Negotiating a Better Microsoft Deal in 2025

Alexander: Good morning, America! Good afternoon, Europe, and good night, Australia. Wherever you are, I wish you a great time of day. We are SAMexpert on our channel, SAMexpert TV, and we're back to discuss a topic we haven't covered in nearly a year: Enterprise Agreement Renewals.

It may seem that the focus has shifted from the Enterprise Agreement to other areas, mainly due to Microsoft's influence. However, this perception is likely not accurate.

Who we are

I'd like to introduce Daryl Ullman, our Negotiation Lead, who will discuss negotiations today. It is essentially his event, and I'll be asking him some questions throughout our conversation.

My name is Alexander Golev, and I am the Consulting and Services Lead at SAMexpert, an independent consultancy specialising in Microsoft cost reduction. Simply put, we focus on helping clients pay less and get more from Microsoft. Importantly, we do not sell Microsoft licenses, so our advice is completely independent.

Have Enterprise Agreement renewals lost CFOs' attention?

Daryl, it may appear that Enterprise Agreement renewals have lost the attention of CFOs and shifted to lower-level management. However, is this actually the case? Based on current trends in Q4/2024, it doesn't seem so. It appears that Enterprise Agreement renewals remain a significant issue for organisations, particularly for enterprises.

Daryl: I definitely don't think so. What I believe happened over the last 12 to 24 months was very much Microsoft's intention. They have moved the focus to Azure and MACC contracts, which, in terms of monetary value, are actually higher than Enterprise Agreements. They redirected negotiations for organisations from EAs to MACC agreements, while EAs still represent one of the most significant IT expenses.

CIOs didn't lose focus; they simply shifted their attention slightly. They believed that lower management could handle the renewals of Enterprise Agreements, allowing them to concentrate on other pressing areas. However, I think this was a significant mistake. As a result, individuals who lacked the training, knowledge, and experience necessary to manage complex enterprise agreements ended up dealing with them—or are still dealing with them.

As a result, organisational costs are increasing. What we see now is CFOs realising the necessity to re-engage and refocus.

Why do Enterprise Agreement costs always rise?

Alexander: I appreciate that you mentioned the rising costs. I recall a key question I faced during my first Enterprise Agreement negotiation over ten years ago when I transitioned from being a licensing consultant to a negotiation consultant. The client asked an obvious yet critical question: "Why did we have a budget of $9 million last year, but Microsoft's new proposal is $5 million more? Why such a significant increase?"

Why must organisations deal with these rising costs? How does this specifically apply to 2025, and how does it differ from 2024?

Daryl: Price lists have increased significantly over the last three to five years. Organisations typically negotiate their contracts every three to five years, and most contracts tend to last for three years, although quite a few also extend to five years.

If you haven't negotiated in three or five years, you might find that you've shifted your focus and priorities. While it's inaccurate to say you've forgotten about your Enterprise Agreement renewal, it may not seem urgent once budgeted.

When the renewal time comes around, you might be unaware of the current landscape surrounding Enterprise Agreements or the Microsoft contractual environment because it's not your primary concern.

Often, someone will prepare a budget based on the expiring Enterprise Agreement without any experience in budgeting for Microsoft or without staying updated on the Microsoft financial environment. As a result, they may be under budget, which I've seen happen numerous times.

The Chief Financial Officer (CFO) receives a budget, but when the renewal quote arrives, everyone is in absolute shock. The expected cost increase is not the usual five, eight, or ten per cent; it averages around thirty per cent or even higher. This sudden increase creates a significant shock, highlighting how much has changed. Factors such as new profiles, cost increases, exchange rate fluctuations, Microsoft decreasing discounts, and the introduction of new products—like CoPilot—contribute to this situation. Many organisations experimented with CoPilot, drawn in by its high promises, but when the bill arrived, the reaction was complete astonishment.

We began to see this shock effect in 2024, and I believe 2025 will be even more painful, with a renewed focus on Enterprise Agreements (EAs). The challenge is growing beyond just EAs, as overall Microsoft spending is increasing significantly. This trend includes Unified Support, which is linked back to EA spending and Azure expenditure. Azure costs are growing exponentially, and to be blunt, many organisations struggle with cost optimisation.

One of my colleagues pointed out that while a Chief Information Officer (CIO) requires approval for purchase orders exceeding $10,000, an Azure architect can engage aspects of Azure and commit to half a million dollars per year without needing approvals or accountability. This disparity is concerning. I need to highlight the magnitude of what Microsoft has accomplished in the market from a business perspective. Unfortunately, many organisations are years behind in recognising and addressing these changes.

