Pricing, Discounts & Concessions: How Microsoft Works
Negotiating a Microsoft Enterprise Agreement (EA) is a high-stakes endeavor. Microsoft’s pricing strategy for enterprise agreements often starts with lofty list prices that few savvy enterprises pay.
Your goal in any Microsoft pricing negotiation is to bridge the gap between that inflated list and the net price you’ll pay.
This guide explains how Microsoft sets pricing, where real discounts originate, and which negotiation levers can shift the price in your favor. For a full overview of negotiations, read our Ultimate Guide to Microsoft Contract Negotiations.
We’ll also discuss documenting concessions so you don’t lose hard-won savings at renewal time. Let’s pull back the curtain on how Microsoft pricing and discounts work – and how you can secure the best deal.
List Price vs. Net Price
Microsoft’s list prices (the official prices in catalogs or price sheets) are deliberately high anchors. They serve as a starting point, but they rarely reflect the actual expenditures of an enterprise customer.
In an EA negotiation, Microsoft might quote a list price for a product (for example, Microsoft 365 E5 at approximately $57 per user/month), knowing full well that a discount will be applied.
The net price is the real price you negotiate – say you end up at $45 per user/month for that E5 license. The difference is significant.
Microsoft often advertises “XX% discount” off list, but savvy negotiators focus on the net-dollar figure, not the percentage. After all, a 30% discount means little if the net price is still higher than what peers pay.
Why List Price Exists:
Microsoft sets list prices to maintain a consistent baseline globally and to leave room for negotiation wiggle room. The list price can be influenced by factors such as region, currency, or Microsoft’s own cost and margin targets.
Importantly, list prices for cloud services (like Office 365 or Azure) have been periodically rising – and starting in 2025, Microsoft is even standardizing some volume pricing (meaning many customers will have the same base list price, with fewer automatic volume discounts).
This makes negotiated discounts more crucial than ever.
Focus on Net Price:
Always center your negotiation on the net price you will pay. Treat the list price as an internal reference only. For example, if Microsoft says “We’re giving you a 15% discount off list,” translate that to the actual per-unit cost and compare it to your budget and market benchmarks.
In many cases, enterprises achieve 20–30% off on major licenses – so if you’re only seeing 10–15%, you know to push harder. The list price vs. net price gap is where your savings lie, and your job is to widen that gap in your favor.
Bottom line: you can’t take a percentage to the bank – only actual net cost. Negotiate with that mindset.
Read about Microsoft 365 negotiations.
Discount Benchmarks in Microsoft Deals
Every Microsoft deal is unique, but there are common discount benchmarks for different products and scenarios.
Knowing these benchmarks helps you gauge if you’re getting a fair deal or leaving money on the table:
- Microsoft 365 / Office 365: For core cloud software, such as Microsoft 365 (Office 365 suites, Windows, and EMS), large enterprises typically secure 15–30% off the list price on EA renewals. For example, if Microsoft 365 E3 lists at around $36 per user/month, a competitive enterprise deal might net it around the high-$20s. Premium bundles, such as M365 E5 (with advanced security and compliance), may list near $57 but commonly end up in the mid-$40s after a 20–25% discount. The bigger your user count and the more you commit to Microsoft’s suite, the deeper the discount you should target. (Tip: Microsoft will often be more generous if you upgrade from a lower suite to a higher one – e.g., moving from E3 to E5 – since you’re increasing your spend.)
- Dynamics 365 (CRM/ERP): Business application suites, such as Dynamics 365 for CRM or ERP, often offer discounts in the 10–20% range in enterprise deals. Microsoft is eager to grow Dynamics adoption, so if you’re bringing this into your EA (especially as a new workload), push for strong concessions. Discounts here might not be as high as for Microsoft 365 (Dynamics has a more niche market and sometimes thinner margins), but double-digit percentage cuts are attainable for large deployments or strategic wins. If Dynamics 365 licenses are part of a broader bundle or you’re swapping out a competitor (like Salesforce or SAP) in favor of Microsoft, use that as leverage to negotiate a better-than-standard rate.
