Microsoft EA Strategy Briefing 2025–2026 – Executive Guide to Managing Price Hikes and Reducing Waste
Intro
Microsoft’s upcoming 2025–2026 Enterprise Agreement (EA) price hikes have become a board-level issue for large organizations. These increases aren’t minor – they represent millions of dollars in new costs due to Microsoft’s pricing changes and bundling tactics.
Enterprises locked into Microsoft’s ecosystem (from Office 365 to Azure) face significant financial exposure from automatic renewals and “all-in” bundles packed with features that many employees never use. Our complete guide to Microsoft EA negotiations.
The bold takeaway: managing Microsoft spend now demands an executive-level strategy, not just routine procurement. CIOs, CFOs, and boards must treat Microsoft agreements as a strategic financial commitment that needs active oversight and optimization.
1. The Scale of Microsoft’s Price Hikes
Microsoft is implementing across-the-board price increases in its EA renewals. Notably, starting November 1, 2025, Microsoft will eliminate volume discounts for online services in Enterprise Agreements.
This means whether you have 500 or 50,000 users, you’ll pay the same list price per license. Previously, large enterprises enjoyed discounted pricing (up to ~12% off) due to their scale – that advantage is now disappearing. The result: many organizations will see unit costs on Microsoft 365, Azure, and Dynamics subscriptions increase by 6%- 12% at their next renewal.
For enterprises where Microsoft is mission-critical, these hikes have a significant impact. A modest single-digit percentage increase can translate to millions of dollars added to multi-year budgets.
For instance, one global firm with a 30,000-seat EA renewal is projected to incur an additional $10–$ 12 million over a three-year term compared to its last contract. These cost jumps stem from Microsoft’s standardized pricing, currency adjustments, and new premium offerings.
In short, the scale of Microsoft’s price hikes can materially impact earnings forecasts – enough that boards and finance chiefs are taking notice. Even if Microsoft’s services remain essential, no CFO wants to rubber-stamp double-digit cost increases without a fight or a plan.
2. Why Everyone on Microsoft Creates Risk
The ubiquity of Microsoft across the enterprise creates a vendor lock-in risk that tilts negotiating power in Microsoft’s favor. When virtually every employee depends on Microsoft 365 for email, documents, and collaboration – and when your developers run workloads on Azure – Microsoft knows you can’t easily walk away.
This heavy dependency weakens your leverage at renewal time. Microsoft can push aggressive terms or bundle in extra products, confident that “everyone is on Microsoft,” and switching to alternatives would be highly disruptive.
Microsoft’s bundling strategy further creates artificial demand and cost creep. The company bundles a wide array of capabilities into its top-tier offerings (like M365 E5), enticing customers to upgrade for a handful of needed features while paying for many others that go underutilized. For example, an organization might adopt the E5 bundle to get advanced security or analytics, but that automatically upsells them on phone system, compliance tools, and more – whether they use those extras or not.
Over time, this bundling inflates spending on “nice-to-have” features that were never individually justified. It also makes the enterprise more dependent on Microsoft’s stack, since more business functions get tied into the ecosystem.
In negotiations, this dependency shifts the balance of power: Microsoft executives know that a customer who has standardized on Teams, SharePoint, Power BI, and Azure has limited outside options.
Without a credible threat to shift spend elsewhere, customers face renewals as a price tag rather than a true negotiation. In short, being fully committed to Microsoft creates a risk of complacency and pricing power that executives must consciously counteract.
3. The Governance Gap: Unused Licenses
A major contributor to overspending on Microsoft is the common governance gap around unused licenses. In many enterprises, 15%–30% of purchased Microsoft licenses are underutilized at any given time – sitting unassigned, or assigned to users who never actually use the service.
This waste (often called “shelfware”) stems from lapses in tracking and adjusting licenses as staff join, leave, or change roles. Without strict governance, companies err on the side of over-provisioning: buying more licenses than needed “just in case” and then rarely revisiting those allocations.
The financial impact of this gap is significant. Consider a case where a bank with 15,000 employees discovered it was overspending roughly $5 million per year on Microsoft 365 licenses that were either unassigned to any user or assigned to accounts that had been inactive for months.