FinOps is not Cost Optimisation

Alexander: I've been thinking about all these "all you can eat" commitments. Procurement typically serves as the gatekeeper for the CFO, and effective procurement assesses the value of purchases. All expenses need to be justified.

For example, we commit to ten million dollars for cloud spending. But what is the return on that investment? What is the value? With that amount of money, you can invest in high-value assets, like jewels, or lower-value ones, like limestone.

That's the challenge. Without FinOps in place, procurement often lacks control.

Daryl: It's important to understand that FinOps is not the same as cost optimisation. This distinction is crucial because it ultimately relates to your Enterprise Agreement renewal, your strategy, and how you prepare for it. I believe one of the biggest misconceptions is that if you have established a FinOps organisation, you also have a cost optimisation process in place.

You don't. Even companies with strong FinOps practices often lack incentives for cost optimisation. One significant issue tied to MACC agreements is that many organisations overcommit. When you overcommit, you have no incentive to optimise costs. Instead, you tend just to spend more and more, which is a significant problem. There are numerous related issues; I could provide a long list.

As a result, billions of dollars are being spent, which flow in Microsoft's direction without any corresponding value being returned. My intention is not to criticise Microsoft; I greatly appreciate them. The real issue lies with the end customers, who have lost touch with and control over how to manage their spending. That is why I believe that CFOs will return to addressing Enterprise Agreements this year. While it may not be significant compared to a MACC agreement, it still represents a substantial amount of money. Unfortunately, the budget simply isn't there.

Leveraging Azure

Alexander: Staying on the subject of Azure and MACCs, but in the context of negotiating the EA, I think the question that I would be asking, okay, Azure commitments and MACCs and Azure consumption without MACCs, how do they affect the overall strategy of Azure negotiations in a bad way?

What actions can we take? Let's imagine that we are Chief Financial Officers (CFOs). How can we turn the situation around and use it to our advantage? Specifically, how can we leverage the increased focus on Azure to negotiate a better deal with Microsoft?

Daryl: It's a good question, but the answer is quite complex. Every organisation is at a different stage in its cloud journey, particularly with Azure. It depends on when you started this journey, where your Microsoft Azure Commitment (MACC) stands, your position within that commitment, the associated terms and conditions, and whether it co-terminates with your Enterprise Agreement (EA) or has a completely separate termination date. Additionally, you should consider whether you can leverage it in relation to your EA.

I recommend that organisations first examine their overall spending with Microsoft when preparing for the EA. It's important to recognise that the EA is not the only element to consider during discussions. While you may not need to negotiate the MACC if it's not up for renewal, having a comprehensive understanding of your total expenditure with Microsoft is crucial. Let Microsoft see the overall value you bring, which can lead to creating various strategies that impact your EA. These strategies should focus on future Azure consumption, upcoming project migrations, and the consideration of third-party alternatives—both for Azure and security within your EA.

Organisations that delay their preparation for contract renewals would often face challenges. Even after 20 years of negotiating enterprise agreements (EAs), many tend to move too slowly and begin preparations too late. Additionally, they often fail to develop alternatives.

A key negotiation concept is BATNA, which stands for "Best Alternative to a Negotiated Agreement." Unfortunately, many people may not be familiar with this term. It is fundamental to negotiation; entering into any negotiation without a solid alternative puts you at a disadvantage. When negotiating EAs, particularly with a company like Microsoft, viable alternatives do exist. You risk losing ground if you do not present alternatives during the negotiation process.

While you may secure a minor discount, without a substantial alternative, you have generally lost the negotiation. I've encountered this mindset with several clients. For example, just earlier, I spoke with executives from a major healthcare provider in North America, who are one level below the CIO, and their average spending on the EA is around $20 million per year, with significantly higher expenditures on Azure.

They believe there's little they can do when negotiating with Microsoft because Microsoft is so large. This defeatist attitude leads them to think the outcomes are predetermined. With this mindset, it's no surprise they cannot secure the best possible deal, leaving money on the table.

In contrast, smaller organisations I have worked with often possess a more proactive negotiation attitude, allowing them to secure far better deals than larger companies.

The result really depends on the individual persona, the business culture, and personal values. It's not solely about licensing or familiarity with Microsoft. Ultimately, it comes down to the fundamental principles of negotiating a large contract.

Be firm and assertive

Alexander: You mentioned smaller organisations, and it reminded me of a client from the United States who came to us saying they spend only 1 million dollars a year on Microsoft licenses.