- Azure Consumption Commitments: Azure pricing works differently from per-user licenses – you negotiate an Azure consumption discount off the pay-as-you-go rates. Typical Azure EA deals with a commitment can yield anywhere from 5% up to 20%+ off Azure’s list rates, depending on your annual cloud spend and growth. For instance, a company committing to spend millions on Azure over three years might get an order of 15% or more off their consumption costs. Very large cloud deals (tens of millions per year) can push this discount even higher (20%+), while smaller commitments might see single-digit discounts. In addition, Microsoft may offer Azure credits or complimentary services (e.g., funding for migrations, or an Azure spend credit if you meet certain usage targets). These are essentially extra discounts in practice. Note that Azure discounts often reset at renewal: if your usage has grown, don’t assume Microsoft will automatically extend your old discount percentage. You’ll need to negotiate afresh to maintain or improve it.
- Azure Pre-Purchase & Hybrid Benefits: Outside of pure negotiation, you should leverage Microsoft’s programs to lower Azure costs. Azure Reservations and Savings Plans (with 1-year or 3-year commitments for specific resources) can reduce costs by 20–60% on those resources compared to pay-as-you-go rates. These aren’t negotiated in your EA pricing sheet, but they are savvy cost tools. Similarly, the Azure Hybrid Benefit is crucial: if you own Windows Server, SQL Server, or other licenses with Software Assurance, you can use those licenses on Azure and pay only for the base cloud resources. This effectively yields significant savings (up to 30–50% on VM infrastructure costs) compared to purchasing new licenses in Azure. While not a “discount,” Microsoft tailors its offerings for you, and it’s a right you must utilize to avoid unnecessary spending. In negotiations, you can also discuss hybrid licensing options or ensure your EA allows you to apply these benefits easily.
- New EA Contracts vs. Renewals: If you are signing a new Enterprise Agreement, especially as a big customer moving from a competitor or Microsoft’s month-to-month plans, you might access extra discounts or incentives. Microsoft might offer a “landing discount” or promotional pricing to win your business. For example, a first-time EA for a company migrating from Google Workspace or IBM could come with an aggressive discount (and even some free onboarding services) to seal the deal. Use that to your advantage – negotiate as if you have choices (because you do). On the other hand, at renewal, Microsoft sometimes tests the waters by reducing the discount in its initial quote (it assumes you’re less likely to leave the platform after three years). Be prepared to push back hard: if you previously had 20% off, insist that the renewal should at least match or beat that, especially if your spending has grown. Microsoft will often retain your prior discount if you negotiate with data and alternatives in hand. Treat a renewal like a fresh negotiation, not a rubber-stamp. The benchmark to remember: well-negotiated renewals can end up 15–30% lower in total cost than Microsoft’s first renewal offer. So there’s significant savings to be had by benchmarking and pushing for more.
Learn about when to choose CSP over EA.
Terms That Move Price
Negotiation is not just about volume – it’s about which levers you pull to unlock Microsoft discounts.
Here are the key negotiation levers (the terms that move the price) and how to use them:
- Multi-Year Commitments: Microsoft rewards commitment. An EA is by default a three-year commitment, but you can sometimes gain an extra discount by committing to even more – for example, structuring a five-year deal or signing up for multi-year service commitments within the EA. Committing to spend over a longer term gives Microsoft revenue certainty, and they may respond with better pricing or price locks. Even within a 3-year EA, agreeing to certain multi-year uptake (such as “we’ll roll out 100% of users on Product X by year 2”) can become a give-and-take: you get a lower unit price, and Microsoft gets assurance of your adoption. The trade-off is flexibility, so ensure you truly intend to meet the commitment before using this lever. However, if your organization is stable or growing, a multi-year commitment can significantly reduce your net unit costs.
- Azure Consumption Growth: Azure is a significant focus for Microsoft, and they will offer deeper discounts if you pledge to increase your Azure usage. If you expect your cloud consumption to increase, use that as a bargaining chip. For example, you might commit to a specific spending trajectory or include terms that grant you a higher discount tier once you reach certain spending milestones. (“If we spend $X million in year 1, our discount on Azure increases from 15% to 18% in year 2+.”) Microsoft may also offer bonus credits for Azure if you agree to aggressive growth targets. Essentially, you are saying: “We will bring more workload to Azure,” and in return, Microsoft lowers the price per unit. Be sure any such targets are realistic – don’t overcommit just to get a discount, or you may overspend on unused cloud resources. However, if you have planned projects (such as data center migrations or new apps) that will increase Azure usage, formalize these in the deal to secure an Azure consumption discount that reflects the future scale, not just current usage.
