How to Negotiate with Microsoft: A Comprehensive Guide

Negotiating with Microsoft can be a complex process, but with the right preparation and understanding, you can secure a favorable deal.

Here’s a detailed guide on how to effectively negotiate with Microsoft for your Enterprise Agreement renewal, covering key points from understanding their internal dynamics to specific negotiation strategies.

Topics in this blog

Understanding Microsoft’s internal dynamics

Microsoft’s account structure

Microsoft is a revenue-driven organization with a vast network of account teams dedicated to servicing their clients. These teams typically consist of account executives, account technology strategists, and other specialists, all focused on meeting their annual targets.

Recognizing this setup is crucial because it positions you, the customer, as a significant player in their revenue goals, regardless of your organization’s size.

Did you know? Up to 90% of Microsoft customers might not be aware that they can continue using their existing subscriptions even without an Enterprise Agreement (EA).

Microsoft EA Negotiation – The importance of preparation

“The most critical factor in negotiation success? Preparation. Without it, achieving a truly good outcome is unlikely. You might feel you got a deal because you bought a lot from Microsoft and received a high discount, but that doesn’t necessarily mean it’s the best deal for you.” – Erik Hollander, LicenseQ Co-Founder.

Preparation is key: 80% of your negotiation success

Effective negotiation begins long before you sit down at the table. Negotiation is the back-and-forth communication aimed at reaching a mutually beneficial agreement. It’s crucial to understand your goals and the other parties beforehand. This way, the discussion focuses on finding common ground and compromises on pre-determined topics.

Essential steps to prepare for a Microsoft negotiation:

  • Start early: We recommend clients begin preparing 12-15 months in advance. While that’s ideal, we understand timelines vary. We’ve assisted clients who started preparing three months ahead, and even two weeks (though the latter isn’t ideal).
  • Know your goals and budget: Understand what you want to achieve, your budget constraints, and the specific products you need. You need to know what you are currently using and what you will use in the future. Your IT roadmap needs to be super clear.
  • Research Microsoft’s objectives: Know what Microsoft aims to achieve in the negotiation. This will help you find common ground and use it to your advantage.
  • Analyze past interactions: Review previous negotiations with Microsoft to identify patterns and anticipate their strategies.
Microsoft negotiation tips by LicenseQ experts

Microsoft Negotiation 101: Negotiate from strength

Key Negotiation Strategies

1. Setting the Stage

Pay attention to what Microsoft is saying during negotiations to understand their priorities and use this information strategically.

Negotiations should be a give-and-take process. Be prepared to make concessions but always ask for something in return.

2. Effective Communication

Ensure that both parties understand each other’s positions by summarizing key points and confirming mutual understanding.

If you don’t understand a position or offer from Microsoft, ask for clarification. This can reveal their flexibility and willingness to compromise.

3. Utilizing BATNA, ZOPA and MESO

BATNA (Best Alternative to a Negotiated Agreement): Know your fallback options if the negotiation doesn’t yield a satisfactory outcome. This gives you leverage and confidence during discussions.

ZOPA (Zone of Possible Agreement): Identify the range of acceptable outcomes for both parties. Staying within this zone increases the likelihood of a successful negotiation.

MESO (Multiple Equivalent Simultaneous Offers): Present multiple offers that are equally valuable to you but might be viewed differently by the other party, helping to uncover their preferences and increase the chances of finding a mutually beneficial solution.

Example: Effective Use of BATNA

Scenario: A company was negotiating with Microsoft for an Enterprise Agreement (EA) renewal. They were using Microsoft 365 E3 licenses and wanted to secure a discount on the E5 upgrade.

Strategy: The company prepared thoroughly by determining their BATNA. They assessed the minimum acceptable configuration they could revert to if negotiations failed, which included retaining their current E3 licenses without any additional services.

Outcome: By knowing their BATNA, they confidently negotiated with Microsoft, signaling that they were prepared to walk away if necessary. This stance pushed Microsoft to offer a more favorable discount on the E5 licenses to avoid losing the deal.

Top Microsoft Negotiation tips

  1. Build trust and rapport – Establishing a good relationship with your Microsoft account team can significantly influence the negotiation outcome. Find common ground and work towards a win-win situation.
  2. Explore alternatives – If negotiations stall with your primary contacts, escalate the issue to higher management levels within Microsoft. Senior managers may have different targets and might be more willing to offer concessions.
  3. Be prepared to walk away – Walking away is a viable option if the deal doesn’t meet your needs.  Large corporations understand that your business needs are valuable, and a strong vendor will be willing to work with you to find a mutually beneficial agreement.
  4. Multi-level selling – Understand that Microsoft’s internal targets can vary by role. An account executive’s priorities may differ from those of a solution specialist. Use this to your advantage by addressing the specific interests of each stakeholder.

