Microsoft EA Renewal

Microsoft agreements are important for many businesses, but the complexity of the details can be overwhelming for IT teams. This can lead to wasted spending or potential risks. While Microsoft has attempted to streamline the process, there are still many factors to consider when optimizing the deal. In this guide, we provide recommendations for planning and successfully renewing your Microsoft Enterprise Agreement (EA) to achieve the best possible outcome.

What are Microsoft EA renewals and licensing agreements?

“Microsoft offers several different types of agreements for licensing their products. The most common is the Microsoft Enterprise Agreement (EA) and the Microsoft Enterprise Subscription Agreement (ESA/EAS). While these agreements may be suitable for some businesses, they may not be the best fit for all organizations, including tiny and medium-sized businesses (SMBs). Other options, such as the Open-Value, Cloud Solution Provider (CSP), and Microsoft Products and Services Agreement (MPSA), may be more suitable for SMBs.

Before discussing optimizing your Microsoft EA renewal, it is helpful to provide a summary of the various agreements and sub-agreements available.

MS EA Agreement

“The Microsoft Enterprise Agreement (EA) is a licensing framework for large organizations that offers the highest discounts. However, this benefit comes with some restrictions. Under the EA, your organization must commit to purchasing specific licenses for all qualified devices and users, and all rights must include Software Assurance (SA) support. This means you must buy certain licenses and support for your entire organization, regardless of whether they are needed.

Payments and additional license purchases are made annually through “True-Up.” It is still possible to make purchases during the term of the agreement if necessary.

There are three types of Enterprise Enrollments that fall under the Microsoft Enterprise Agreement:

• Enterprise Enrollment: This is the most common type of EA and covers licensing for client-based products.
• Enterprise Subscription Enrollment: This is a subscription-based version of the Enterprise Enrollment, also known as the Microsoft Enterprise Subscription Agreement.
• Server Cloud Enrollment: This is a sub-enrollment that covers server-based products under the Microsoft EA and is available in both perpetual and subscription options.

In some organizations, there may be separate Enterprise Enrollments for client-based products and Server Cloud Enrollments for server-based products.

There are a few key differences between an EA and an ESA:

• All licenses purchased under the ESA are subscription-based, even if the product’s default license model is perpetual.
• The ESA allows for more flexibility in reducing licenses annually through a process called “True-down.” However, the EA may be more cost-effective in the long run compared to the ESA

What is Microsoft MPSA?

The Microsoft Products and Services Agreement (MPSA) is designed for transactional agreements with companies with more than 250 users, while the Select Plus is the predecessor to the MPSA.

The purpose of these agreements is to allow organizations to make ad-hoc purchases of licenses for products outside of the Enterprise Pool or to purchase licenses without Software Assurance (SA). However, for some large organizations, the higher discounts available through an EA and the additional cost of coordinating MPSA purchases may not outweigh the benefits.

Open and Open Value agreements are designed for small organizations. These agreements can be transactional, like the MPSA, or committed, like the EA, with the option for higher discounts. Payment options include upfront payments or spreading payments out over time if there is a commitment.

What is Microsoft CSP?

Cloud Solution Provider (CSP) agreements provide an alternative channel for companies to purchase Microsoft Online Services and other products on a subscription basis. Some key differences between CSP agreements include the following:

• Monthly payments rather than annual payments
• The ability to adjust licenses monthly through the “true-up” and “true-down” process rather than annually
• Support is provided through a partner rather than Microsoft

While CSP agreements are not specifically targeted at small and medium-sized businesses (SMBs), their high flexibility in payment and license purchasing makes them more suitable for SMBs. Volume discounts available through an EA may make it more viable for larger organizations.

Preparing for Your Microsoft Enterprise Agreement (EA) Renewal

While the following recommendations primarily focus on EA and Enterprise Subscription Agreement (EAS) renewals, they also apply to other agreement types. Understanding Your Environment As with any software renewal process, it is essential to understand your current environment and future projections, as well as your overall business strategy. This will help you have productive discussions with Microsoft and make informed decisions about your license renewal

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Microsoft Deployment Assessment

To understand your license requirements, conducting a deployment assessment of your current environment is essential. This involves investing in resources to understand Microsoft Licensing metrics, your current contract, and the Microsoft Product Terms. This will allow you to create an initial Effective License Position (ELP) that will serve as a baseline for planning and negotiations with Microsoft.