These were E3 and E5 seats paid for in the EA, but never actually used in day-to-day operations. Such governance failures – essentially paying Microsoft for ghost users or unused services – directly inflate the renewal baseline. When it’s time to renew the EA, the organization ends up re-committing to that 15–30% overspend if nothing is done.
This makes Microsoft renewals much harder to control, because the discussion starts from a bloated usage count.
In effect, the lack of internal license management hands Microsoft an extra revenue stream for free. It also signals to Microsoft’s sales team that the customer isn’t closely watching utilization, making them an easier target for further upsells.
Closing this governance gap is therefore a critical first step to regaining control.
4. Financial Oversight Through Usage Audits
To combat hidden overspend, enterprises should treat Microsoft licensing with the same rigor as a financial audit. This involves conducting regular usage audits of all Microsoft services and comparing those findings with license counts.
Instead of viewing license management as a low-level IT task, treat it as an ongoing financial oversight activity with visibility from the CFO or audit committee. Every seat and subscription is like a line item on a balance sheet that needs justification.
A thorough usage audit will cross-check user activity on key platforms: How many employees actually used Teams last month? What percentage of users with Power BI Pro access have opened a dashboard recently? How many SharePoint sites see meaningful traffic? Similarly, on Azure, compare purchased capacity or commitments to actual consumption.
By quantifying real usage, these audits often reveal clear opportunities to trim excess. If only 60% of your users actively use a given service that you’re licensing for 100% of employees, you have room to downsize or re-scope those licenses.
Critically, this process should be led by a cross-functional team (Finance, IT, maybe Internal Audit) to ensure independence and objectivity. The findings should be reported in financial terms – for example, “2,000 Office 365 E5 licenses assigned to inactive accounts, costing $X per year in waste.”
This frames Microsoft’s spending as a material expenditure that merits the same scrutiny as any other large operating expense. And the payoff is huge: if an audit uncovers, say, 20% of licenses that can be eliminated or downgraded, and you act on it, that could equate to $4 million or more saved over a three-year EA cycle for a large enterprise.
Those savings are reflected directly in the bottom line. In short, regular usage audits are a form of financial control that can keep Microsoft costs in check, rather than letting license bloat continue unchecked between renewals.
5. Optimization as a Governance Tool
License optimization is not a one-off project – it’s an ongoing governance tool for cost control. Once usage audits identify underutilized assets, organizations must take action by strategically optimizing their Microsoft licensing.
This includes right-sizing license levels and eliminating or repurposing unused licenses before the renewal is signed.
One high-impact tactic is downgrading users from premium bundles (like Microsoft 365 E5) to lower-cost plans (like E3) when the advanced features aren’t needed. It’s common to find large populations of users who were given an E5 license by default, even though they never use the extra security, analytics, or voice features that differentiate E5 from E3.
By reverting those users to E3, the organization still meets their productivity needs but at a much lower cost. For example, downgrading 8,000 users from E5 to E3 in an upcoming renewal can save roughly $6 million over a three-year term.
This kind of move ensures you’re not overpaying for bells and whistles that only a subset of power-users or specific departments actually require.
Another optimization angle is to evaluate standalone add-ons versus bundles. Microsoft’s bundling often tempts customers into broad upgrades, but many E5 capabilities can be purchased à la carte as add-ons to E3. Suppose only 10% of your workforce truly needs a certain E5 feature (say, Power BI Pro or advanced eDiscovery). In that case, it might be far cheaper to buy 1,500 add-on licenses for those users rather than 15,000 full E5 licenses for everyone.
Effective governance means aligning license levels with roles and usage patterns: executives and analysts typically receive top-tier packages, while standard knowledge workers opt for core productivity suites. This segmentation prevents over-licensing by default.
In summary, optimization is a continuous governance practice. It requires setting policies (for example, defining which job roles qualify for an E5 license) and enforcing them before and during the EA term.
Optimization isn’t about cutting value – it’s about eliminating waste and overspend. By doing so proactively, the enterprise enters renewal negotiations with a leaner, a more justified license count, which in turn reduces the financial footprint of the new agreement.
