Enterprise Agreement renewal explained
1. Renewing your Enterprise Agreement
Getting the most out of your Microsoft Enterprise Agreement renewal is important. A poorly thought out or poorly executed renewal can result in wasted investment, unnecessary overhead, and a missed opportunity to get the most out of your Microsoft investment. This is why it is important to plan and prepare ahead of time. If you don’t, you may be left scrambling at the eleventh hour.
People often talk about THE Enterprise Agreement renewal. However, renewal decisions are actually made for individual Enrollments. Your Enrollments could have multiple different end dates depending on when you purchased them and usually these each need to be renewed when they expire.
When deciding on an EA renewal, you’ll want to consider the type of license and the features that it offers. For example, you might choose an EA that includes Windows 10 and only Windows 10 if this is your main focus. On top of that you might want to choose a contract that allows you to buy Microsoft Cloud Solutions (Microsoft CSP) if your organization only has a few users, instead of adding this to your EA for most of your users. An alternative would be to put everything in an Enterprise Agreement and to buy all your licenses for software and cloud services under one contract.
2. What are you renewing?
The term of the Enterprise Agreement is three years. At the end of this period, you have the option to renew your agreement for another three-year term.
When you renew your initial Enterprise Agreement, you don’t pay for the on-premises software license again, you only pay for the Software Assurance renewal. Read more about Software Assurance here.
The pricing for the Enterprise Agreement Subscription (EAS) Enrollment is different, as with this contract you don’t own the license, but only the right to use a certain license. Upon renewal of EAS prices are based on a ‘License plus Software Assurance’ basis. The buy-out option for EAS customers enables you to buy and own the perpetual rights to previously licensed on-premises software.
3. Microsoft Licensing Statement
Whether you’re negotiating a new Microsoft Enterprise Agreement or renewing your current agreement, it’s important to make sure that your licensing status is in order. There are many moving parts to Microsoft’s licensing program, and a Microsoft Licensing Statement (MLS) can be a valuable tool.
The MLS document contains an inventory of license transactions that Microsoft keeps for your organization. It contains information about Microsoft volume licensing programs and individual software components. The information contained in the MLS document is important for the management of Microsoft software assets.
The MLS document can be very overwhelming to read at first. It’s important to review it to make sure that no licenses are added in error. If you’re unsure of what is in your MLS, contact your Microsoft account team for assistance.
Finally, it is important to note that Microsoft will grant you this document, however they do not consider it to be a factual statement of your organization’s account. It is merely what Microsoft thinks might be in your possession and no rights can be derived from it. License management is always up to you as the buyer of the software and services and not up to Microsoft.
On top of this, licenses that you might transfer to other parties (for instance in a divestiture) will not be deducted from the account, making it very difficult to use an MLS as a factual statement.
4. Tips for a successful renewal
1. Prepare a list of all entities involved in the negotiation
Ideally, start a minimum of 6 months before the renewal deadline. This will allow you to get an idea of your requirements and to identify any optimization opportunities. Microsoft usually starts planning your upcoming renewal internally 12 months in advance.
2. Identify actual usage of Microsoft software and services within your organization
Do a thorough inventory of your usage on the entire Microsoft portfolio and check if you are planning to use additional software or services in the upcoming 12 months. Visit our Optimization Services page to find out how we can help you with this.
3. Identify the commercial levers that will most likely benefit your organization
For example, Microsoft proposes a significant first-year discount, but then reduces this discount in subsequent years. This is less than ideal! List your requirements (nothing is too small) and present all of your demands to Microsoft. Leave nothing undiscussed.
4. Stay flexible
Microsoft constantly changes the rules, so you have to be flexible.
E.g., their shift from company-wide EA obligations to procure Enterprise Desktop (Enterprise CAL Suite, Windows OS and Office Pro Plus) to a subscription-based contract which programmatically allows you to scale up and down (for instance a full M365 E3 contract allows annual flexibility to reduce to a minimum of 500 users).
Now Microsoft sees a risk here, they want to change back to the company-wide model (stating that you need to retain a certain number of licenses for M365 in order to keep discounts at a certain level).
Choosing a higher discount in exchange for a lack of flexibility can end up costing you more in the long run. For instance, if your employee count tends to fluctuate a lot.
