Get the best deal from your 2024 Microsoft Enterprise Agreement

If you've ever been in the hot seat of negotiating with Microsoft, particularly when your organisation is deeply integrated with Microsoft 365 applications, you know the challenge of facing seemingly non-negotiable terms. 

The depth of Microsoft's integration in your systems – from key security features to essential business tools – often positions you as a captive customer, seemingly bound to renew under Microsoft's terms. But this doesn't have to be your narrative.

By grasping Microsoft's goals and your company's needs, you can effectively manage the challenges of being a Microsoft 365 customer. The goal is to transform what appears to be a lock-in situation into an opportunity for negotiation, leading to terms that are not only agreeable but also beneficial for your organisation's growth and success.

Microsoft's Declining Discount Policy and Its Implications

Microsoft's Discount Policy Changes

In recent years, Microsoft has shifted towards a declining discount policy, influenced by several key factors, including the market dominance of M365E5, revenue pressures on Sales Managers, and fluctuating foreign exchange rates. 

This policy shift has led to a noticeable reduction in the discount levels offered on Microsoft's products and services, affecting how customers approach negotiations and plan their Microsoft-related expenditures.

Impact of M365E5's Market Dominance

The premium licensing tier of M365E5 has bolstered Microsoft's negotiating position. As more customers adopt this higher-tier offering, Microsoft has been gradually reducing discounts, especially on lower-tier licenses like E3. 

This approach is strategically designed to encourage customers to upgrade to the more expensive E5 licenses, which come with advanced features and capabilities. The dominance of M365E5 in the market plays a significant role in Microsoft's overall pricing and discount strategy.

Revenue Pressures on Sales Managers

Another contributing factor to the declining discount trend is the increased revenue pressure on Microsoft's Sales Managers. With corporate goals focusing on maximising revenue and profitability, these managers face heightened expectations to meet ambitious sales targets. By lowering the discount levels, Microsoft aims to enhance its revenue per sale, aligning with its broader financial objectives.

Influence of Foreign Exchange Rates

The fluctuating nature of foreign exchange rates adds a layer of complexity to Microsoft's pricing strategy. Exchange rate variations can affect the company's costs and overall profitability, prompting adjustments in pricing and discount rates. Consequently, this leads to variable discount levels across different regions and markets, reflecting Microsoft's response to global economic conditions.

Optimising Your Microsoft 365 Strategy

Gathering and Analysing Utilisation Data

Begin your Microsoft 365 strategy by conducting a detailed analysis of your current usage. It involves a granular review of how each Microsoft 365 application is utilised within your organisation. Assess the actual engagement with each feature and compare it against the expected use and promises made during the sales pitch. Especially focus on any underutilisation to pinpoint areas where you're not getting the full value for the cost.

Evaluating Microsoft 365 E3 to E5 Upgrade

As part of your strategy, consider the implications of upgrading from Microsoft 365 E3 to E5. This decision should be driven by a clear understanding of the additional features E5 offers, particularly in areas like advanced security and compliance, and whether these align with your specific organisational needs.

Downgrading from E5 to E3 as a Negotiation Tactic

Alternatively, evaluate downgrading from Microsoft 365 E5 back to E3. This strategy puts Microsoft on the defensive and forces them to justify the higher value and cost of E5. By actively considering a downgrade, you demonstrate a commitment to cost-effectiveness and a willingness to align your subscription more closely with your actual usage and needs.

Exploring Alternative Microsoft Product Offerings

Expand your strategy to include alternative Microsoft product offerings. That includes combinations like Office E1 plus Enterprise Mobility + Security (EMS) for a mix of essential Office applications with enhanced security features at a lower cost. Also, consider Frontline Worker options like F1 and F3 plans, which are tailored for frontline staff and offer core functionalities at a more budget-friendly price point.

Challenging Stakeholders and Reviewing Requirements

Engage with stakeholders in your organisation to understand their actual needs versus perceived requirements. Scrutinise past decisions that led to the current state of your Microsoft 365 deployment and review all security requirements. Identify any overlap with competitive products and consider cost-cutting measures on similar or redundant products.

