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Learn about Microsoft Enterprise Agreement, its length and renewal, True-Up best practices, and negotiation tips.
► Find out how to optimize Microsoft licenses!
Microsoft is fully aware that it is one of the most important vendors for helping enterprises build business processes. The company often uses its market position as leverage to convince customers to purchase more licenses than they need. In this guide, we explain how you can find leverage of your own and negotiate Microsoft Enterprise Agreement renewal and True-Up to your benefit.
As a background, Microsoft’s transformation from an on-premises software giant to a cloud leader has led them to deploy different up-selling tactics. Often cited examples include lines like “with your company growth, you will eventually need those licenses” and “your users need extra GBs of storage”.
With the right data, you can avoid wasting money on excess licenses or choose E5 instead of E3. The beauty of today’s technology is that you can run an organization as lean and efficient as you want, with accurate forecasts.
The Microsoft Enterprise Agreement, or Microsoft EA, is a subscription to the rights to use Microsoft products and services. It offers value for companies with 500 or more users/devices, with the flexibility to buy more services under one agreement.
Microsoft EA licensing is a subscription lasting three years to use their products. At contract termination, an option is given to renew for one or three additional years.
Enterprises also receive the Microsoft true-up — a yearly evaluation of the qualified licenses deployed in your EA, which usually takes place every year around the time one enters their EA.
Preparation is key when approaching a Microsoft EA renewal. The items described below expand on the general SaaS optimization best practices available with other SaaS vendors.
Microsoft nonetheless requires a slightly different approach — one that is more detailed and supported by user activity data with which you can use to negotiate with the Microsoft account manager or reseller. In particular, by proving that one’s demand will increase in the future, you’ll be able to negotiate your renewal.
Getting approval on discounts also takes time since it needs approval from multiple sides (e.g., to build a business case, to show how your number of users or products will eventually increase, etc.). Building a business case for yourself proves to be the essential piece of the negotiation.
Microsoft only gives out discounts to enterprises that own cloud licenses. Unfortunately, if you’re still using on-premises licenses, these negotiation tactics won’t work.
Remember, Microsoft wants you to upgrade your license plan (e.g., from E3 to E5, from F3 to E3 or E5). When doing so with the right data in hand, one has more facts to support requests and can ask the right questions to get the right results.
Next, here are the best practices to negotiate your Microsoft EA. As you read, remember: there’s never a bad time to reassess your agreement — but the earlier you start, the better.
Find SaaS services that overlap with Microsoft products. Consolidate application functions to a single vendor and you'll increase your leverage for negotiation.
Are employees using Teams and Zoom? Are they using Outlook and Gmail? Overlapping services decrease collaboration and productivity but also limit volume-based discounting.
By consolidating application functions to a single vendor, you increase your license need and leverage for negotiation.
Compile a baseline for user needs, and rightsize license types based on the features and functionality they need. Make sure to compare the 3 different license types and prices Microsoft offers for enterprises, so you can make an educated reassess.
To get the best information for the negotiation conversation, make sure to have user activity data and their licenses to explore optimization opportunities. There are three potential optimization practices you can look for:
You can either use Microsoft admin analytics to discover usage by the department or use a SaaS Management platform to discover all users and their historic daily activity by specific Microsoft 365 product and license inventory.
Review the usage data and discover all the users who haven’t used Microsoft products in the last 90 days. Once found, directly ask them if they still need access to that product. If not, remove their access and reduce the tier if that option is available. If they still need the access, leave it as it is.
Don’t forget that companies often deploy enterprise-grade applications with unnecessary features. The more data one can gather, the clearer the picture will be and the more support one will have during negotiation.
Once license type assessments are finished, begin negotiating by proposing a longer-term service extension.
Term discounting offers compelling cost savings on Microsoft EAs. Account managers or channel partners are pressured to sign longer-term contracts to decrease costs on renewals support with customer support or success staff.
Bigger, multi-year contracts are more enticing because of their total contract value. Account managers are therefore incentivized on “bookings” and their long-term value (LTV).
As previously said, the Microsoft EA is a three-year-long agreement. When up for renewal, businesses have the option to renew for one or three additional years.
Another option is to renew on a monthly basis — Microsoft CSP (Microsoft Cloud Solution Partner). If you expect big user or usage changes in the future, this renewal can help get the best price until that period is over.
For example, let’s say you currently don’t have many users of Microsoft products but expect that number to increase or decrease in the future. One can use CSP until the number of licenses you demand will stabilize. This prevents wasting spend until you become more confident that the three-year EA makes more sense.
Valuation and Wall Street interest are all connected to contract value for SaaS companies. Think about it, is it cheaper to offer small discounts to an existing customer that already spent hundreds of thousands of dollars, or to pay to acquire new customers?
Big brands with long-tenured relationships have a better chance of scoring these discounts. If these discounts cannot be used, you can still ask for limits to future price raises on renewals. You may not save today but can boost future savings.
This brings us to the next tip. Taking advantage of the end of Microsoft’s financial year date.
Just like with other SaaS vendors, take advantage of fiscal year dates, during which account managers are pressured to renew contracts on time and improve revenue forecasts.
Microsoft’s financial year-end is on June 30th. Remember this date since it can give you more power at the negotiation table.
If your Microsoft EA is up for renewal close to that date and your business case is strong enough, the account managers will be more open to meet your requests to prevent spillover and accept your terms just to get the renewal done in time.
Gather the data on users, licenses, and usage when doing so. Make sure to start early by either using either a renewal calendar or renewal alerts.