5. Negotiate price locks
Be sure to investigate and negotiate price locks for items you are interested in. Microsoft has recently announced several price increases and these won’t be the last. If you can anticipate using certain technology, products or services, lock the prices in your CPS. You will benefit from this if Microsoft announces another price increase.
6. Make a list of demands
There are many other items you can negotiate with Microsoft. No list is too long. Make sure to write all your requirements down and have them ready before you sit down at the negotiation table. This is one of the most important things to consider.
Create a long ‘negotiation list’ to enable you to easily ‘give up’ some items that are less important to you in order to keep the main items you really want. This will help your negotiation position with Microsoft!
Want even more tips for a successful renewal? Read our blog here where we share further helpful insights.
5. What can you negotiate?
Generally, Microsoft customers are focused solely on getting discounts during their renewal, but we feel that it is important to look beyond this as well. Especially as it is getting harder and harder to get high discounts from Microsoft. You need to also consider flexibility, price locks and optimization.
Discounts
Discounts depend on three main components:
- Company size
- Level of deployment in the cloud
- Investments in what Microsoft considers strategic technology i.e #SQLServer, #Dynamics365 and #Azure
The level of discount you can achieve is dependent on your deployment in the cloud. The level of cloud saturation in the Netherlands is very high for example, giving companies little wiggle room. In neighboring Germany, cloud adoption is not as high, giving clients more space for negotiation.
Flexibility
Flexibility is very important as Microsoft tends to change its tactics. Before Microsoft would push high discounts with companywide obligations, then they changed to subscription-based and flexible modelling. They have now once again gone back to the companywide model.
Price Lock
Recently, Microsoft announced many price increases. We recommend including technology that you anticipate you will start using in your CPS as this will LOCK the prices. This ensure your costs stay the same, even if Microsoft announces another price increase.
Optimization
This is our main advice: optimize! Make sure you only buy the licenses you actually need. Buying only what you need at a smaller discount can end up being a lot cheaper at the end of the day than buying everything at a high discount.
There are many other things to negotiate and don’t hesitate to have a list of requirements ready – whether you think you can get them or not! Microsoft will listen, although they usually will not budge on technical services. You will need a very convincing argument and keep in mind you are likely not going to get everything you ask for.
Case study cloud negotiation:
Let’s use the example of a client based in the Netherlands who enjoys an average 15% discount on their 365 E3 suite. If they are using all the functionality within the E3 suite, Microsoft will push them to move to the E5 suite. The client is happy with E3 and has no requirements to move to E5. However: Microsoft will not give this client the 15% discount during their next renewal on E3.
6. LicenseQ’s successful approach to an EA renewal
Our approach includes:
- Inventory of current environment
- Competitive landscape
- Identification of business requirements
- Bill of Materials /
- Benchmarking & Pricing
- Negotiation strategy
The negotiation phase can last months. Regardless of the duration, it is important to understand the process. We support clients with their renewal following our successful phased approach.
It all starts with a correct inventory of your Microsoft estate. We always look for the current installations and usage of cloud services and find ways to optimize based on the licensing rules that Microsoft sets. Visit our Contract Negotiation Support page for more information.
After the inventory has been done, cost models will identify the correct scenario to inform your negotiation strategy and you are ready to dictate the conversation to Microsoft.
The most important point to remember is that the Microsoft Enterprise Agreement renewal process is forever changing. While the original agreement was a full-on, one-time event, Microsoft now makes it possible to discuss potential additions and signing of new Enrollments at different points in time.
Nothing is set beforehand – Microsoft takes a confident approach, but in the end, it’s always a puzzle. High discounts are becoming more and more difficult to get.
Watch the video below to learn more about preparing for your EA renewal. We give tips on how to handle timelines and deadlines.
Need support with your EA renewal?
This article focused on how you can approach a successful Enterprise Agreement renewal. The EA remains a complicated licensing model to understand and work with. LicenseQ can provide immediate support and go through the EA process with you. For more information, visit our Contract Negotiation page or contact our licensing experts at info@licenseq.com.
Other articles in this series:
- The basics of the Enterprise Agreement
- How to set up an EA(S)
- Enterprise Agreement order requirements explained
- What is the difference between the Annual Report and the True-up?
- How does Software Assurance work?
- What are the different types of Enrollment?
- 10 tips to reduce your Enterprise Agreement spend
- Understanding the Enterprise Agreement Renewal process
- 5 tips for renewing your Enterprise Agreement