It is crucial to perform this assessment well in advance. Unless you have a mature software asset management (SAM) program and optimized processes, the figures in your ELP will likely be higher than expected, requiring additional actions to align costs with your budget.

MS EA renewal Considerations

There are several factors to consider when optimizing your Microsoft Enterprise Agreement (EA) renewal:

• Have you properly “ring-fenced” Windows Servers within clusters to minimize the need for Datacenter licenses?
• Have you removed any unused copies of software from your estate, or are they just taking up space and requiring unnecessary licenses?
• Do users need the editions of software they are using, or could they get by with a lower edition? For example, do developers need Visual Studio Enterprise, or would Visual Studio Professional suffice (which is approximately 20% of the cost)?
• Have you considered implementing dedicated SQL Server clusters?
• Have you thoroughly analyzed your SQL Server instances and determined whether they require licenses?
• Are you relying solely on software asset management (SAM) tools for your analysis? Many tools cannot accurately depict optimized license requirements and only provide a snapshot view.
• Do you really need Software Assurance (SA) for all your licenses? Have you considered whether it is worth the cost for legacy physical servers that are “too heavy to lift”? Have you considered supplementing your EA with a Microsoft Products and Services Agreement (MPSA)?
• Are there any migrations occurring? Have you properly accounted for the necessary licenses?
• Are you taking advantage of any Bring Your Own License (BYOL) SA benefits, such as license mobility through SA and the Azure Hybrid benefit?

The goal is to determine the minimum license requirements for your current estate, which will serve as the foundation for your Microsoft EA renewal discussions. As with any negotiation, there is always a chance that it may not be successful, so minimizing your current requirements helps to minimize the potential impact in the “worst case” scenario

Understanding Your Future Estate

In addition to understanding your current requirements, it is also essential to consider your future plans for the IT estate. Some questions to consider include:

• Are you currently in the process of migrating to the cloud? If so, do you have an estimate of how many workloads will be migrated? Are you able to leverage any Software Assurance (SA) benefits, such as the Azure Hybrid Benefit or License Mobility through SA?
• Do you want to maintain control of your assets by staying on perpetual licensing?
• Is there a planned hardware refresh in the works?
• Are there any planned acquisitions or divestitures that could impact your licensing needs?
• Are there any upcoming projects that will require a significant software investment?
• Are there any high-level consolidation plans, such as migrating all business intelligence tools to Tableau?
• Has IT security mandated the update of all software to supported versions?
• Is there a targeted cost reduction value that needs to be achieved through your EA renewal

Can you model the license requirements for the future estate? While it does not have to be perfect, being able to assess the “by-the-book” needs can provide valuable insights, including:

• Cost estimations
• Commercial levers
• Areas where existing license models may not be optimal

Take the time to understand your goals to minimize any unnecessary spending. Many agreements are negotiated for short-term benefits that create issues in the long term or commit too aggressively to a migration plan that does not come to fruition, both of which can result in significant cost increases over time.

Developing a negotiation strategy for your Microsoft Enterprise Agreement (EA) renewal

At this point, you should have a clear understanding of your current situation and your desired future state. The next step is to develop a robust negotiation strategy to help you reach your goals.

Defining goals and flexibility

Before engaging with Microsoft, it is important to define a clear set of goals. This will provide structure for the discussions and increase the likelihood of making progress.

It can be helpful to work with Microsoft to achieve your goals and let them structure the agreement accordingly. This can lead to a more customized agreement structure that can be easily modified to meet your needs. By taking this approach, you can quickly identify areas of flexibility and save time that could be better spent negotiating with other regions. It is important to note that this does not mean inviting Microsoft in for one of their “assessments,” as these are often disguised audits.

