Negotiating Azure Commitments: How to Secure Discounts on Your Cloud Spend

Negotiating Azure Commitments: How to Secure Discounts on Your Cloud Spend

Introduction – What Are Azure Commitments?

Azure commitments are agreements where you pledge to spend a certain amount of money on Microsoft Azure over a period (typically 1 to 3 years).

This practice – often part of an Enterprise Agreement (EA) or Microsoft Customer Agreement (MCA) – is essentially an Azure enterprise commitment.

In simple terms, you’re saying “We promise to spend $X on Azure in the next few years” in exchange for potential benefits from Microsoft. Read our overview, ” Azure Cost Management & Licensing: Negotiation Tactics for Cloud Savings.

Microsoft pushes for these commitments because it guarantees them predictable revenue and locks you into using Azure services.

Instead of wondering if your cloud spend will fluctuate or move to a competitor, Microsoft secures a baseline spend from you. In return, why would a buyer agree to an Azure monetary commitment? Because it can unlock bulk discounts, credits, and better terms that you wouldn’t get by paying-as-you-go.

Enterprise customers who negotiate commitments often receive lower pricing per unit, free support or training, and other perks, but only if they negotiate wisely.

The key is that Azure commitments are negotiable. Microsoft’s first offer is rarely the best offer. With the right strategy, you can turn your promised spend into a leverage point to secure significant cost savings and contract flexibility.

In this guide, we’ll explore how to set the right commitment level, negotiate discounts and extras, and protect your interests for the future.

Setting the Right Commitment Level

The golden rule for Azure commitments: Never over-commit.

Any portion of your commitment you don’t end up using is basically money wasted. Microsoft won’t refund unused Azure funds; it’s a “use it or lose it” deal.

So, how do you decide how much to commit? Base your commitment level on realistic data and leave a safety buffer.

Key factors include:

• Past Azure consumption: Look at your actual Azure spend over the last 12-24 months. This is your starting point for forecasting future use.
• Growth projections: Factor in planned projects, user growth, or migrations that will increase Azure usage. Be honest – are those projects fully approved and likely, or just optimistic plans?
• Buffer below forecast: Plan to commit slightly less than your most realistic forecast. It’s safer to exceed a conservative commitment than to fall short on an aggressive one.

In practice, committing conservatively means you might use more than you committed (which is okay – you’ll just pay the normal rates for the extra usage or negotiate a top-up later).

But if you commit too high and your usage doesn’t meet it, you’ve paid for cloud resources you never use. The strategy is to start with a commitment that you’re comfortable with and will be utilized, and then scale up with growth or in the next agreement.

For example, consider a company forecasting about $5 million in Azure usage for next year. Different commitment levels lead to different outcomes:

As shown above, setting your Azure commitment below the forecast (e.g. $4.5M on a $5M forecast) is a safer bet. You’d almost certainly hit that $4.5M, and any usage beyond that just gets billed at standard rates.

On the other hand, committing the full $5M (or more) offers no cushion – if your growth slows or plans change, you might only spend $4M but still owe Microsoft for $5M. In practice, it’s usually better to err on the lower side.

You can always increase your cloud usage (and even negotiate adjustments or add-ons later), but you can’t easily undo an oversized commitment.

Pro tip: Microsoft’s sales reps might encourage a larger commitment by painting a rosy picture of your future cloud growth.

Stay skeptical. Use your own data to right-size the commitment, and remember that it’s better to slightly under-commit and grow later than over-commit and waste budget.

In negotiations, you can also discuss a ramped commitment (starting lower in year 1 and increasing in years 2 and 3) if you expect significant growth – this aligns your spend with actual adoption.

The bottom line: commit to what you need, not what Microsoft hopes you’ll need.

Know which method to choose, Azure Reserved Instances vs. Pay-As-You-Go: Cost Comparison Guide.

Negotiated Discounts for Commitment

One big advantage of making a substantial Azure commitment is the ability to negotiate discounts off the standard cloud pricing.

Microsoft rewards bigger spending promises with better rates, essentially giving you a custom Azure bulk discount for your volume. The larger your commitment, the more leverage you have to ask for lower prices.