6. CSP vs EA – Introducing Financial Flexibility
Given Microsoft’s pricing shifts, executives should re-evaluate whether a traditional Enterprise Agreement is the right fit or if the Cloud Solution Provider (CSP) model offers better financial flexibility.
In a CSP model, an organization purchases Microsoft subscriptions through a certified provider on a monthly or annual basis, rather than committing directly to Microsoft for a three-year term, as in an EA.
With the removal of EA volume discounts, the cost per license under CSP is now very similar to EA pricing – meaning the old argument that “EA is cheaper for big companies” holds less weight than it used to.
The big advantage of CSP is flexibility. Under a CSP arrangement, you can scale your license count up or down as needed, usually month-to-month. If you hire new staff or start a project, you add licenses; if you undergo layoffs or a project ends, you can reduce licenses and stop paying for them relatively quickly.
In contrast, an EA locks you into a fixed number of licenses for a 3-year term (with only the ability to increase, not decrease, during that period).
This flexibility can be financially invaluable. Many CFOs would prefer slightly higher unit costs if it means avoiding the expense of paying for a thousand extra licenses that would sit idle for two years of a contract.
To illustrate the differences clearly, consider the following comparison of EA vs. CSP characteristics:
| Factor | Enterprise Agreement (EA) | Cloud Solution Provider (CSP) |
|---|---|---|
| Contract Term | 3-year fixed commitment (typical) | Monthly or annual subscriptions (can cancel/adjust at renewal intervals) |
| Pricing per License | Locked-in pricing for term; historically volume discounts for large seat counts (now phased out for cloud services) | Standard list pricing (post-2025 aligned with EA); pricing can be adjusted by Microsoft periodically |
| Scaling Flexibility | Can increase counts during term, but cannot reduce until the next renewal (no built-in true-down) | Can add or remove licenses on a monthly basis, aligning costs closely to actual user count and usage |
| Payment & Billing | Typically annual upfront payment for each year’s committed licenses (some EA deals may allow annual adjustment for growth) | Pay-as-you-go billing (monthly or annually) through the provider; you pay only for current active licenses each billing period |
| Minimum Size | Requires a large user count (usually 500-seat minimum) to enter an EA; meant for medium-to-large enterprises | No minimum seat requirement – you can use CSP for any number of users, suitable for companies of all sizes or subdivisions |
| Support & Management | Managed via Microsoft account reps or a licensing partner; enterprise IT handles day-to-day license management and true-ups | Managed by a Microsoft partner (reseller) who often provides administrative support, license management tools, and guidance as part of the service |
From a financial planning perspective, CFOs should model CSP scenarios in conjunction with any EA renewal. This means calculating the 3-year total cost of ownership under a flexible consumption model versus the EA’s fixed commitment.
In many cases, the analysis shows that the ability to avoid paying for excess capacity outweighs any discount an EA might offer. For example, a CSP model could allow you to shed 10% of licenses during a downturn, whereas an EA would have you pay for them regardless – that avoided cost may save more money than a 10% EA discount would have in the first place.
Additionally, CSP agreements can reduce cost volatility by aligning expenses with usage; you won’t be caught off-guard paying for an unexpectedly large true-up at year’s end, because you’ve been adjusting all along.
It’s also worth noting that the CSP route doesn’t have to be all-or-nothing. Some enterprises adopt a hybrid approach: keep core, stable users under an EA (to potentially receive a discount on that base load), but place more variable or growth-dependent users on CSP, where they can be flexed.
The key is that finance leaders ensure Microsoft licensing is approached with flexibility in mind. With Microsoft’s own changes leveling the playing field, enterprises now have an opportunity to prioritize agility and cost control by leveraging CSP options.
7. Multi-Cloud as Risk Diversification
Microsoft’s influence isn’t limited to Office software – many enterprises have significant investments in Azure cloud services as part of their EA. This introduces another strategic lever for cost management: multi-cloud diversification.
Relying solely on Azure for cloud infrastructure can increase your exposure to Microsoft’s pricing power, just as being all-in on Microsoft 365 does for software.
To mitigate this, organizations are considering spreading certain workloads across multiple cloud providers, such as Amazon Web Services or Google Cloud. Adopting a multi-cloud strategy isn’t just an IT architecture decision; it’s also a financial risk management move.