While it may seem romantic, working with Microsoft to develop a customized agreement structure can be more effective than starting from your previous framework and trying to fit in shifts in technology and business strategy from the past few years or accepting a “one-size-fits-all” structure that may not meet your needs.

It is true that larger companies may have more bargaining power, but smaller businesses may be able to negotiate more concessions than they expect. While there may be elements of negotiations that feel like a battleground, the terms and pricing are often more flexible than they seem, despite Microsoft’s efforts to standardize them.

While negotiating a forward-looking contract and working towards your goals, it is important to keep your baseline (i.e., current requirements) in mind. It is easy to get caught up in discussions and end up paying more than you intended for functionality that you may only use later in the agreement. Be aware of when it is no longer worth it to pursue certain targets. If it means paying upfront for features, you will only need years 2 or 3 of the agreement.

Identifying Commercial Levers

Most commercial levers will depend on your specific circumstances, such as considering Microsoft Hyper-V versus VMware vSphere for a virtual environment project. However, there are a few levers that almost everyone can utilize.

Microsoft’s shift from an on-premises software provider to a leader in cloud services has changed the way it does business with large organizations (LORGs). Customers can take advantage of Microsoft’s focus on moving enterprises to the cloud in their negotiations.

One of the most obvious commercial levers to consider in negotiations is the focus of Microsoft account managers on selling Azure and O365 services. You can use this focus to your advantage by committing to a slightly higher cloud spend in exchange for a concession on a critical on-premises element.

It is important to appreciate the value of your company’s name in negotiations with Microsoft. The company’s success in its transformation has been driven in large part by critical customers. Each successful case helps to build investor trust and increase share value, so it is worth leveraging your brand as much as possible. It could even be the deciding factor in achieving certain concessions.

Finalizing negotiations

Avoid getting swept up in the excitement of negotiations, and always do thorough due diligence throughout the process. Some common mistakes to avoid include the following:

• Not fully understanding your current environment and future goals
• Neglecting to identify commercial levers
• Failing to consider the long-term implications of your agreement
• Not taking the time to do proper due diligence

Below are some things that need to be corrected by organizations working on MS renewals.

Licensing

• Be thorough when conducting a deployment assessment, and don’t assume you have complete inventory visibility. Validate data points against your CMDB, Active Directory, and antivirus software.
• Ensure you fully understand license metrics, including how to apply for CPU licenses in a virtual environment and the minimums for Core licenses.
• Remember that SAM tools should only be used as a guide and may not provide the most optimized figures. Double-check findings if relying on these tools for renewal or true-up.
• Remember that some tools may have discovery and reporting issues with certain products, such as SQL Server editions and Core counts for certain CPU types. Consider the potential need for RDS requirements as well.

Preparation for negotiations

• Ensure all relevant business stakeholders are involved early and have complete visibility of the renewal process.
• Consider bringing in third-party experts to support negotiations, not just with technology licensing issues but also to provide independent IT procurement expertise or SAM process improvements.
• Be moderate with timeline estimates for significant projects or migrations. This can result in wasted spending if the project is not completed within the agreed-upon timeframe.
• Remember to consider the long-term implications of your agreement. It is important to plan for the future, not just the present.
• Be proactive in identifying commercial levers and opportunities to negotiate better terms.
• Remember to do due diligence throughout the process to avoid making costly mistakes.

Tips for negotiating your Microsoft Enterprise Agreement (EA) renewal:

• Make sure all important agreements and agreements are documented in writing. Please don’t rely on verbal statements, as they are not legally binding. It’s best to include all agreed-upon terms in the contract to avoid conflicts later.
• Take the time to thoroughly review the fine print. Even if you feel confident about the agreement, the clauses may only sometimes reflect what was agreed upon. Consider getting a legal review.
• Keep the information private. While it’s helpful to work with Microsoft to construct the deal, be careful not to reveal too much, and definitely don’t share any deployment data.
• Compare and evaluate the discounts being offered. Microsoft’s “best offer” may not always be the most competitive, and agreeing to a lower value may set a precedent for future deals.”