How to Negotiate a Microsoft Enterprise Agreement (EA)

How to Negotiate a Microsoft Enterprise Agreement

• Start Early: Begin discussions 12-18 months before renewal.
• Assess Requirements: Identify current and future software needs.
• Leverage Competition: Compare Microsoft with other providers.
• Negotiate Flexibility: Ensure flexibility for user count adjustments.
• Bundle for Discounts: Bundle products to maximize savings.

Introduction: How to Negotiate a Microsoft Enterprise Agreement

Negotiating a Microsoft Enterprise Agreement (EA) can be complex, particularly for organizations aiming to strike the right balance between meeting IT needs and managing costs effectively.

Microsoft EAs are popular among large enterprises because they offer volume discounts, flexibility, and simplified management for multiple Microsoft products and services.

However, you may pay more than necessary without proper planning and negotiation strategies. This guide will dive into the intricacies of negotiating a Microsoft EA, covering everything from understanding the basics to effective negotiation strategies that ensure you get the best deal possible.

What is a Microsoft Enterprise Agreement?

A Microsoft Enterprise Agreement is a licensing contract that provides a cost-effective way for companies to license Microsoft software across multiple users and devices. Typically, EAs are designed for organizations with 500 or more users or devices.

They offer three-year terms and cover a wide range of Microsoft products, including Windows, Office 365, Azure, and Dynamics 365. The benefits of an EA include:

• Cost Savings: Volume discounts are provided for licensing, which can significantly reduce software expenditure.
• Simplified License Management: The EA consolidates all Microsoft software licenses into one agreement, making managing it easier.
• Access to New Technologies: The EA provides access to Microsoft’s latest technologies and software updates.

Key Components of a Microsoft EA

Understanding the components of a Microsoft EA is essential before entering the negotiation process.

The following are the main parts of an EA:

1. Enterprise Products and Services
   • Enterprise Products include core Microsoft products like Windows 10, Office Professional Plus, and Client Access Licenses (CALs).
   • Enterprise Services include cloud services like Microsoft 365, Azure, and Dynamics 365.
2. True-Up Process
   • A True-Up is an annual process required for enterprises to report any changes in their license usage, such as additional users or devices. The True-Up is essential to adjust licensing costs to match actual usage.
3. Software Assurance (SA)
   • Software Assurance is an optional offering that provides access to updates, upgrades, training, and additional support services. Although including Software Assurance in your EA can be beneficial, it also increases the cost.

Preparing for Microsoft EA Negotiation

Preparation is key when negotiating with Microsoft. Below are steps to help you prepare effectively:

1. Understand Your Requirements
   • Assess Current Usage: Review current usage across your organization, identifying which products are essential and which are not fully utilized. Determine which services you need, which can be eliminated, and which you plan to expand over the next few years.
   • Establish Future Needs: Make a three-year projection based on growth plans, potential technology upgrades, and cloud migrations. Understanding your future IT needs is vital when discussing product commitments.
2. Gather Data and Build an Inventory
   • Create a License Inventory: Build a comprehensive list of current licenses, including on-premises software, cloud subscriptions, and third-party tools used alongside Microsoft products.
   • Engage Stakeholders: Ensure that business units, IT departments, and procurement teams are all involved in gathering an accurate picture of the organization’s software needs.
3. Benchmark and Research
   • Benchmark Pricing: Research public benchmarks or engage with consultants experienced in Microsoft licensing to gather information on pricing. Understanding market standards gives you an edge during negotiations.
   • Analyze Existing Contract: Understand your contract and pinpoint key terms that need improvement. These could include pricing adjustments, expanded services, or more flexible payment options.

Microsoft EA Negotiation Strategies

1. Engage at the Right Time
   • Microsoft operates on a quarterly fiscal cycle, and the end of each quarter, especially the fiscal year-end (June), can be the best time to negotiate. Microsoft sales representatives are pressured to meet their sales quotas, which means they may be more willing to negotiate favorable terms.
2. Leverage Competition and Options
   • Consider Alternatives: Before approaching Microsoft, consider evaluating competing products. Microsoft is more inclined to offer better pricing if it knows you are considering alternatives such as Google Workspace or AWS services.
   • BYOL (Bring Your Own License): Evaluate if your organization can shift some services to the cloud using the BYOL model, where you can use existing licenses on cloud platforms such as Azure. This may create leverage for better Azure pricing.
3. Bundle Products for Discounts
   • Microsoft often provides volume discounts for bundling multiple products, such as Microsoft 365, Windows Server, and Dynamics 365. Consider bundling products that align well with your organization’s technology roadmap to maximize cost savings.
4. Negotiate for Flexibility
   • User Adjustments: During the negotiation, ensure that your EA allows user adjustments based on actual usage. Negotiating flexible terms regarding increasing or decreasing users is critical, especially if you are uncertain about headcount growth.
   • Cloud Consumption Commitments: Avoid strict Azure or Dynamics consumption commitments. Instead, negotiate for more flexibility or a lower initial commitment to avoid unnecessary spending.
5. Reduce True-Up Costs
   • Track License Usage: True-up costs can escalate if license usage is not monitored properly. Ensure you have a robust tracking mechanism to keep your license count accurate and avoid surprises during the True-Up process.
   • Negotiate Caps on True-Ups: You can also negotiate caps on True-Up costs. This ensures that if your usage increases unexpectedly, the financial impact on your organization is limited.
6. Emphasize ROI for Software Assurance
   • If you choose to include Software Assurance in your EA, ensure you negotiate the benefits you will use. For example, request Training Vouchers, Planning Services, and Technical Support to maximize the value received from Software Assurance.
7. Consider a Price Lock-In
   • Price Protection: Microsoft may try to increase prices over time. Negotiate for a price lock-in that protects you from price hikes for the entire three-year term of the EA. This ensures predictable costs and protects against inflation.

