the bounds of customer satisfaction). To balance this, consider engaging an independent licensing expert or consultant to support your renewal process.
An independent firm (such as Redress Compliance or similar Microsoft licensing specialists) works on your side to find cost savings, ensure optimal licensing, and benchmark your deal.
They can perform a license position assessment, suggest architectural licensing tweaks, and help negotiate strategy with insider knowledge of Microsoft’s tactics and discount ranges.
Considerations:
Ensure any advisor you hire is independent (not also a reseller in disguise) and has deep expertise in Microsoft licensing. Share your goals and constraints; they can identify areas you might overlook.
For example, they might point out an opportunity to switch some licenses to a different program (maybe moving a subset to CSP or taking a Microsoft 365 E5 Security add-on instead of full E5) that significantly cuts costs.
They can also provide benchmark data: Are you getting a typical discount for an organization of your size in your industry, or is there room for improvement?
Additionally, during the negotiation meetings, you can have the consultant either coach you behind the scenes or even present as part of your team to validate technical licensing points (“According to the product terms, we are allowed to do X, so we don’t need that extra license Microsoft is suggesting”). This helps counter any over-licensing recommendations.
Impact:
Independent experts often help companies realize 10-30% additional savings on their renewals that they might have missed. They earn their fees many times over.
For instance, a licensing advisor might find that you can use a cheaper licensing construct for a test environment (saving $100K), or they might know that Microsoft can extend a special promo that your account team didn’t mention.
One enterprise engaged a licensing consultant and discovered they were entitled to free backups for Office 365 under their current plan. They avoided buying a third-party backup or a higher SKU, saving substantial costs.
Another got intel that an upcoming pricing change could be avoided by renewing a bit early – the consultant’s knowledge saved them from a 5% price hike.
In negotiations, having an expert can shorten the process and yield a better result, as Microsoft knows the customer is well-informed and can’t be easily misled on licensing complexity. In summary, expertise pays off in dollars and cents in an EA renewal.
Action:
Engage Your Procurement and Legal Teams Deeply: Treat the EA renewal as an IT exercise and a procurement project. This means applying procurement best practices, such as competitive checks, TCO analysis, clear requirement definitions, and risk assessments.
Legal review is also key: ensure the terms (liability, data protection for cloud, etc.) meet your company’s standards or negotiate adjustments if needed. Non-cost terms might not save money immediately, but can save risk-related costs later.
Considerations:
Procurement can assist with vendor management aspects, such as reseller bidding and communication, and ensure that documentation is in order. Legal can negotiate terms like the ability to transfer licenses to affiliates or clarify usage rights, which, if too restrictive, could cost you more later.
Pay attention to renewal notice periods and any auto-renewal clauses for certain online services (some cloud subscriptions auto-renew monthly, even under EA, unless canceled).
Establish processes to handle these so you don’t unintentionally pay more than you need. Also, if there are non-standard terms that Microsoft has granted (e.g., a unique discount or flexibility), ensure that legal captures them properly in an amendment to avoid ambiguity.
Impact:
A thorough procurement and legal engagement protects the deal’s value and avoids hidden costs. For example, procurement might catch that Microsoft’s quote included an unnecessary support line item you already have covered – removing it saves money.
Legal might negotiate a clause that could have, for example, restricted license reassignment in a way that would later force additional purchases. These things cumulatively ensure the cost savings you aim for are realized and not offset by unforeseen expenses or contractual traps.
Action:
Continue Vendor Management Post-Renewal: Once the new EA is signed, keep the momentum. Set up QBRs (quarterly business reviews) with Microsoft to review consumption vs. plan and ensure you’re getting the value out of what you purchased (and adjusting if not).
Hold Microsoft accountable for any promises (like deployment assistance or training as part of the deal). Keep the relationship warm, but also make it clear that you’ll be closely monitoring usage and costs, which sets the expectation that you won’t tolerate overselling.
Considerations:
Use these vendor meetings to preview any upcoming needs or changes from your side, so Microsoft can plan (or they don’t freak out if you drop usage somewhere). Suppose Microsoft knows you are a vigilant customer.
In that case, they may also be more forthcoming with optimization suggestions (they should help you optimize rather than risk you being unhappy and leaving).
Also, maintain executive-level engagement if possible – a Microsoft account team tends to give more attention to accounts where the CIO or CFO periodically engages, as it signals importance.
Impact:
Ongoing engagement ensures no surprises and continuous alignment, which indirectly saves costs. Suppose there’s a concern (e.g., your Azure usage is tracking below the commitment).
In that case, you can address it early – perhaps by negotiating to shift some of the commitment to another service rather than losing it.
If you foresee a change, you can sometimes get Microsoft to adjust mid-term terms to accommodate it (although this is not guaranteed, a collaborative stance can be helpful).
Ultimately, treating the renewal as a living agreement rather than a one-and-done transaction means you can fine-tune as you go, preserving value and easing the next renewal cycle.
In summary, how you engage with Microsoft and who you have on your side matters:
- Strong internal coordination and vendor management can extract more value and cooperation from Microsoft.
- Independent licensing expertise acts as a force multiplier for your team’s efforts, uncovering savings and ensuring you stay ahead in the licensing game.
- Procurement and legal rigor fortify the deal, plugging leaks that could result in financial losses.
By leveraging all these, enterprises are best positioned to achieve a cost-effective EA that is both financially and operationally favorable.
Read about our Microsoft Negotiation Services.