Leveraging Utilisation Data in Negotiations

Armed with this comprehensive utilisation data and a clear understanding of the various Microsoft 365 plans and alternative options, you're well-equipped to enter negotiations. Use this information to challenge Microsoft's proposals, especially if they involve adding new products or moving to more expensive plans without a clear justification based on your usage patterns and needs.

Incorporating Strategic New Products into Your Microsoft Portfolio

Leveraging Microsoft's Strategic Product Ambitions

Microsoft's focus for 2024 centres on building and selling top-tier platforms and products aligned with the digital transformation needs of various organisations. 

The company has set ambitious product adoption targets, with its share price partially influenced by its success in selling more products and solutions to both existing and new customers. This push forms a part of Microsoft's broader strategy, particularly in the cloud sector, where they aim to increase their annual run rate through a 'land and expand' approach.

Strategic New Products for Consideration

When considering adding new products to your portfolio, it's important to evaluate those that align with Microsoft's strategic goals. For 2024, key focus areas include Copilot, Viva Suite, Sentinel, and Microsoft Dynamics. These products represent Microsoft's commitment to cloud technology and digital workplace solutions, making them critical to the company's future growth.

Impact of Considering Strategic Products

If your organisation is evaluating or planning to enhance the use of these strategic products, this presents a compelling story that can influence negotiations with Microsoft. Your interest in adopting these products, particularly if there are competitive alternatives available, provides leverage in discussions. It's crucial, however, to ensure that these products align with your organisational needs and are not just acquired for the sake of a potential deal.

Negotiating a Tiered Approach for New Product Adoption

Strategic Tiered Adoption for New Microsoft Products

When integrating new products like Copilot, Viva Suite, Sentinel, and Microsoft Dynamics into your portfolio, a tiered approach to adoption can be highly beneficial. This strategy involves gradually rolling out these products across your organisation rather than committing to a full-scale implementation upfront. Such a phased approach allows you to evaluate the product's impact and effectiveness within your organisation, ensuring a more calculated and risk-mitigated integration.

Leveraging Tiered Adoption in Negotiations

The tiered adoption strategy can be a strong negotiation point with Microsoft. You can negotiate discounts based on the growth and eventual full adoption of these products. The idea is to secure initial lower pricing that scales with increased usage and deployment across your organisation. This approach aligns the investment with actual usage, providing financial flexibility and reducing the risk of overspending on unproven or underutilised technologies.

Negotiating Discounts Based on Growth and Quantity for 365

Incorporate into your negotiations the concept of discounts tied to growth metrics and additional quantities. For example, you can negotiate for discounts on your Microsoft 365 suite that become more substantial as your usage of the new strategic products increases. This creates a win-win situation, where Microsoft benefits from the gradual increase in product adoption while your organisation enjoys scaled cost benefits.

The Importance of Time: A Six-Month Renewal Plan for Microsoft Negotiations

Overview of the Six-Month Renewal Plan

Time management is a crucial element in navigating Microsoft negotiations. A well-structured six-month renewal plan ensures you address all critical aspects of the negotiation process systematically and effectively. This plan should encompass several key steps:

1. Internal Budget Alignment: Begin your plan by aligning your organisation's budget with the expected costs of the Microsoft agreement. This involves reviewing your current financial situation and forecasting the potential impact of the new agreement on your budget. Early budget alignment helps in setting realistic expectations and financial limits for the negotiation.

2. Stakeholder Objectives Alignment: It's essential to align the objectives of all key stakeholders within your organisation. This step ensures that everyone's goals and expectations regarding Microsoft products and services are understood and considered. It helps in forming a unified front during negotiations.

3. Internal Requirements Assessment: Conduct a thorough assessment of your organisation's requirements for Microsoft products and services. This involves understanding the needs of different departments and how Microsoft's offerings can meet these needs.

4. Internal Utilisation Analysis and Plan: Analyse how your organisation currently utilises Microsoft products. Identify areas of underutilisation or overutilisation and plan how to address these in the new agreement. This analysis is crucial for arguing for or against certain aspects of the agreement based on actual usage.