As many know, it's usually quite challenging to negotiate with Microsoft for companies that spend less than 5 million. However, this client had a very assertive approach and was willing to stand their ground. As a result, they secured a very favourable deal.

Daryl: That's right, they got a great deal. It really comes down to attitude.

It's about positioning yourself within that specific region with the Microsoft team. Ultimately, success relies heavily on understanding the fundamentals, which many people seem to have forgotten. Instead, it feels like some are just desperate for a good deal.

You can still achieve an excellent deal if you maintain the proper fundamentals and a positive attitude, even with declining discounts and rising costs. It's all about how you approach the situation and your level of preparation.

What is considered a good discount?

Alexander: Daryl, slightly off-script: I just received a message from my friend George on WhatsApp. He's driving and listening to us on YouTube; he's not watching. He asked, "You mentioned diminishing discounts. Could you give us a rough estimate of what an organisation with 3,000 to 5,000 seats used to get compared to what they can expect in 2025 as a starting point for negotiations with Microsoft? I'm not asking for the final discount, just the initial conversation starting points."

Daryl: I'm cautious about discounts.

Alexander: It's a provocative question, I know.

Daryl: It's not that I don't want to share my thoughts on this, but discounts depend on many different factors, and I don't want to mislead anyone. What I can say is that discounts have dropped by over 50%. For example, if an organisation with 3,000 users received a great deal three years ago with a 12 to 20 per cent discount on level B of the price list, they should expect to receive half of that discount now—if they are lucky. By "lucky," I mean if they ask for it.

This reduction largely affects organisations that jumped onto the E5 plan—rightly or wrongly. Those who genuinely utilise the E5 security components have found themselves in a tough spot. Microsoft is strategically leveraging its position in the market with Office and Microsoft 365, which includes everything under that umbrella. As a result, we are seeing a reduction in on-premise editions, rollouts, and features; the focus is clearly shifting to the cloud.

Why is this happening? Microsoft has effectively created a situation where organisations feel almost captive to their offerings. The alternatives in the market are diminishing, and when options are limited, suppliers—rightfully, from their perspective—have little incentive to offer compelling discounts unless there's a strong business case or a significant alternative presented.

Leveraging Microsoft's push to AI and Copilot

Alexander: Let's discuss the elephant in the room, which you've mentioned several times. We can't avoid talking about AI. There's a significant commitment from Microsoft to invest an additional $80 billion in AI in 2025 if I'm not mistaken. This funding has to come from somewhere.

The reception of Copilot has been lukewarm, if not outright cold. The enthusiasm we saw in 2024 seems to have faded significantly. I've heard this from various sources during different meetings. Success stories are rare, and when they emerge, they primarily come from implementation companies rather than the end clients.

I may not be entirely accurate, but this is the sentiment I'm picking up from my channels. With Microsoft continuing to position AI and Copilot as strategic products and shifting towards Pay-As-You-Go options for Copilot, the end client focus in 2024 appears to have turned to finding ways to secure discounts on Copilot, which has proven to be challenging. The pressing question for CFOs and CIOs is how to leverage Microsoft's push for AI while ensuring they don't waste money.

Given the numerous complexities involved, this isn't a straightforward question. I'd appreciate your thoughts and any insights you can provide.

Daryl: There was a significant push for Copilot starting in mid-2023, which continued into 2024. For Microsoft, Copilot represents their AI offerings, at least for enterprise organisations.

Microsoft was so confident in the product's value that discounts were minimal compared to the overall Enterprise Agreement (EA), even for huge organisations with hundreds of thousands of users. Copilot was marketed to C-level executives using basic features, such as running it in Teams and providing meeting summaries, to cut corners and save time.

I don't know if everyone on the call remembers when Microsoft introduced tagging in Office about 20 years ago. Suddenly, you could see tags over words, and by clicking on them, you could access a wealth of information from the web or directly in the document. People were amazed, and Microsoft promoted this feature as the best return on investment (ROI) for CIOs, C-level executives, and their teams, claiming it would save time on day-to-day tasks.

In my opinion, Copilot is somewhat similar in its promise. It aims to save time through features like meeting summaries and action items. Many organisations adopted it but generally purchased a limited number of licenses to experiment with the tool. Some overcommitted, while others took a more cautious approach. There was significant hype and many promises surrounding Copilot.

However, the anticipated benefits haven't materialised. I'm not a tech expert; I'm a commercial expert. I interact with customers multiple times a day and consistently hear similar feedback from clients around the globe: Copilot has not delivered the promises that Microsoft made. That's the underlying reality.

