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Why Microsoft EA is getting expensive and what you can do about It

For over two decades, Microsoft Enterprise Agreements (EA) have provided large and small businesses with a flexible and cost-effective route to incorporate the most recent Microsoft technology solutions.

For larger enterprises, EAs have been the sole means to tap into Microsoft's vast array of products and services, all at a discounted price within a well-organised procurement structure.

So, why have things shifted, and why do you see a 15%-20% surge in your Enterprise Agreement costs upon renewal?

  1. We're moving towards a subscription model for licensing, which falls under operational expenditure or OPEX. This shift is primarily due to CSP (Cloud Solution Program).

  2. Desktop licensing has gone from being something you buy once to something you pay for regularly. Previously, you could hold off upgrading your Office and Windows OS for 4-5 years. Now, that's not an option.

  3. New options exist for on-premise servers, like the SQL Server Pay-As-You-Go model. It bills you hourly if you connect SQL to Azure with an Azure Arc agent.

  4. In November 2022, SQL Server costs went up by 10%. That means a two-core pack of SQL Server Enterprise Edition costs about $15,123 (a jump from $13,748), and one core of Standard Edition is $3,944 (up from $3,586). That will also push up the Software Assurance (SA) cost, which is always 25% of the license cost.

  5. In March 2022, the Microsoft 365 product family cost increased by about 10%, so Microsoft 365 E3 moved from $35 to $38.

  6. Microsoft 365 now receives live security fixes all the time.

  7. Microsoft's sales reps are getting most of their money from selling Azure, not Enterprise Agreements.

  8. Sales teams focus on larger companies, and the partner ecosystem is homing in on smaller enterprises with 2,500-15,000 users.

  9. There's not a lot of competition for Office apps. Google's workspace hasn't developed into an enterprise alternative.

  10. There's also no competition for Windows OS. Windows 10/11 is pretty much the only option out there.

Even though it might seem like Microsoft holds all the cards, returning to basics can help you regain the upper hand. Following a tried-and-tested approach, you could reduce costs and increase discounts by 20%-30% at your next renewal.

Here's how you can do it:

  • Start from scratch: Understand what you're using, what you have, what you're missing, and where you stand with your licenses.

  • Plan: Work out what you need, what you'll need in the future, and how to use M365 based on individual needs. Come up with a bill of materials (BOM).

  • Optimise: Get rid of unnecessary software, reconfigure the hardware, tidy up your assets, swap licenses, and develop a final, optimised proposal.

  • Prepare to negotiate: Work out what you want, why you want it, your best alternative, your priorities, and your action plan. Get your team ready.

  • Negotiate: Set your requirements, align your multi-cycle negotiation, analyse proposals and give feedback. Get a team of experts to help you. Decide on a closing strategy.

  • Close the deal and make it happen: Review the final proposal, present an executive summary internally, check the contract, and devise a plan to communicate contract terms and benefits to your team.

When it's time for your next Microsoft contract renewal, start with the basics and don't underestimate the power of a good process.