5. Negotiation Plan: Develop a comprehensive negotiation plan. This should include your negotiation goals, strategies, key talking points, and the concessions you are willing to seek or offer. A well-prepared negotiation plan increases the chances of a successful outcome.

6. Internal and External Communication Plan: Establish a communication plan detailing how negotiation updates will be communicated internally within your organisation and externally with Microsoft. Effective communication is key to ensuring all parties are on the same page throughout the negotiation process.

7. Closing and Rollout Plan: Finally, have a plan in place for closing the negotiation and rolling out the new agreement. This should include steps for finalising the agreement, communicating the outcome to stakeholders, and implementing the new terms and conditions within your organisation.

Mastering Microsoft 365 Negotiations and Strategy

To prepare effectively for strategic negotiations with Microsoft, you need to take several important steps.

Start by ensuring that key stakeholders in your company are well-informed about Microsoft's strategic priorities, including M365 E5, Azure, Dynamics 365, Power Platform, Viva Suite, and Unified Support. This knowledge will align their expectations with your negotiation goals.

Next, it's vital to conduct a detailed analysis of Microsoft's proposed strategic products and compare them with what competitors offer. This analysis will help you decide which products best suit your company's needs.

You also need to challenge Microsoft's sales pitch. Highlight any cost increases and the possibility of future undiscounted pricing. This approach underscores the potential need to consider alternatives if Microsoft's offerings become too costly.

Building early relationships with both the Microsoft account team and your internal stakeholders is another key step. These relationships are crucial for discussing the best renewal options and setting clear expectations for the negotiation process.

Finally, keep a close eye on how Microsoft's pricing strategies affect your costs. Be ready to adjust your Microsoft product usage to ensure you're getting the best value. This approach not only optimises your current spending but also strengthens your position in future negotiations.

By following these steps, those in charge of sourcing, procurement, and vendor management can negotiate with Microsoft more effectively, ensuring they get the most value out of their agreements.

Frequently asked questions

What factors have led to Microsoft's declining discount policy in recent years?

Microsoft's declining discount policy is due to the market dominance of M365E5, increased revenue pressure on Sales Managers, and fluctuating foreign exchange rates, leading to reduced discounts, especially on lower-tier licenses.

How can a tiered approach to adopting new Microsoft products benefit an organisation in negotiations?

A tiered approach involving phased adoption allows for the assessment of product impact, provides financial flexibility, and can be used as leverage in negotiations for scaled pricing and discounts based on increased usage.

What are the key strategic products Microsoft is focusing on for 2024?

For 2024, Microsoft's key strategic products include Copilot, Viva Suite, Sentinel, and Microsoft Dynamics, which are central to its cloud technology and digital workplace solutions.

Why is it important to conduct an internal utilisation analysis of Microsoft products?

Conducting an internal utilisation analysis helps identify underutilised or redundant features, enabling organisations to negotiate better terms, cut costs, and align their subscription with actual usage needs.

What should be the focus of a six-month renewal plan for Microsoft negotiations? 

A six-month renewal plan should focus on internal budget alignment, stakeholder objectives alignment, internal requirements assessment, utilisation analysis, developing a negotiation plan, and establishing internal and external communication plans, culminating in a closing and rollout plan.

What role does analysing current and past utilisation of Microsoft 365 products play in negotiations? 

Analysing current and past utilisation of the Microsoft 365 products helps organisations understand their actual use versus expectations, allowing them to negotiate based on the value received versus fees paid and identify potential areas for cost reduction.

What is the importance of considering downgrading from Microsoft 365 E5 to E3 in negotiations? 

Considering downgrading from E5 to E3 puts Microsoft on the defensive, compelling them to justify the higher value of E5, and can be a tactic to achieve better terms or concessions in negotiations.

Why is stakeholder objectives alignment crucial in Microsoft negotiations?

Aligning stakeholder objectives ensures that the goals and expectations regarding Microsoft products are unified across the organisation, leading to a cohesive strategy and a stronger negotiating position.

Overview of Microsoft's key product line up for 2024