Summary
IT procurement teams have negotiated Microsoft agreements since around 2003. For a long time, negotiating another agreement, another discount and another renewal was one of procurement's favourite exercises.
Some procurement people now say they are giving up. They tell us there is nothing left to negotiate; the process has become too complicated, since they are dealing with new metrics and entities they are not used to.
However, negotiation with Microsoft is still possible. But you need to approach it differently. If you are coming off a three- or five-year agreement, the playbook you used last time has changed and no longer works. For most companies we speak to, the biggest shock is the amount of change.
Two major price changes in 12 months
First: On 1 November 2025, Microsoft replaced the four Enterprise Agreement price levels, A, B, C and D, with one flat level. This level-based price structure had been in place since the early 2000s. It automatically gave larger companies a better price level, and they negotiated additional discounts on top.
Companies already on Level A were not affected, except perhaps in negotiations. For companies on Levels B, C and D, the change is a price increase, regardless of how Microsoft presents it.
Second: On 1 July 2026, Microsoft applied an across-the-board price increase. For large organisations, the price of M365 E3 rose by approximately 8 to 8.5% and E5 by about 5 to 5.5%, depending on where you are in the world.
Those two changes add 20 to 25% to the Microsoft budgets, depending on your size and your previous level. Add the price increases from 2024 and 2025, and some companies face an average increase of 35 to 50% at their next renewal even though their user base may not have grown. We see these figures in proposals, quotes and price lists.
Add headcount growth, new requirements (for example, IT security components), step-ups from E3 to E5 or E5 to E7, AI, and Azure, and the budget grows exponentially.
Your total Microsoft spend
Across the whole Microsoft stack, most companies are looking at least at doubling their spend. In extreme cases, we worked and work with clients paying Microsoft five to ten times what they paid three to five years ago.
Price increases account for only a small part of that growth. The main cause is the move to cloud and AI, which has been building for many years.
Another recent complication is that Microsoft agreements are multiplying. If previously, organisations mostly had one Enterprise Agreement, nowadays there is a mix of EA, CSP, supplemented by Unified Support. Plus there's Azure MACC. As a result, your spend sits in separate contracts with separate renewal dates. Your EA or CSP agreement renews on one date and your Azure consumption commitment on another. If you have a Microsoft Unified Support agreement, it is linked to your overall spend proportionally. When you add everything together, you may find you are paying Microsoft several times what you used to.
There are many other reasons for Microsoft budget growth in organisations. Copilot Cowork usage, billed in credits, is starting to affect the spend visibly. Some spend categories may have moved to Microsoft from other vendors as Microsoft becomes a more central software provider.
Analyse your own spend over the last three to five years and plot the trend. If you negotiate directly with Microsoft, the trend forms part of your negotiation case. If you buy through a reseller, you still need it, because it shows whoever you are speaking to the full picture of where you are with Microsoft and where you are heading.
Your Microsoft account team may no longer exist
Microsoft stopped direct account coverage for small companies many years ago. And it continues to cut it for mid-sized companies, moving them to the channel (Microsoft's CSP partners). Many of you will find you no longer have a Microsoft team to negotiate with.
Channel partners now earn from your growth
In the past, Microsoft mostly paid CSP partners flat incentives, whether or not a company's spend grew. Partner compensation is now based on growth, so the partner has to show that your spend is increasing.
Partners are entitled to make money, and the incentive is legitimate. It still explains the recommendations you receive: E3 to E5, E5 to E7, Copilot, Copilot Cowork, and the Defender and Purview suites. If you know what motivates the partner, you negotiate from a position of knowledge.
Copilot Cowork and credit billing
Copilot Cowork is usage-based and billed in Copilot credits. You now pay for metered consumption on top of any fixed per-user Copilot cost. The metric is new and very costly.
If you ask for a higher discount, Microsoft will ask you to pre-commit to Copilot credits and consume against that commitment, as with an Azure commitment. You have to estimate your usage with very little market experience to guide you. How much should you commit? What happens if you under-consume? Will unused credits move to the next year? Can you pre-pay? You have seen these questions before with other products, and they now come back in a new format.