When negotiating an Azure monetary commitment, consider pushing for these common perks:

• Flat percentage off Azure rates: This is a straightforward discount on the Azure price list (rate card). For example, negotiating 10% or 15% off all your Azure consumption.
• Credits or rebates: Instead of (or on top of) a discount, Microsoft might offer cloud credits. For instance, if you spend $5M, they could throw in an extra $250K credit – effectively a rebate you can apply to your usage.
• Special pricing for specific services or projects: If you have a big upcoming project (say a large VM deployment or a data warehouse) you can ask for a unique discount on those particular services. Microsoft might give you a lower rate on that high-cost service to win the deal.

The exact discount you can negotiate will vary, but bigger deals usually see deeper cuts. As a ballpark, multi-million dollar Azure commitments often secure an additional 5–15% off Azure’s pay-as-you-go rates.

This would be on top of any savings you get from Azure’s normal programs (like reserved instances or savings plans).

For example, if you already use reserved instance pricing for VMs, you might negotiate an extra 10% off those reserved rates because of your large commitment. Smaller commitments (hundreds of thousands to low millions) might see more modest discounts, perhaps in the single-digit percent range.

The key is to use your spending as bargaining power – the more you’re willing to commit, the more you should insist on a better deal per unit.

Always remember: Microsoft’s initial offer might be conservative. Don’t hesitate to counter with industry benchmarks or competitive quotes if the discount seems thin.

If they only offer 5% off on a multi-million commitment, that’s a sign to push back harder. Everything is negotiable when you have leverage.

Microsoft would rather trim its margins a bit than lose a big chunk of guaranteed revenue. Come prepared with a target discount in mind and justify it with the value of your commitment and any alternatives you’re considering.

Read how to use AHB, Azure Hybrid Use Benefit (HUB) Explained: Save on Windows & SQL Licensing in Azure..

Azure Pre-Purchase Funds & Credits

Discounts on rates are great, but they’re not the only way to save money in an Azure deal. Microsoft often includes extra funds and credits in enterprise agreements, especially when you’re making a significant commitment.

These are essentially bonuses that reduce your overall cost or add value to your Azure investment. Always ask about these incentives, because Microsoft might not volunteer them up front.

Examples of what to negotiate for include:

• Migration credits: Microsoft may provide free Azure credits to offset the cost of migrating workloads from your data center (or from AWS/Google) into Azure. This could be a lump sum of Azure dollars to use in the first year.
• Engineering support (FastTrack or dedicated help): As part of your commitment, ask for Microsoft’s assistance in deploying or optimizing Azure. They might include access to FastTrack engineers or architecture consulting hours at no charge, ensuring your projects succeed (and you consume your commitment).
• Training and certification vouchers: Cloud skills are critical. Microsoft can offer free training programs, certification exam vouchers, or funding for workshops to help your IT teams get up to speed on Azure. This saves you from having to separately budget for training.

These kinds of extras directly or indirectly lower your total cost. Free credits mean you pay less out-of-pocket for actual usage. Free engineering help means you don’t have to hire consultants to get Azure set up correctly.

Training vouchers reduce your staff development expenses. They all improve the total value of the deal beyond just the price of Azure services.

When negotiating, always ask, “What else can you include?” Microsoft has various incentive programs (especially for clients migrating to Azure or launching new Azure services) – but they often only give them if you ask.

For instance, there are programs for Azure migration assistance, funding for proofs-of-concept, or even marketing funds if you’ll be a public reference.

Squeeze every bit of value you can out of your commitment; these perks can easily be worth tens or hundreds of thousands of dollars. You’re committing a lot to Microsoft – make sure they commit some freebies to you.

Renewal Protections

It’s not enough to get a good deal for the next three years – you also need to think about what happens after your commitment term.

Without planning, you could face a steep price increase or tough renegotiation when it’s time to renew.

That’s why savvy buyers negotiate renewal protections as part of the initial deal. Essentially, you want to lock in some safeguards now to protect your future self.

Key tactics include:

• Price locks for renewal: Try to include a clause that if you renew your Azure commitment at equal or higher levels, your pricing stays the same (or better). This means if you continue with Azure in three years, Microsoft won’t suddenly charge you more per unit just because your old contract ended. You’re rewarding them with continued business; they should reward you with consistent pricing.
• Caps on price increases: If price locks on specific services aren’t possible, negotiate a cap on any Azure price list increases. For example, an agreement that Azure rates won’t go up more than 3-5% annually for you, even if Microsoft’s public prices rise. This shields you from big cloud inflation. Some contracts tie this to an index (like CPI inflation) or just use a fixed percentage cap.
• Commitment rollover options: What if you don’t use all your committed funds by the end of the term? Normally, that unused budget expires. But you can ask for a rollover provision. This could allow you to carry forward a portion of unused Azure commitment into the next year or next contract, or give a grace period (say 3-6 months extra) to use leftover credits. It’s not a standard feature, but in a big deal, Microsoft might agree rather than see you leave money on the table (and be unhappy).