Microsoft is facing more challenges in selling Copilot now than it did a year or a year and a half ago, as its adoption has not grown as expected. This situation raises some important considerations for your Enterprise Agreement (EA) renewal in 2025.

Be cautious. Microsoft had been encouraging organisations to commit to higher volumes of Copilot by offering discounts—both on Copilot licenses and your EA. Although these incentives were not explicitly stated, they have been part of negotiations. As we approach 2025, you should be wary of including Copilot in your discussions unless you have a compelling business case.

If you don't see the value in Copilot and don't have a solid project ready to launch immediately after signing your EA, it's best not to introduce it in the negotiations. Microsoft can leverage your interest in Copilot to push for additional commitments, and if you decide to remove Copilot from the table during negotiations, you risk losing all negotiating leverage. Additionally, if you purchase Copilot without a clear plan for its usage, you may end up with unnecessary licenses that you've already paid for, which could lead to complications in future negotiations.

Approach the topic of Copilot—and AI in general—with caution. While AI is developing and evolving, we are still far from realising the promises made for enterprise organisations.

Leveraging "scorecard" products

Alexander: Let's continue discussing AI as leverage. I want to clarify my question. There's traditional advice you can often get from someone with deep knowledge about Microsoft: you can gain negotiation leverage by committing to certain so-called scorecard products—Microsoft's internal term for flagship products that are the most significant for sales metrics. It's not sacred knowledge that Microsoft sales representatives do not receive equal compensation for every product. For some products, sales reps may not receive any compensation at all. Additionally, they may only be compensated once a product starts being consumed rather than at the point of sale.

Daryl, could you advise our viewers on what two or three flagship products in 2025 they should consider using as leverage? If you can see a viable path for implementation and have a solid business case, then leveraging these products could be beneficial. What do you think?

Daryl: As you mentioned, I believe it's no longer a market secret. First of all, products related to server technology aren't very interesting these days. Whether you have SQL, Windows, or DevTools doesn't really matter; if you increase your usage or volume, no one cares. That's one aspect. Don't waste your time there; it's simply not worth it. Ultimately, the focus is primarily on security products.

Everything related to compliance and security is crucial. I'll bundle these together because both E5 compliance and E5 security score high on the Microsoft representative scorecards. Additionally, Dynamics 365 is important, appearing prominently on everyone's scorecard. And, of course, we can't overlook Copilot; it's clearly a major target for them.

You need to play this game very carefully. It's not just about adding these products to your Enterprise Agreement (EA). Things can get really interesting if you currently have them in your EA but aren't utilising them effectively across the organisation. You may have groups of users using specific components while others are not, whether in Power BI, specific compliance products, or involving different types of users—such as internal versus external consultants.

If you can build an alternative solution for a particular group of users based on their usage trends and establish a fallback position, that can be quite challenging for sales representatives. Sometimes, moving backwards can be just as powerful as moving forward. Taking a step back can be difficult, but I always encourage checking to see if that option is feasible.

Let's not forget the importance of basic negotiation strategy, particularly regarding posture. Many people overlook this aspect. You can create a viable alternative without having to retreat. It's crucial to be strategic. Remember, Microsoft is a formidable competitor. If you don't elevate your approach in 2025, your costs will likely rise. It's as straightforward as that. If you have the budget and wish to contribute, do so. However, if you're concerned about your budget and personal targets, stepping out of your comfort zone and enhancing your efforts may be necessary.

Can Unified Support be leveraged?

Alexander: Unified Support. We often mention that we can leverage our overall Microsoft spending to influence Unified Support negotiations. However, does it work the other way around? Can we leverage Unified Support to negotiate a better Enterprise Agreement (EA) deal in 2025?

Daryl: Using a Unified Support contract as leverage in your Enterprise Agreement (EA) negotiations is very challenging. In fact, I would say that 99 per cent of the sales teams involved with EA and Azure products tend to overlook Unified Support. However, it's crucial to consider it during negotiations, especially since the costs for Unified Support have doubled or even tripled over the last three to five years. Neglecting Unified Support is not an option; you must aggressively negotiate it and reassess your actual need for it.

This aspect of negotiations often gets overlooked because it's not as significant as an EA, so it doesn't receive the same level of attention. However, when you see your support costs with Microsoft rising from, say, $1 million a year to $3 million a year, you have to ask yourself: Do you really need that level of support? Are there alternatives available? Have you truly negotiated hard with Microsoft on this issue? Most organisations haven't, and this component often gets brushed aside.