Copilot Cowork usage is not included in E7, and Copilot Cowork is not part of the E5 bundle. Check what each bundle contains and do not assume anything is included.
Lack of preparation time is an old problem. When licensing isn't your area of expertise, details like these are easy to miss amid all the new buzzwords, and they cost you more later.
Microsoft 365 E7 and the push from E5
Microsoft 365 E7 launched around May 2026, roughly 10 years after E5. The price is $99 per user per month, close to $1,200 per user per year. E7 includes Agent 365, Microsoft 365 Copilot and Entra Suite.
Microsoft 365 suites used to be well-defined bundles at a set price. E7 is open-ended. Microsoft calls it a frontier package, designed for people driving AI development inside their companies, and one of its core components, Agent 365, is a toolkit for creating agents. Once security and other additions are included, E7 users will cost thousands, and Copilot Cowork credits come on top.
Microsoft is pushing companies from E5 to E7 as aggressively as it pushed them from E3 to E5. Microsoft's account teams, sales reps and channel partners have their incentives and bonuses tied to your spend growth on Microsoft 365.
But beware and be strategic. Microsoft is discounting E7 heavily today, so the upgrade looks affordable in your first-year budget. The catch is in how Microsoft negotiates the discounts – decreasing year on year. The discount is highest in year one and declines in years two and three. When a three-year agreement ends, your overall spend has grown, and your discounts have declined. You then face a further 50 to 60% increase, and a weaker negotiating position.
Price is only part of the decision. Review your requirements and the components you use. Look at competing products in your company, because AI does not only come from Microsoft, and Microsoft has strong competitors. Benchmark your options and offers. Bring your Anthropic or OpenAI contract to the negotiation, and use AWS against Azure, even if you are a mid-sized company.
Do not commit to anything you are unsure about. Pre-commitments turn into shelfware, especially under user-based licensing. User-based licensing is still in use and will sit alongside token-based billing and Azure consumption for many years. It may gradually die off as everything moves to consumption-based billing, but that has not happened yet.
Some companies face an average increase of 35 to 50% at their next renewal even though their user base may not have grown. When a three-year agreement with declining E7 discounts ends, you face a further 50 to 60% increase.
Do not take the full E7 package for everyone. Buy it for the small group who needs it. Review your F1, F3, E1, E3, E5, and E7 requirements, and build several user profiles. Two, three or four profiles are manageable with the tools available, depending on your size and your ability to manage the estate.
Check what external users, suppliers and vendors need for security and day-to-day use. Your team can gather usage data with existing tools and scripts. Run AI over that data to find trends and assumptions you can bring to the negotiation.
Microsoft still needs you
Microsoft is growing. Its share price has risen by around 25% in the last three months, and revenue for fiscal year 2026 came in at over $330 billion.
A company with 10,000 or 20,000 users, spending $5 million, $10 million or $20 million a year, may assume it is too small to matter. Microsoft still cares about that company. When Microsoft loses one company in one area, the losses start to accumulate, and Microsoft has always been wary of shifts in the market, especially with AI.
Anthropic and OpenAI add-ons for Office can already auto-populate Excel and do far more for the standard user. In six to 12 months, a new product may emerge that could replace Office inside companies with little disruption. If the Microsoft 365 lock-in weakens, Exchange, Outlook and everything around them become replaceable quickly. Switching away from Microsoft used to look impossible. It has not happened yet, but the threat is real.
In our view, Wall Street overreacted earlier this year. Azure grew by 39 to 40%, yet the market judged the growth too slow and worried that Microsoft's investment in AI infrastructure would not pay back. The share price has not returned to where it was before that drop. It now hovers around $500 and looks unstable. Oracle lost over 50% of its market value. Microsoft's resilience and ability to deliver should never be underestimated, but a 50% drop could happen to Microsoft too.
