Introduction – Why Renewal Preparation Matters
Renewing a major Microsoft contract (like an Enterprise Agreement) is not an automatic routine – it’s a strategic opportunity to optimize your spend and terms.
If you wait until the last minute to address a Microsoft renewal, you weaken your negotiating leverage and often end up locked into another cycle of overspending. Microsoft’s sales teams plan well in advance, and so should you.
By starting your renewal preparation 12 months out, you ensure your organization controls the process and outcome, rather than being rushed by Microsoft’s timeline.
A proactive approach lets you identify savings, explore alternatives, and negotiate better terms before the pressure of the expiration date looms. Read our guide to Microsoft Renewal Negotiation: How to Cap Price Uplifts and Secure Discounts.
T–12 Months: Internal Audit & Usage Review
12 Months Before Expiration – Conduct an Internal Audit:
Begin a thorough audit of your current Microsoft licenses and how they’re being used. The goal at this stage is to establish a clear baseline of what you have versus what you need.
Pull usage reports and inventory all subscriptions, then identify any “shelfware” – licenses that are paid for but sitting unused. Many enterprises discover they’ve been over-licensed, such as when users are assigned a premium E5 license when an E3 or E3 would suffice.
This is the time to flag those opportunities for downgrades and eliminations. Engage your IT asset management team or use tools to track login activity and software deployments to see real usage data.
Key Tasks at 12 Months Out:
- Audit License Usage: Compare purchased licenses to actual active users and consumption. Document any underutilized services (e.g. perhaps hundreds of Visio or Project licenses that nobody launched in the last year).
- Identify Over-Licensing: Spot users or departments with higher-tier licenses than needed. For example, if certain employees have Microsoft 365 E5 but aren’t using the advanced security or voice features, note them as candidates to move to E3 or lower.
- Gather Pain Points: Meet with your IT admins and procurement/legal teams to review the current contract terms. Document pain points or limitations in your existing agreement – such as inflexible true-up terms, unused software assurance benefits, or lack of price protections – that you’d like to address in the renewal.
By the end of this internal review phase, you should have a comprehensive audit report capturing your license inventory, actual usage, and a list of potential optimizations.
This report marks a critical milestone, as it serves as the factual foundation for all your renewal decisions. Having hard data on what you use (and don’t use) arms you with clear targets for savings and ensures you’re not blindly renewing everything “as is.”
In short, the 12-month mark is about knowing your environment better than Microsoft does – so you can enter renewal discussions with confidence and evidence. Milestone: Internal audit report completed and reviewed by key stakeholders.
T–9 Months: Define Future Needs
9 Months Before Expiration – Align on Future Requirements:
At roughly the 9-month pre-renewal point, shift focus to looking forward. Now that you know your current usage and pain points, engage with business leaders and IT planners to define what your organization will need from Microsoft over the next term.
This step ensures your renewed contract aligns with upcoming projects and strategic goals, rather than just copying the old one.
Key Tasks at 9 Months Out:
- Gather Business Input: Consult business units and project managers about any upcoming initiatives that might require new or expanded Microsoft technologies. For instance, if a department plans to deploy a data analytics project, you might need Power BI or extra Azure services. If the company is pushing an AI-driven strategy, consider whether Microsoft 365 Copilot or other AI tools are on the roadmap.
- Evaluate New Products & Features: Microsoft continuously releases offerings like security add-ons (e.g., advanced compliance, Defender suites) and new products (like Copilot or enhanced Power Platform capabilities). Review which of these new solutions are relevant or beneficial for your organization. This is your chance to decide if you’ll incorporate them into the new agreement or intentionally exclude what you don’t need. Don’t let Microsoft’s sales team decide this for you – make a conscious choice about each major product.
- Cull Outdated or Unneeded Services: Likewise, identify any services or products you’re currently paying for that have become redundant or obsolete. Perhaps you subscribed to a Microsoft product that your teams have since stopped using or replaced with a third-party solution. Plan to eliminate those at renewal. Every product on the contract should earn its keep.