- Product Bundling and Upgrades: Microsoft loves to bundle products, and you can leverage that to your advantage. Bundling refers to purchasing a comprehensive set of Microsoft products together, typically at a lower overall price. For instance, purchasing the full M365 E5 suite (which bundles Office, Windows, security, compliance, etc.) may result in a lower incremental cost than buying some of those components à la carte or opting for a lower bundle. Microsoft might say, “If you add Security + Compliance licenses, we’ll give you 5% off the whole M365 E5 price,” effectively encouraging you to go all-in on their ecosystem. Similarly, new products like Copilot or other AI add-ons, or extras like Teams Phone or Power Platform, might come with incentive discounts if added to the EA. The key is to only bundle what you plan to use; don’t let Microsoft upsell you shelfware just for a notional discount. However, if you are considering those products, consider negotiating a package deal. The bundle approach can also be applied across product lines: for example, tying a Dynamics 365 purchase or a Surface device purchase to your agreement may unlock a better rate on your core software. Microsoft’s account teams have some flexibility to shift discounts around – they might make one product cheaper if you buy another. Be open to creative packaging that improves your total cost of ownership. Just ensure any product you add has real value to your org (or at least a viable adoption plan).
- Competitive Pressure: One of your strongest bargaining chips is the credible threat of competition. Microsoft knows that you often have alternatives: AWS or Google Cloud instead of Azure, Google Workspace instead of Office 365, Zoom or Cisco instead of Teams, Salesforce instead of Dynamics, and so on. If you can show that you are evaluating those options (or even run a full RFP), Microsoft sales reps will work much harder to win or keep your business. Use this tactfully: for example, engage with AWS or Google to get comparison pricing for your workloads, or highlight a pilot your company is doing with a competitor’s product. Microsoft will typically respond with better pricing or extra concessions (“concession” could mean a discount, or free migration support, or a longer price lock) to dissuade you from switching. The key is credibility – idle threats won’t move the needle. But if, say, leadership is genuinely considering shifting some users to Google or splitting cloud workloads, let Microsoft know they’re in a fight. Even hints like “We have to justify this against AWS pricing internally” or “Our CFO is asking why we don’t just use Google’s offering” can put Microsoft on notice. They prefer to discount rather than lose a customer to the competition. Just be prepared: Microsoft might counter with bundle deals (“We’ll match that competitor’s price if you also adopt X Microsoft product”). Always evaluate the trade-offs, but don’t be shy about using the competitive landscape to your benefit.
- Fiscal Year & Quarter-End Timing: Microsoft, like many big vendors, has sales cycles and targets. Their fiscal year ends on June 30, and each quarter’s end (March 31, June 30, September 30, December 31) can be a pressure point for the sales teams. Aligning your negotiation timeline to these can unlock extra generosity. For instance, if your EA renewal happens to fall in Microsoft’s Q4 (April–June), you might find the salesperson far more flexible to close the deal before June 30 to hit year-end quota. That’s when you’ll see offers like “additional 5% discount if you sign this week,” or throw-ins like extended payment terms or some free licenses, because the rep needs your deal booked. Similarly, calendar year-end (Q2 for Microsoft) sometimes brings promotional offers. Leverage this timing: plan your RFPs, internal approvals, and other key steps so that Microsoft is aware the deal could close by quarter-end. Even if your agreement technically renews later, starting negotiations in a way that puts Microsoft in a high-pressure quarter can be advantageous. Caution: Don’t let their timeline force you into a bad deal – maintain control. The end-of-quarter rush can work for you, but you should still be ready to walk if the terms aren’t right. Use time pressure on them, not on you: start early so you aren’t scrambling at the deadline, and then choose to finalize at the optimal moment for maximum concessions.
These levers often work in combination.
For example, a multi-year Azure commitment made at the end of the year, with a competitive cloud bid in hand, is a recipe for a very nice discount. Identify the relevant levers for your situation and focus on those points.
How to Document Concessions for Future Leverage
Winning a great deal is only half the battle – you also need to protect those hard-won concessions for the long term. Microsoft’s standard contracts won’t remind you of the special discounts or terms you negotiated once it’s renewal time; that’s on you.
Here’s how to document and leverage concessions so you don’t lose value in the future:
- Keep a Detailed Concessions Tracker: Create an internal document or spreadsheet that lists every discount, special price, and non-standard term that you negotiated. Include specifics: e.g. “Microsoft 365 E5 – 25% off list ($xx per user/month net),” “Azure – 15% consumption discount off PAYG rates, with $200k in migration credits,” “Price cap: unit prices for O365 E3 cannot increase >5% at renewal if renewed by date X,” etc. No detail is too small – if Microsoft gave you an extra month of service, a free training program, or flexible true-up terms, log it. This concessions tracker is your memory bank; three years later, you’ll need it to remind Microsoft (and yourself) what was agreed.