Also read our insightful blog on Top Microsoft Negotiation Mistakes to Avoid. 

Example: Multi-Level Selling for Better Terms

Scenario: A mid-sized enterprise was struggling to get a substantial discount from their Microsoft account executive for a large Dynamics 365 implementation.

Strategy: The enterprise escalated the negotiation to the account executive’s manager and eventually to the regional sales director. They presented a compelling business case, highlighting the long-term partnership and potential for future growth.

Outcome: The higher-level managers, keen to secure the enterprise’s long-term business, offered better terms and a significant discount on the Dynamics 365 implementation, which the initial account executive was unable to provide.

Other important aspects to consider 

The importance of flexibility

Microsoft is increasingly pushing for company-wide commitments in exchange for discounts. Evaluate if these commitments align with your organization’s needs and consider the total cost of ownership rather than just the discount percentage.

Microsoft User profiling

Utilize user profiling to ensure you’re only paying for the licenses you need. Different roles within your organization may require different types of licenses, and optimizing this can lead to significant savings.

Case study: User Profiling for Optimal Licensing

Scenario: A municipality was considering renewing their Microsoft 365 licenses. They initially planned to purchase E5 licenses for all employees.

Strategy: Upon evaluating their workforce, they realized that not all employees required the full features of E5. They conducted user profiling to identify different user needs. Office workers needed E5 licenses, while field workers, who primarily used mobile devices, only required F3 licenses.

Outcome: By applying persona profiling, the municipality optimized their licensing costs, securing significant savings without compromising on the necessary features for different user groups.

Price lock

Locking in prices for the duration of your agreement can protect you from future price increases. This is especially important given Microsoft’s trend of frequent price adjustments.

Example: Locking in Prices for Future Savings

Scenario: An organization was concerned about potential price increases for Microsoft services over the next few years.

Strategy: During their EA renewal negotiation, they prioritized securing a price lock for key products and services. This meant negotiating a fixed price for the duration of their agreement, even if Microsoft increased prices globally.

Outcome: When Microsoft announced price increases, the organization was shielded from these hikes, resulting in substantial savings over the contract term.

What you can negotiate

Microsoft negotiation beyond discounts

While discounts are a common focus, there are other areas you can negotiate:

  • Terms and Conditions: Request specific contractual terms that benefit your organization.
  • Product Bundles: Tailor product bundles to meet your specific needs and negotiate favorable terms for these bundles.
  • Service Levels: Negotiate service level agreements (SLAs) that ensure you receive the necessary support and service quality.

Microsoft’s aggressive licensing tactics: A cause for concern?

Recent reports suggest a shift in Microsoft’s licensing practices, with some clients facing pressure and scare tactics from sales teams. Here’s a breakdown of the key concerns:

  1. Fines for Unknowingly Exceeding Licenses: Clients are being threatened with fines for unknowingly using features that push them beyond their existing licensing agreements.
  2. Leveraging Licensing Portal Data: Microsoft is monitoring client usage through the licensing portal and using that data to pressure them into expensive upgrades, even for minimal feature utilization.
  3. Limited Options and Upselling: The tactic often involves pressuring clients to upgrade everyone to the most expensive E5 plan to avoid fines, regardless of actual user needs.

These aggressive tactics raise concerns about fairness and transparency. Clients are left feeling confused and potentially bullied. Here’s why this approach might backfire:

  • These scare tactics can damage Microsoft’s reputation and erode trust with clients.
  • Clients may seek alternative solutions or consultants to navigate licensing agreements and avoid unnecessary costs.
  • Microsoft’s traditional audit practices seem to be declining in Western Europe, potentially due to their ineffectiveness.

The takeaway? Building trust and fostering long-term partnerships requires transparency and open communication.  Proactive communication about potential licensing issues and a focus on client needs would be a more sustainable approach for Microsoft.

Conclusion

Negotiating with Microsoft requires a strategic approach and thorough preparation. By understanding Microsoft’s internal dynamics, setting clear goals, and employing effective negotiation strategies, you can secure a deal that benefits your organization. Remember, preparation is key, and leveraging tools like BATNA, ZOPA, and persona profiling can give you a significant advantage.

With these tips and strategies, you’re well-equipped to navigate your next negotiation with Microsoft successfully. Reach out to us today with any questions at info@licenseq.com and make sure to check out our Contract Negotiations Support page. 

Contact us today