- Set Goals and Priorities: Establish clear objectives for the renewal. For example, set a target like “reduce total Microsoft spend by 10% without impacting productivity” or “gain more flexibility to increase/decrease licenses annually.” Define your non-negotiables: perhaps you need a cap on price increases or better contract terms regarding support or cancellation. Align these goals with both IT strategy and business priorities. It’s important at this stage that IT, finance, and procurement are all on the same page with what a successful renewal looks like – whether that’s cost savings, adding certain new capabilities, or mitigating specific risks (like compliance or uptime guarantees).
By T–9 months, you should have a future-ready plan: a documented set of requirements and objectives for your next contract period. This plan acts as your wish list and roadmap when you enter discussions with Microsoft.
Having your future needs clearly defined prevents you from being easily upsold on things you don’t need, and it ensures you budget for the things you truly do need.
Milestone: Renewal objectives are finalized and formally agreed upon, with input from IT leadership and business stakeholders, ensuring that everyone is aware of the upcoming negotiation’s objectives.
Read our guide, Negotiating Microsoft Renewal Discounts: How to Avoid the “Loyalty Tax”.
T–6 Months: Explore Alternatives
6 Months Before Expiration – Explore Market Options:
As you hit the 6-month countdown to renewal, it’s time to broaden your perspective and create leverage.
This phase involves examining alternative licensing scenarios and gathering competitive insights. Even if you intend to renew with Microsoft, exploring other options arms you with bargaining power and ensures you’re getting the best deal.
Key Tasks at 6 Months Out:
- Initiate Conversations with Microsoft: Let your Microsoft account team know you’re starting the renewal planning (if you haven’t already) and ask for an initial renewal quote or proposal. Microsoft often provides a first quote around this timeframe. Getting their opening offer early gives you something concrete to analyze (though it’s rarely their best offer).
- Engage Alternative Providers (CSP or Others): Contact a few Cloud Solution Provider (CSP) partners and request quotes for equivalent licensing. CSP resellers can often sell Microsoft subscriptions with more flexibility or occasionally at better rates for certain products. Also, evaluate the Microsoft Customer Agreement for Enterprise (MCA-E) option – Microsoft’s newer buying program that might suit your needs if an Enterprise Agreement no longer fits. The idea is to have at least one alternative proposal in hand. For example, you might get a quote from a CSP to provide your licenses on a monthly, pay-as-you-go basis. Even if you don’t intend to switch, just having this alternate pricing gives you leverage to challenge Microsoft’s offer.
- Benchmark and Price-Check: Use external data or advisors to benchmark your deal. What discount percentage do companies of your size and profile typically get on an EA renewal? Are there known promotions (like Azure spending commitments or product bundle deals) in the market this year? If you have contacts at peer companies or work with a licensing consultant, gather information about going rates and successful negotiation outcomes. This helps you gauge if Microsoft’s proposal is fair or inflated. For instance, if peers are getting 20% off the list price on certain bundles and your quote is only 5%, you know you should push harder.
- Model Different Scenarios: Develop a few financial models that compare various renewal approaches. One scenario could be a traditional 3-year Enterprise Agreement renewal with your adjusted license counts. Another scenario might be shifting some portion of licenses to a CSP model or shortening the contract term. Consider a hybrid approach (e.g., core user licenses on EA for price stability, but seasonal or project-based licenses via CSP for flexibility). Also model the impact of dropping certain products vs. adding new ones. This analysis will show the cost implications and help identify the most cost-effective strategy. It also prepares you to discuss pros and cons with executives in a quantified way.
By the end of this exploration phase, you should have documented alternatives and comparison data.
You’ll understand the trade-offs between renewing as-is versus switching to other licensing programs or providers. Importantly, you’ll be able to tell Microsoft, “We have other options on the table,” which is a powerful position.