- Get Everything in Writing: Verbal promises from a sales rep are not enough. If a concession is offered, ensure it’s either written into the EA contract, an amendment, or, at a minimum, a signed side letter or email from Microsoft confirming it. For instance, if the representative says, “We’ll hold your Year 4 price at the same rate if you renew early,” that needs to be confirmed in writing (e.g., an email from Microsoft’s corporate domain, and even better, referenced in your contract paperwork). When the rubber meets the road at renewal, you want to be able to pull out documentation and say, “Here, you agreed to this last time.” Microsoft will honor written commitments; it won’t honor a salesperson’s forgotten promises. The rule to live by: If it’s not documented, it doesn’t exist. Insist on documentation for every concession, with no exceptions.
- Codify in the Contract or Side Agreements: The safest place for concessions is in the contract itself – in the EA terms or in attached documents. Many enterprises use a “Negotiation Summary” or Concessions Letter that both parties sign alongside the EA. This might list all the special negotiated terms in one place for clarity. For example, it might say “Customer will receive a 25% discount on Microsoft 365 E5 licenses for the term of the agreement” or “Microsoft will provide 100 hours of engineering support at no charge in Year 1.” Work with your procurement or legal team to attach this kind of summary to the contract. Microsoft is familiar with the concept – it ensures alignment. If, for some reason, Microsoft won’t put a certain promise in the formal contract (occasionally, they cite policy), push to at least get an official email or document from them confirming the understanding. File it with your EA. It’s your safety net.
- Plan the Renewal Handoff: Often, the team that negotiates this EA may not be the same people handling the next renewal (due to role changes, etc.). Avoid “organizational amnesia.” Take your concessions tracker and write a summary for future teams: what you achieved, which areas were hard-fought, and what to watch out for next time. Include any advice like “Microsoft tried to remove our discount on Azure at mid-term – we pushed back and retained 15%. Be ready to defend this at renewal.” Share this document internally: with your procurement department, IT leadership, finance, and anyone likely to be involved in the next three years. Set calendar reminders, perhaps a year before expiration, to retrieve this information. By doing this, when Microsoft comes back with a new quote later, you’re armed with knowledge: “We need the same 25% off, and we want to keep our special terms A, B, C – here they are as documented.” Continuity is key to maintaining momentum and avoiding setbacks.
- Leverage Concessions in Future Negotiations: The final part of the documentation is using it. At renewal, explicitly reference your past concessions and incorporate them into your opening demands. For example: “We will renew, but only if we carry over our 25% discount on Product X and get an improvement on it if possible.” Or, “Last EA, Microsoft provided us an extended payment term as a concession; we expect that to continue.” By showing that you remember and have records of everything, you signal to Microsoft that you are a professional buyer who won’t let discounts silently drop off. In some cases, you may even negotiate to memorialize concessions in the renewal – e.g., negotiating a clause that statesif you renew with Microsoft again, certain discounts will continue. This isn’t always granted, but if you can obtain a price-protection clause or at least a written assurance for the next cycle, it’s a valuable benefit. If not, your best defense is your record-keeping and preparation to fight for those items again.
In short, treat negotiated savings and terms as corporate assets. Protect them by recording their experiences and educating future stakeholders.
Microsoft’s pricing memory is short when it benefits them – make sure your organization’s memory is long.
FAQ – What to Do Next
Q1: Is Microsoft’s pricing negotiable, or are we stuck with the quote we’re given?
A1: It’s negotiable. Microsoft may present an EA quote as if it’s standard, but enterprise pricing is never “take it or leave it.” Negotiation is expected. You can push for better discounts on licenses, more favorable payment terms, and other concessions. Don’t accept the first quote as the final word. Microsoft’s sales reps have flexibility (within approval limits) to improve pricing if you make a strong business case or competitive threat. Always remember: list prices and initial discounts are just a starting point. Nearly everything – from the percentage off to adding freebies or adjusting terms – can be on the table if you ask for it. Be firm and back up your requests with data (usage, benchmarks, alternative options). In a Microsoft pricing negotiation, silence is expensive – so counter their offer and see what moves.
Q2: What level of discount should we target for our EA renewal?