Negotiation depends heavily on mindset. You are not entirely in Microsoft's pocket, and there is uncertainty in the market. Bring that confidence to the negotiation.
Across the whole Microsoft stack, most companies are looking at least at doubling their spend. Bring your Anthropic or OpenAI contract to the negotiation, and use AWS against Azure, even if you are a mid-sized company.
Go back to the fundamentals, whether your deal is worth $1 million or several billion dollars. Understand the market threats to Microsoft and who its competitors are. Know how your company uses Microsoft's products and services today, and what your future usage will look like.
We believe now is the best time ever to negotiate with Microsoft. AI is the biggest threat Microsoft has faced, and moving away from Microsoft is much easier than it was. Microsoft's growth no longer comes mainly from E3 and E5. Renewals of the Microsoft 365 suite are still critical to Microsoft's underlying health, because the suite holds the core position in your company and Microsoft builds everything else on it. The market is ruthless. With your positioning right, you can negotiate and drive prices down.
Look at CSP promotions
Look for promotions. There are more of them in CSP and the Microsoft Customer Agreement for Enterprise (MCA-E) than in the EA, and they deliver real value and cost savings. Some current promotions run until the end of September, with more to follow. Details are available online, or you can ask your reseller.
If you are negotiating an EA for 5,000 or even 10,000 users, CSP may be the better option because of these promotions.
Direct account teams often cannot offer the same level of discounts as the channel. Since 1 November 2025, the Enterprise Agreement has one flat price level in place of levels A, B, C and D.
Use the friction inside Microsoft
Since January 2026, we have seen more internal conflict within Microsoft than before. Microsoft's last round of layoffs included a large number of experienced account managers. Relationships and knowledge between Microsoft and the companies those managers looked after left with them.
Account teams now cover only the top tier, and the channel is very strong. The Microsoft teams with direct relationships and the teams responsible for the channel work with different tools, which are sometimes not connected. Direct account teams often cannot offer the same level of discounts as the channel. They have their hands tied, because Microsoft wants most companies to buy through the channel.
Put your EA out to bid against several CSP partners, and be aggressive about it. A channel partner may offer you a better deal than your Microsoft account team. Go to two or three partners. Not every channel partner can sell an Enterprise Agreement, and some resellers can only sell EAs. You do not have to stay with the large reseller you have used for the last five or 10 years. Smaller partners are often very aggressive, have strong growth incentives and want your business.
Treat Microsoft as one vendor
Dynamics 365 also drives cost increases, and its contract usually renews on a different date from your EA or CSP agreement, Unified Support and Azure consumption commitment. Microsoft has built these separate contracts inside companies for many years.
Do not accept that separation as fixed. All of the spend goes to the same software vendor. Combine your contracts, look at the total and use your entire Microsoft spend to negotiate.
Coming off a three- or five-year agreement
Take time to refresh your knowledge of what has changed. Break each price increase down. Some increases may be legitimate because the package includes more. Others are regional pricing changes driven by exchange rates. Some come from bundle upgrades (E3 to E5 or E5 to E7), and some from Copilot and Copilot Cowork. Work out where each increase comes from and what the trend looks like.
Look at new vendors and new contract vehicles. CSP has replaced the EA as the standard. Do not be afraid to introduce a new contract type, even if you have 50,000 or 100,000 users.
The mood is swinging back
At a recent conference in Oak Ridge, TN, a roomful of ITAM and procurement professionals were told that they seemed tired. They replied that they were not tired. They were lost. But they are not giving up, learning and readjusting to the new reality.
The complexity of what Microsoft licensing and services have become can feel overwhelming. But the principles of negotiation have stayed the same, and the new technology brings more deals and more ways to structure them. For negotiators, the last five years have not offered a more dynamic time to work with Microsoft.
Follow SAMexpert to keep up with current trends and understand your next steps. Read our articles and send us your questions. We conduct these negotiations on behalf of clients.
SAMexpert is an independent Microsoft licensing advisory firm. We do not sell Microsoft licences or cloud services.