Showing that you’re willing and able to move to a different model (or even a competitor’s service where applicable) keeps Microsoft motivated to offer concessions.
Milestone: Alternative licensing scenarios are analyzed, and a strategic choice (renew EA vs move to CSP/MCA, etc.) is tentatively decided based on what best meets your objectives.
T–3 Months: Final Negotiation Phase
3 Months Before Expiration – Enter Active Negotiations:
With about 90 days left on the clock, you transition into the formal negotiation stage.
By now, you should have your usage data, future needs, and alternative options all lined up. This is when you and Microsoft (and/or your reseller) hammer out the final deal.
It’s critical to stay organized and maintain executive support during this intense period.
Key Tasks at 3 Months Out:
- Review Microsoft’s Proposal in Detail: Likely, you will have a renewal proposal from Microsoft at this stage (if not, request one immediately). Scrutinize every line item against your earlier objectives and audit findings. Ensure that all the reductions (shelfware removal, downgrades) you identified are reflected – Microsoft’s first draft might still include everything you had before, so you may need to explicitly remove items. Verify that the quantities and new product additions align with your defined future needs, and confirm the pricing against your established benchmarks.
- Finalize Your Negotiation “Asks”: Develop a clear list of concessions and changes you will ask for. This often includes a discount target (e.g. “we are looking for at least a 15% cost reduction from the initial quote”), specific discounting on new products like Copilot if you plan to adopt them, and price caps or protections (for example, a clause that limits price increases or guarantees a set discount if you add more licenses during the term). Also include non-financial terms in your asks: flexibility to swap license types, improved payment terms, or the removal of unfavorable clauses from the contract. If you identified any compliance issue earlier, plan how to address it – e.g., ask Microsoft to waive a back-cost for an overage or include it as part of the new agreement rather than a separate penalty.
- Secure Executive Sponsorship: Ensure your C-level executives (CIO, CFO) and possibly legal counsel are engaged and on standby. Negotiations can move fast in the final weeks, and you may need quick approvals or strategic input. Having an executive sponsor involved now adds weight to your requests (“Our CFO has mandated we not exceed X budget”) and helps avoid delays. It also signals to Microsoft that your organization is serious and unified in its stance.
- Set a Hard Timeline (Walk-Away Date): One of the best negotiation tactics at this stage is to avoid being backed into a last-minute corner. Communicate an internal “walk-away” date for the deal – for instance, decide that if you don’t have acceptable terms by, say, one month before expiration, you will enact Plan B (whether that’s a short-term extension or switching to CSP month-to-month as a bridge). Let Microsoft subtly know that you have a firm deadline to sign, well before the actual expiration. This prevents the common scenario of the sales rep dragging things out until a few days before expiry to pressure you into rushing a signature. If Microsoft knows you’re prepared to say “no” and temporarily continue without an EA, they are less likely to stall and more likely to put their best offer on the table in time.
As you enter the final stretch, keep all negotiations documented. Redline the contract draft with every concession and change you have agreed upon, and insist on getting all promises in writing (verbal assurances mean little later).
By the time you are at the one-month mark, you ideally want a nearly-final contract draft that has all the agreed discounts and terms, just pending final signatures.
Milestone: A fully negotiated contract (or at least a term sheet) with all your key concessions is ready, awaiting sign-off. You’ve effectively shaped the renewal to meet your objectives, rather than simply accepting Microsoft’s standard terms.
Renewal Checklist
To ensure nothing falls through the cracks, use a checklist to track your renewal preparation tasks.
Here’s a quick renewal checklist of critical items, their purpose, and their status as you approach the final negotiation and signing:
| Checklist Item | Purpose | Status |
|---|---|---|
| All unused licenses identified | Avoid paying for shelfware | ☑ |
| Desired discount % documented | Anchor negotiation target | ☑ |
| Alternative proposal in hand | Build leverage with options | ☑ |
| Renewal team roles assigned | Ensure accountability | ☑ |
| Microsoft account team engaged | Communicate expectations early | ☑ |
(Add additional items as needed for your situation – for example, “Executive sponsor briefed ☑” or “Legal review completed ☑.” The above core items should be checked off by the time you’re in negotiation mode.)