A2: While every situation varies, large enterprises often aim for at least a high-teens to mid-twenties percent off on major components. For example, a company with thousands of users might negotiate a discount of 20% or more on Microsoft 365 subscriptions. Azure deals can likewise see double-digit percentage discounts if the spend is significant. If your initial quote is only, say, 10% off list on a big-ticket item, that’s likely below market – a signal to push for more. Use industry benchmarks: if you know peers of similar size got 25% off E5, there’s no reason you should settle for 15%. That said, consider your leverage factors (spend volume, how much Microsoft wants to retain or grow your account). Smaller organizations or those with less leverage might land in the 5–15% range on some items, but there’s almost always some wiggle room. The key is to benchmark and ask – Microsoft won’t volunteer a higher discount; you have to request it and justify it. And don’t fixate only on percentage – ensure the net price meets your budget targets. Sometimes you might achieve your cost goal via a combination of discounts and added value (credits, extended terms, etc.). Aim high and let Microsoft counter; it’s a negotiation, after all.
Q3: When is the best time to negotiate with Microsoft?
A3: Start early, finish at the right moment. Ideally, begin your internal planning 12 months or more before your EA expires – audit your usage, decide what you need (and don’t need) going forward. Engage with Microsoft at least 6 months in advance with your intent to secure a new deal – this puts you in their pipeline without being last-minute. The best time to finalize the negotiation is when Microsoft is motivated to close, typically by the end of their fiscal year or quarter (June 30 is the year-end, but each quarter’s end can also work). If you can align your deal to close in June, for example, you’ll often get the most aggressive offers as that deadline approaches. However, be careful not to let their timeline rush you into a bad deal. Use it as leverage, not pressure. The worst time to negotiate is the last week before your current agreement expires if that doesn’t coincide with any Microsoft push – you’ll be under the gun, and Microsoft will know it. So, start early for options and cushion, but time the final handshake wisely when Microsoft has incentives to be generous.
Q4: Microsoft is urging us to add new products (such as upgrading to Microsoft 365 E5, adopting Copilot AI, or increasing our use of Azure) during our EA negotiation. Should we do it?
A4: Include new products only if they align with your roadmap or deliver clear value. Don’t buy something just because Microsoft is pushing it – even if they dangle a bigger discount. That said, if you plan to eventually move to a product (such as an E5 security upgrade or an Azure AI service), the EA renewal is a prime time to bundle it in under favorable terms. Microsoft often sweetens the deal when you adopt new offerings, offering special pricing, credits (such as free months or usage credits), or deployment support for those products. For example, upgrading to E5 could come with 6 months of a discounted price, or adding Azure OpenAI services might earn you some one-time Azure credits. Leverage Microsoft’s eagerness: negotiate pilots or phase-ins (“We’ll take 500 Copilot licenses as a pilot at a 50% discount, with the option to scale at that rate next year if it meets our needs”). This way, you can test the value without making a full commitment. In short: don’t be afraid to say “no” or “not now” to a product that isn’t a fit – Microsoft will push, but they can accept a deferral. If it is something you want, absolutely use the negotiation to lock in a good deal on it upfront. Microsoft’s pricing strategy for enterprise agreements often rewards those who embrace the latest products – just do it on your terms, not just because of the hype.
Q5: How can we make sure the savings and special terms we negotiate now don’t disappear at the next renewal?
A5: The best approach is to memorialize everything and plan. As we discussed, document every discount and concession in writing – either in the contract or an official side letter. When the next renewal cycle arrives, review that documentation and use it as a baseline for requirements. Also, consider negotiating price protections now; for instance, a clause that allows you to renew specific licenses at the same discount or a cap on price increases if you renew by a certain date. Microsoft sometimes agrees to these protections for loyal customers (especially if you tie it to a commitment, like an early renewal or a multi-year extension). If you can’t get a formal future cap, at least have an email from the account team expressing an intention to maintain pricing – it’s not binding, but it gives you leverage in discussions. Internally, ensure that your procurement team (current and future) is aware of these terms. Well before the next renewal, hold a handoff meeting or send a memo reviewing “Here’s what we negotiated last time, and here’s what we need to secure again.” By being proactive, you prevent Microsoft from quietly reverting prices to list or removing a discount. In summary, carry your deal knowledge forward: what you win today must be defended tomorrow. Suppose you treat negotiated terms as enduring expectations and remind Microsoft of them with proof. In that case, you stand a much better chance not only of keeping those savings but also potentially improving on them in the next round.
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