I've noticed this attitude, particularly among seasoned negotiators who have dealt with Microsoft multiple times; they seem fatigued. They frequently express sentiments like, "We've done three deals, we've done five deals, what can we do differently?"

The difference you can make is in your attitude. To be frank, consider bringing in external help. Field experts can serve as your additional leverage—the secret sauce. It's not that the external party knows more than you do (though they likely do), but their input can significantly enhance your negotiating position.

Alexander: It's a no-brainer that negotiating every month differs from negotiating every year.

Daryl: It's not just that, Sasha. With my years of experience, I don't mind being blunt about it. It's all about motivation.

In-house negotiators often lack the incentive. They simply don't have that compelling drive to negotiate aggressively anymore; they're exhausted. Sometimes, you need a coach, a mentor, or someone who feels obligated to push you because they are compensated for it. That extra drive, whatever you want to call it, can make a real difference. These professionals have a wealth of experience and know what they're doing, but I believe they're just tired.

Microsoft is pushing organisations to MCA-E and CSP

Alexander: There is one important topic that we must address, and surprisingly, despite the significant market buzz, not everyone is aware that in November of last year, Microsoft published a blog post announcing that starting January 1, 2025, they will cease renewing certain Enterprise Agreements.

The way this announcement was presented felt almost like a lottery. Microsoft did not specify which exact types of agreements would be affected, only mentioning cloud agreements. But what does "a cloud agreement" mean? Essentially, every Enterprise Agreement can these days be considered a cloud agreement.

The only limitation mentioned was that the new policy applies only to direct markets. Therefore, if you are located in a country like Ukraine, you may not be affected since it is an indirect market. However, for those in the United States—a traditional direct market for Microsoft—this announcement is significant. Microsoft already directly engages with multiple clients across the United States.

So, according to the blog post, they stated that you will no longer be able to renew your Enterprise Agreement.

What are your options? Microsoft will provide you with either an MCA-E or a CSP agreement. I want to highlight some key points. First, no discounts are available in the CSP price list. And, as far as I know, there is no MCA-E price list. So, the pricing is the same for all organisations, regardless of size, and you will need to re-negotiate any discounts you previously received automatically in an Enterprise Agreement based on your organisation's size.

Additionally, transferring the Azure tenant from EA to MCA could be pretty tricky. You need to consider how this transition will be implemented and plan it, as it's a significant challenge. Azure under an Enterprise Agreement (EA) and Azure under an MCA are different, even though the backend systems are the same. In many cases, you cannot simply switch a tenant from an EA to an MCA. How will this process work?

Licensing rules vary significantly, which will also increase costs, but I won't go into details right now. I'm currently working on a video that will cover everything in detail. We'll publish it on our YouTube channel. In that video, we will explain all the important differences in licensing between EA and MCA-E/CSP.

The transition may impact your on-premises environments, Azure Hybrid Use Benefit (AHUB), Azure Stack HCI, and more. I apologise for using so many technical terms—I promised not to, but the bottom line is straightforward: every expert agrees that costs will increase.

You might be able to negotiate a discount, but imagine finding yourself in a "take it or leave it" situation. When it's time for renewal, you email Microsoft, stating your intention to renew your Enterprise Agreement (EA), and then you receive a response. Ninety, sixty, or even thirty days before the renewal, you learn that you're on the list of those who cannot renew their agreement anymore. The available options are MCA, MPSA, or others, but you're unprepared for this shift.

You may have been gearing up to negotiate your EA, only to suddenly find yourself in a completely different landscape where the licensing rules have changed. You try to use old terms and leverage, but they inform you that those strategies no longer apply under the new framework. You can't renew your licenses; instead, you'll need to purchase new subscription licenses, which means costs will rise.

Daryl, what advice would you give to organisations in the direct markets right now? What would be the smartest approach for them?

Daryl: The situation is very new and just starting to unfold. Based on what we've heard in the market and what we're observing, the initial impact will affect organisations with between 500 and 2,400 users. This group is referred to as Tier A or Level A under the Enterprise Agreement (EA). Microsoft has been attempting for years to move these organisations away from EA. Now, it seems they have made a firm decision: if these organisations don't want to move, Microsoft will make them.