FAQs
When should Microsoft renewal preparation start? → Ideally, 12 months before the contract expiry. Starting a full year in advance gives you ample time for analysis, internal alignment, and back-and-forth with Microsoft. It might seem early, but large enterprises and Microsoft itself plan this far ahead for renewals.
Why do we need alternatives if we plan to stay with Microsoft? → To build leverage. Having an alternative quote or plan (like a CSP offer or even considering another vendor for certain services) is your negotiation ammunition. It challenges Microsoft’s initial quote and encourages them to deliver a more competitive offer. If Microsoft thinks you have no choice but to renew, you lose bargaining power.
Can unused licenses be removed at renewal? → Yes – a renewal is the prime time to drop shelfware. Enterprise Agreements let you reduce quantities for the next term. Any licenses or services you no longer need can be left out of the new contract, which immediately cuts costs. Just make sure you identify those unused licenses well before negotiations and communicate the removal as part of your renewal plan.
What if negotiations run past the contract expiry date? → Ideally, avoid this scenario by setting a hard timeline (as mentioned). But if it looks like you won’t close the deal in time, you have options to prevent a service gap. You could arrange a short-term extension of the existing agreement (with Microsoft’s agreement), or temporarily shift to a monthly CSP subscription for a bridge period. Both approaches keep you licensed while you finalize the new contract. Be aware, though, that Microsoft may increase pressure as the deadline passes, so try to have a contingency ready rather than signing a bad deal under duress.
What’s the biggest risk of poor renewal preparation? → The biggest risk is overpaying for three more years (or whatever your term is) and locking in a suboptimal contract. Without thorough preparation, you might miss the chance to eliminate unused licenses, overlook better pricing, or agree to unfavorable terms. In short, a lack of preparation can cost your organization millions and limit your flexibility. It can also leave you stuck with products you don’t need or without solutions you later realize you should have negotiated in. Preparation is all about mitigating these risks by going in informed and with a strategy.
Five Expert Recommendations
Drawing from successful Microsoft negotiations, here are five expert best-practice tips to ensure a smooth and cost-effective renewal:
- Start renewal planning 12 months out. Early planning is non-negotiable – it gives you time to gather data, rally internal support, and manage the process on your schedule. Last-minute negotiations almost always favor the vendor, not you.
- Use actual usage data to drive decisions, not assumptions. Let facts about your organization’s usage guide what to renew or cut. Don’t blindly re-order the same bundle you had; tailor it based on real needs and avoid buying “extra” just in case.
- Always benchmark against market alternatives. Whether it’s comparing Microsoft’s offer to a reseller’s or just knowing industry discount norms, having external reference points ensures you don’t accept an inflated quote. Knowledge of alternatives keeps Microsoft honest.
- Push for discounts and written price caps. You won’t get what you don’t ask for. Be aggressive in seeking better pricing – Microsoft expects negotiation. Also, try to secure a price cap clause (e.g., limiting price increases or setting fixed renewal pricing for certain products) to protect against future cost spikes.
- Treat the renewal as a chance to reset terms. Don’t view it as just a paperwork update; view it as renegotiating a new deal. This is your window to fix what was wrong in the last contract and align it with your current strategy. Whether it’s adding flexibility, improving support terms, or removing onerous clauses, make those changes part of the renewal conversation.
By following a structured timeline and adhering to these best practices, CIOs and procurement leaders can transform the Microsoft contract renewal from a dreaded deadline into a strategic win.
Remember, a well-prepared renewal not only saves money but also sets your relationship with Microsoft on the right footing for years to come.
You’ll achieve the optimal mix of products, pricing, and terms to support your business — and you won’t be caught off guard when the next renewal cycle rolls around.
Read about our Advisory Services