By securing these protections, you prevent nasty surprises down the road. Imagine if Azure prices jumped 10% overnight in year 3 – a cap would save your budget. Or if you were 10% short of consuming your commitment by the end, a rollover clause would let you extend and use it instead of losing that value.

Also, having renewal price protection means that when the time comes to sign a new deal, you aren’t starting from scratch at potentially higher prices. You’ve pre-negotiated that loyalty and growth are rewarded with stable or better discounts.

Another tip: document any promises now for renewal time. If Microsoft’s account team says, “Don’t worry, we’ll take care of you next time if you commit big now,” get that in writing in the contract.

Negotiating from a position of protection ensures your cloud costs remain predictable and fair, even as the Azure landscape and your usage evolve.

EA vs CSP Commitments

Not every Azure customer signs a massive Enterprise Agreement some buy Azure through other channels.

The way you purchase Azure affects how commitments and discounts work.

The two common models for enterprises are EA/MCA vs CSP:

• Enterprise Agreement (EA) or Microsoft Customer Agreement (MCA): This is the direct agreement with Microsoft for large organizations. It typically involves a multi-year commitment (e.g., a 3-year Azure monetary commitment). In an EA/MCA, you negotiate custom pricing and terms, often securing substantial discounts and credits as discussed above.
• Cloud Solution Provider (CSP): This is buying Azure through a Microsoft reseller/partner on a pay-as-you-go basis. With CSP, there’s usually no long-term commitment – you pay monthly for what you use. Some CSPs might offer slight discounts or bundles. Still, generally, pricing is closer to list, and you don’t have the same ability to negotiate bespoke terms because you’re a smaller fish in Microsoft’s eyes (and working through a middleman).

Each approach has pros and cons, which can be summarized as:

If your Azure spend is large and relatively predictable, an EA/MCA commitment usually pays off because you can negotiate meaningful discounts and incentives.

The savings on unit costs can be significant for big workloads, outweighing the risk of any unused commit (as long as you sized it right). Plus, EAs often come with support benefits and a direct relationship with Microsoft.

On the other hand, if your cloud usage is smaller, erratic, or you’re just testing the waters, the CSP route might be better. You’ll pay standard rates, but you won’t be tied down.

You can turn services off and instantly save money, and you won’t worry about meeting a yearly spend quota. Some companies also start on CSP and move to an EA once their spend grows enough to justify a commitment.

In summary, choose the model that fits your scenario. An Azure enterprise commitment via EA/MCA makes sense when you can confidently forecast usage and want to squeeze out every discount possible.

CSP is attractive if you need month-to-month agility or are not ready for a big promise. It’s all about balancing cost vs flexibility for your business needs.

Checklist – Before Signing an Azure Commitment

Before you finalize any Azure commitment contract, run through this checklist to make sure you’ve covered all bases and negotiated the best deal:

• Audit your Azure usage and growth: Review past cloud spend and forecast future needs. Know your numbers so you commit an amount grounded in reality.
• Commit below your forecast: Set a commitment level slightly under your projected spend. Avoid overcommitting – it’s better to exceed a smaller commit than waste a larger one.
• Negotiate percentage discounts: Don’t settle for pay-as-you-go rates. Push for a flat percentage discount off Azure’s list prices, and ask for special pricing on any big-ticket services you plan to use heavily.
• Ask for credits and extras: Request additional value like migration credits, free support/engineering hours, and training vouchers. These extras reduce your total cost and help you maximize Azure.
• Secure renewal protections: Include clauses to guard against future surprises – price locks or caps on increases, and options to carry over unused commitment if possible. Protect yourself now for the renewal in a few years.
• Choose the right agreement type: Decide if an Enterprise Agreement/MCA or a CSP model makes more sense. Big, steady spend usually warrants an EA for discounts; smaller or unpredictable use might stay flexible with CSP.

Checking all the above ensures you’re entering the Azure commitment with eyes open and a solid plan. It’s much harder to add these things after you sign, so get them in writing upfront.

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