By maintaining workloads on multiple clouds, you create competitive tension.
Microsoft knows that if it dramatically raises Azure prices or offers a poor renewal deal, you have the technical capability to shift more workloads to a competitor.
Even if you don’t intend to move everything, the fact that 100% of your apps are not locked into Azure gives you a bargaining chip.
One fictional case study: A global company shifted approximately 12% of its cloud workloads from Azure to other providers ahead of its EA renewal. In doing so, they reduced the Azure consumption covered under their Microsoft agreement and signaled their willingness to go further if needed.
The immediate result was a roughly $4 million reduction in the cost of the new EA, partly due to purchasing fewer Azure services and partly because Microsoft responded with greater discounting on Azure to retain the remaining workloads.
Multi-cloud adoption also serves as insurance against future price hikes specific to Azure. Microsoft, like other cloud vendors, periodically adjusts prices for certain services or imposes new costs (data egress fees, support plans, etc.). If all your IT is in Azure, you have little choice but to absorb those. But if you have a footprint in AWS or GCP, you can more readily say, “We’ll move this new project elsewhere if Azure isn’t cost-competitive.” Over time, this flexibility can help save costs and strengthen your negotiating position.
It’s essential to recognize that multi-cloud can introduce complexity – it necessitates skilled teams and robust governance to effectively manage multiple platforms. However, from a pure risk diversification standpoint, spreading your bets across clouds can cap your exposure to Microsoft’s unilateral pricing decisions.
For CIOs and boards focused on long-term resilience, that diversification is increasingly seen as a prudent strategy, akin to diversifying a financial portfolio.
8. Cross-Functional Alignment for Governance
One reason Microsoft often spends spirals is the lack of cross-functional alignment in managing these agreements.
Too often, different parts of the company approach a Microsoft renewal in isolation: IT is concerned with acquiring the latest technology, Procurement focuses on negotiating a favorable price, Finance checks the budget impact, and so on – but they aren’t tightly coordinated.
Microsoft’s account teams are adept at exploiting these silos. They might, for example, bypass procurement by engaging directly with a line-of-business leader or CTO, pitching an upgrade (say to E5 or a new cloud service) as a “must-have” innovation.
If internal teams aren’t united, Microsoft can drive demand internally that weakens the company’s negotiating stance.
This is why board oversight and executive steering are now critical for Microsoft governance. Managing a multi-million-dollar EA can no longer be a back-office task; it needs the same cross-department strategy as a major capital investment. IT, Finance, Procurement, and even Legal and Security should be aligned months before Microsoft comes to the table.
They should agree on clear goals and boundaries: for instance, a maximum budget increase the company is willing to tolerate, a unified stance on not buying certain bundles that aren’t valued, and requirements for any new product additions (e.g. “show us a business case for Copilot before we spend on it”).
By presenting a united front, the enterprise can avoid the classic traps (like IT promising adoption of something without understanding cost implications, or procurement focusing on unit price while ignoring whether half the licenses are unnecessary).
Cross-functional alignment also involves establishing governance structures to continue monitoring Microsoft usage throughout the EA term. For example, an executive committee might review Microsoft license utilization and cloud spend every quarter, ensuring accountability across departments.
The presence of high-level oversight changes Microsoft’s approach too – a vendor is far less likely to push a questionable upsell if they know the customer has strong internal checks and a C-level sign-off requirement.
Ultimately, when IT, Finance, and Procurement speak with one voice, Microsoft loses the ability to “divide and conquer”. The company can then drive a harder bargain and maintain discipline in its software spending, rather than being led by the vendor’s agenda.
9. Beyond Discounts – Structuring the Agreement
When negotiations do commence, enterprises must look beyond just upfront discounts on license pricing.
Of course, securing a strong discount matters, but equally important are the contractual terms that determine flexibility and risk over the next three years.
Savvy CIOs and CFOs are focusing on structural levers in the EA that can save money or prevent future costs.