Negotiating EA Renewals

Renewals can often be as important as the initial negotiation, especially as your organization’s needs evolve.

Here are some strategies for EA renewals:

1. Start Early
   • Lead Time: Start discussing renewal terms at least 12-18 months before the end of your current agreement. This allows ample time for in-depth discussions, competitive evaluation, and alternative options.
2. Use Previous Experience
   • Highlight Underutilized Licenses: Use the insights from your previous contract to highlight underutilized licenses or services that were not used at all. Push for credits and discounts, or remove those components in the new agreement.
3. Reevaluate Product Needs
   • Shift to Cloud or Hybrid: If you have not already transitioned to the cloud, the renewal negotiation is an ideal time to reevaluate your on-premises versus cloud needs. Shifting to a hybrid or full cloud model can result in better pricing.
   • Dynamics of Hybrid Work: With remote work becoming common, reassess your license type. For example, replacing expensive device-based licenses with more affordable user-based licenses can yield savings.

The Role of Microsoft Licensing Consultant

Engaging with a Microsoft licensing consultant can provide valuable support throughout the negotiation process:

1. Licensing Expertise
   • Licensing partners know about Microsoft licensing terms, programs, and discounts. They can help decode the licensing language and advise on the best path forward for your organization.
2. Cost Analysis and Benchmarking
   • Licensing partners can provide benchmarking data and cost comparisons, helping to ensure you’re getting the best deal compared to similar companies in your industry.
3. Negotiation Support
   • Microsoft’s licensing agreements are complex, and having an expert at the table who knows Microsoft’s negotiation strategies is beneficial. A licensing partner can often secure more favorable terms.

Common Pitfalls in Microsoft EA Negotiations

1. Overcommitting to Cloud Spend
   • Organizations often commit to significant cloud spending that they do not ultimately use. This leads to paying for capacity that remains unutilized. To avoid this, start with conservative cloud commitments and scale as needed.
2. Not Considering Alternative Licensing Options
   • Microsoft offers other licensing programs, such as the Microsoft Products and Services Agreement (MPSA) and CSP (Cloud Solution Provider) model. Failing to evaluate these alternatives could result in missing more cost-effective options.
3. Ignoring True-Up Compliance
   • The True-Up can be an unpleasant surprise if not tracked throughout the year. Monitor your license usage regularly and reconcile any changes immediately to avoid a large, unexpected bill.
4. Not Negotiating Flexibility
   • Failing to negotiate flexibility for user count adjustments, deployment rights, or cloud consumption can lead to wasted resources and higher costs. Ensure your agreement allows adjustments without penalties.

Cost Optimization Tips for Microsoft EA

1. Remove Unused Services
   • Remove services or features that are not being utilized. For example, if not all users need Office 365 E5 licenses, downgrading them to E3 can lead to considerable savings.
2. Consider CSP as a Complement
   • Consider using the Cloud Solution Provider (CSP) model for smaller offices or departments. This model offers month-to-month flexibility and can complement your core EA agreement.
3. Adopt a Hybrid Model
   • Mix on-premises and cloud services based on workload needs. You don’t necessarily need to move everything to the cloud simultaneously. Keeping some services on-premises can sometimes be a more economical choice.

Microsoft Enterprise Agreement FAQ

What is a Microsoft Enterprise Agreement (EA)? It is a three-year licensing agreement offering volume discounts and simplified license management for large organizations using Microsoft products.

What are the benefits of an EA? Key benefits include volume-based cost savings, centralized license management, and access to the latest Microsoft technologies.

When is the best time to negotiate an EA? The end of Microsoft’s fiscal year (June) is usually the best time to negotiate, as sales representatives are more willing to provide discounts to meet quotas.

How can I prepare for EA negotiation? Assess current license usage and project future requirements, and engage stakeholders to understand your software needs before negotiation.

What is the True-Up process? The True-Up is an annual adjustment for increased license usage during the previous year. Ensure accurate tracking to avoid unexpected costs.

How do I negotiate flexibility in the EA? Ensure that your EA includes terms that allow you to adjust the number of licenses based on changes in your workforce without penalties.

What role does bundling play in EA negotiations? Bundling multiple Microsoft products, such as Microsoft 365 and Azure, can help secure better volume discounts and lower overall costs.

How can I control True-Up costs? Regularly track license usage and negotiate caps on True-Up costs to prevent unexpected financial impacts during the True-Up process.

Can a price lock-in be negotiated? Yes, you can negotiate a price lock-in to protect against price increases over the three-year EA term, providing stability in cost planning.

Should I engage a licensing partner for EA negotiation? Licensing partners bring expertise, help benchmark pricing, and can negotiate better terms, making them valuable in EA negotiations.

What alternatives to an EA should I consider? Consider alternatives like the Microsoft Products and Services Agreement (MPSA) or the Cloud Solution Provider (CSP) model, which may be more cost-effective for some organizations.

How do I leverage competition during negotiations? Evaluate competitors like Google Workspace or AWS to strengthen your position during Microsoft EA negotiations for better pricing and terms.

Can I renegotiate an existing EA during renewal? Yes, EA renewals allow renegotiating terms, eliminating unused licenses, and adjusting product usage based on new business needs.

What should I do if my cloud commitment exceeds actual usage? To avoid being overcommitted, negotiate more flexible cloud consumption commitments and try to reduce commitments during EA renewals.

How can I use Software Assurance effectively? To maximize ROI, negotiate to ensure you are leveraging Software Assurance benefits, such as training vouchers, technical support, and planning services.