As an enterprise leader, you can take advantage of your network. Knowing what your enterprise friends pay for Microsoft licenses can give you the confidence to push for better pricing terms.
The best practice is to get as many prices as you can get and calculate the average, minimum, and maximum price. Compare it with your current price for use during negotiation.
Another option is to buy Microsoft through one of the resellers since they occasionally offer lower prices thanks to their volume discounts. Do the research and find the best option for you.
If you are lucky enough to work for a company with great brand recognition, you can leverage your “logo” power and get a discount.
If this discount doesn’t work, Microsoft can potentially still offer free consulting on best practices or propose extra POCs for their products you don’t yet use.
Microsoft has special accelerators in place to motivate account managers to renew and upsell high-profile agreements as they want to keep their leading role in the market and expand the number of products in client organizations.
Another way to let Microsoft compete for you is to discuss pricing with Microsoft’s competitors and come back with a request to match or improve their pricing. Microsoft may undercut its published pricing to steal business from the competition.
This strategy’s success depends largely on your brand’s strength. Use this tip wisely and with precaution.
Since Microsoft EA includes True-Up, you can use this flexibility to change the agreement and to optimize the number of licenses and costs you pay for Microsoft 365.
Make sure to track user data and activity to receive clearer pictures of appropriate licenses.
Microsoft EA True-Up is an annual process for aligning your EA with whatever licenses you may have added or removed in the previous 12 months. It is an opportunity to manage and track EA licenses more efficiently.
Microsoft EA True-Up provides great flexibility to your EA during which you’re not only aligning inventory but are also making sure that you are not wasting spend on Microsoft licenses.
However, it’s important to make the best of this process. Here are some rules you need to follow.
Enterprises are always consumed by software renewals and other annual changes like True-Up. There isn’t always enough bandwidth to tackle them all so prioritize the ones with the most business value. However, if you have business processes built around it, Microsoft is definitely one for which you need to make time. True-Up is a perfect opportunity to align your business needs.
With MS True-Up arriving once a year, you’re responsible to submit an Update Statement even when you don’t have any changes — when this happens, it’s called “zero-usage order”.
Just like with a Microsoft EA renewal, the earlier you start, the more you can maximize the True-Up.
The annual true-up order must be sent to Microsoft’s team or reseller between 60 and 30 days prior to the anniversary date of your EA enrollment. If you don’t complete the True-Up in time, you might get hit by a Microsoft licensing compliance audit.
This means you need to start reviewing your Microsoft software, hardware, and Online-Services purchases at least 120 days prior to the anniversary date. This review is a perfect time to find obsolete or excess licenses resulting in wasted spend. More on this topic in the best practices section below.
(The Microsoft EA True-Up Timeline. Source: Microsoft's Enterprise Agreement True-up Guide)
It is important that you only report changes that are licensed under the EA. True-Up doesn’t need to be complicated, that’s why Microsoft published a couple of questions that you can ask yourself while finding changes:
Though flexible, there are still unknown True-Up practices that you can take advantage of. Let’s see what those are.
Keep an up-to-date inventory to track and manage users of Microsoft products and services. Optimize them by having the right data in your hands, either manually or automatically with LeanIX's SMP.
Consistent tracking helps you:
Answering questions from above will help you determine if you can:
On your contract anniversary date, and when data shows you using fewer Microsoft licenses than you previously set in the EA, consider reducing your Microsoft spending and pay for fewer subscriptions.
Microsoft True-Down is an annual process to align your EA with the reduced number of qualified desktops, users, and processors that you have removed in the previous 12 months.
As seen in the first screenshot, Microsoft account managers and resellers help you review changes and to suggest new Microsoft products that might fit your organization.
They also suggest best practices on how to increase adoption. Drawing upon experience and use cases in many different industries, they are skilled at increasing the adoption of their products.
Keep in mind that tracking users and usage on your own helps you make better decisions and fact-based conversations with the account managers or resellers.
Companies don’t always get enough flexibility with the general Microsoft EA. In that case, you can switch to Microsoft CSP.
CSP enables you to work directly or indirectly with Microsoft partners that can easily package their own tools, products, and services, and combine them into one monthly or annual customer bill.
It’s easy to just sign a True-Up review and waste money on the products and licenses you don’t use. That’s why it’s important to track your inventory of Microsoft products and services and analyze the actual usage of users in as much depth as you can.
Microsoft account managers and resellers often try to sell you more of their products and upgrade you to a higher enterprise plan. Complete Microsoft products visibility and having the right set of data help you determine if additional products or licenses are actually needed and support your conversations with facts.
As the True-Up timeline image above shows, you should start with a review at least 120 days before the EA anniversary date. Starting too late can potentially make you miss optimizing opportunities and waste money where it’s not needed.
When you don’t complete your True-Up in time, you might get hit by a Microsoft license compliance verification (or, in other words, a licensing audit).
Even though the True-Up is not a renewal, it can still be used for negotiation purposes. Using the same negotiation techniques from the Microsoft EA renewal section can help you find additional optimization opportunities during the True-Up.
No matter which part of Microsoft EA you want to negotiate, the better data you equip yourself with, the better you will be at the negotiation table. EA renewal and True-Up times are a great opportunity to learn more about your Microsoft products' usage and users.
Take time to prepare and always ask what is possible — whether that is extra POCs to extra support to increases in your Azure or Cloud usage. Microsoft will help you reach a win-win situation.
Take control of your SaaS today!
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