Key non-price terms to consider include:
- Mid-Term Downgrade or Reduction Rights: Negotiate the ability to reduce license counts or downgrade a portion of licenses to lower editions during the agreement term (for example, at the one or two-year mark). This is unusual in Microsoft’s standard EA (which normally locks you in), but large customers have had success inserting clauses for one-time adjustments if business conditions change. Such provisions can be extremely valuable. For instance, a global insurer negotiated a mid-term license reduction option and later exercised it when a planned expansion didn’t materialize. This flexibility saved roughly $8 million in license costs that would have otherwise been wasted on unused E5 seats. Having a safety valve for changing circumstances de-risks the commitment.
- Audit and Compliance Protections: Microsoft license audits pose a threat that can result in unexpected fees. Customers can seek contract language to mitigate this, such as extended notice periods to resolve compliance issues or limits on how far back Microsoft can claim unlicensed use. In some cases, companies have negotiated for a period of “audit grace” after major transitions (for example, migrating to Azure or new licenses) to avoid punitive true-up surprises. The goal is to prevent Microsoft from using audits as a revenue lever during the term. Clear compliance reporting processes can be agreed upon, ensuring both parties have transparency and allowing issues to be addressed without incurring heavy penalties.
- Pricing Caps and Renewal Safeguards: While Microsoft is unlikely to freeze prices for future terms, you can attempt to cap the rate of increase or secure most-favored pricing. For example, if Microsoft introduces global price increases or removes a programmatic discount (as they are currently doing), you either receive a commensurate benefit or can adjust your usage commitment. Additionally, scaling clauses can be added for large Azure spends – such as committing to a certain cloud spend but with flexibility if consumption falls short due to business changes (so you’re not paying for capacity you don’t use).
In essence, structure the agreement to build resilience against future hikes and surprises. An EA should not be simply a price list; it should be a partnership framework that acknowledges the uncertainties in a three-year horizon. Negotiating these terms might not seem as immediately satisfying as getting 5% discount, but they often yield greater long-term savings and agility.
A well-structured agreement could mean the difference between absorbing the next industry-wide price hike and having an out.
Executives must push their negotiation teams to think creatively about these non-standard terms. Microsoft, of course, will not volunteer them – you have to ask and be willing to insist, leveraging your spend and the credible alternatives at your disposal.
By focusing on structure in addition to price, enterprises can emerge with an agreement designed for financial resilience, not just one-time cost appeasement.
Five Strategic Recommendations
To wrap up, here are five strategic actions for executives to manage Microsoft costs in 2025–2026 and beyond:
- Mandate a Microsoft usage audit as part of financial governance – Treat your Microsoft subscriptions like any other major expenditure that requires regular auditing. Establish executive oversight to review license utilization and cloud usage at least annually (or more frequently) to identify waste and opportunities for optimization.
- Reclaim unused licenses before renewal – Do not go into an EA renewal with 15–30% of your licenses unassigned or inactive. Launch a cleanup effort to identify and eliminate those shelfware licenses now. It’s reasonable to expect significant waste if you’ve never done this before, so plan for a one-time reduction and then continue to monitor it thereafter.
- Model CSP scenarios alongside EA renewals – Don’t assume that renewing the traditional way is your only or best option. Have your finance team model a Cloud Solution Provider approach, either fully or partially, and compare the costs and benefits. The added flexibility of CSP (scaling down when needed) can often trump a simple discount in terms of financial outcome.
- Diversify with multi-cloud – Even if you remain committed to Azure and Microsoft’s stack, introduce some diversity in your cloud deployments. Shifting even 10–15% of workloads to AWS or Google can provide leverage and hedge against Microsoft’s future price moves. A multi-cloud strategy isn’t just an IT architecture; it’s financial insurance against vendor lock-in.
- Negotiate structural terms, not just discounts – When it’s time to negotiate, go beyond haggling over a percentage off. Aim to build in resilience clauses, including the right to adjust downward if needed, protections against audits and sudden changes, and flexible scaling terms. These structural elements will help insulate your organization from whatever Microsoft does in 2026, 2027, and beyond.
By taking these steps, boards and executive teams can regain control over Microsoft spend. The goal is to ensure that your organization derives the value it needs from Microsoft’s technology without being caught off guard by price hikes or paying for unnecessary extras.
In an era of rising software costs, a proactive, governance-driven approach to your Microsoft Enterprise Agreement is not just wise – it’s become a necessity for financial resilience.