We anticipate that the majority will shift to Cloud Solution Provider (CSP) agreements rather than Microsoft Cloud Agreement - Enterprise (MCA-E). The focus is moving toward the channel, with Microsoft aiming to transition as many smaller organisations as possible. There are tens of thousands of such organisations, which aligns with the broader changes expected in 2025 and how those changes will affect budgeting. If you are unaware of these upcoming changes and are basing your budget on the same metrics from 2024 or your last billing cycle, you might face a significant pricing shock—your CFO may also be surprised.

It's crucial to understand these changes and prepare accordingly. Consider what alternatives are available. An EA for smaller organisations is no longer regarded as the best option. Given the variety of choices, it may not even be the best licensing option available today.

You need to be fully aware of what the transition entails. As Sasha noted, several adjustments will be necessary. Costs are expected to rise, and it should be taken seriously. It's advisable to budget for an average increase of 20 per cent. However, I would recommend planning for a 30 per cent increase to be more realistic. Additionally, be aware that there will be migration costs.

If you have nearly 2,500 users, consider the possibility of moving to a higher tier; it may be worth exploring. However, I must be frank: smaller organisations are facing diminishing options.

Large organisations still hold significant negotiation leverage, whereas smaller organisations will encounter challenges in 2025. I believe it could be the most challenging year yet for small organisations working with Microsoft. Unfortunately, I don't have good news for them, so it's essential to prepare accordingly. If possible, focus on optimising your resources—optimise, optimise, optimise.

Alexander: I have a suggestion for small companies. The first step they need to take is to educate themselves. You can ask us, you can ask your Cloud Solution Provider (CSP), or others for guidance, but it's crucial to understand the basics on your own. You should know at least half of the answers yourself. Therefore, seek out information about the differences, watch informative channels that share knowledge, and learn—even if it's just high-level information. Transitioning is not going to be a painless process.

What if you feel like you have no leverage?

Alexander: Daryl, we have a few questions from the audience. Luka is asking about the following scenario: a European company with 6,000 seats is renewing its Enterprise Agreement (EA), only online services, with some existing amendments to the current EA and no licensing changes since they are already on full E5. From my perspective, there doesn't seem to be any optimisation potential, especially since they are aware of the active and disabled users with licenses and so on. What do you think? They are already on full E5.

Daryl: Many organisations find themselves stuck in a mindset where they believe that having an E5 license means they can no longer optimise their Microsoft spend. They think, "We have E5—there's nothing more we can do."

That's where I begin to examine the overall ecosystem. I would assess your position in the market, your Microsoft account team, your value to that team, and any competitive products you may offer. I would also consider your future projects and Azure, AWS, or GCP consumption levels. Evaluating what's happening with Dynamics and Power BI is also crucial.

You need to ask yourselves the bigger questions. You've already lost the negotiation if you remain fixated on optimisation and E5 alone.

In my experience, something can always be leveraged in these discussions. It isn't just about the usual E5 conversation or the combination of Office, Windows, and Core CAL like it used to be. If you find yourself with no leverage and only optimisation in mind, it's time to return to the fundamentals. That's my recommendation. There will always be something you can bring to the table—there always is.

What is the BATNA for those who are already locked in?

Alexander: There is a great question for you, Daryl. What is the Best Alternative to a Negotiated Agreement (BATNA) for someone who has already committed to the Microsoft (MSFT) ecosystem, especially if negotiations begin to focus more on terms and conditions, price protection, SKU, price lock-in, and investment incentives for Copilot migration? In your experience, are there other effective strategies that could be employed? So, what is the BATNA if you're already entrenched and locked in with Microsoft?

Daryl: That ties back to my previous answer. We need to look at the bigger picture. There are factors to consider that depend on your geography and sector. Are there key projects you want to roll out with Microsoft that they might want to highlight with a testimonial or case study? Do your executives have any relationships with Microsoft that you can leverage? You might also consider using your reseller as a back channel to Microsoft. You could potentially influence the negotiations by providing your reseller with various information. What competitor products are available regarding compliance and security? Don't forget to look back at Azure, Google Cloud Platform (GCP), Amazon Web Services (AWS), and third-party suppliers. There are definitely options available—I'm sure of it.

You need to expand your perspective. If you stick with the standard approach to Microsoft in 2025, you could find yourself in a lose-win situation: losing on your end while Microsoft wins.

A company of 2,000 employees: CSP or MCA-E?

Alexander: Thank you for that perspective, Daryl. Jacob has a question: if a new company has 2,000 employees, will they be required to sign an MCA-E? Will they have to sign a CSP?

Daryl: I think you'll most likely be directed toward a CSP initially. It can vary depending on whether it's a direct or indirect market, as there are still many indirect markets. I believe you'll end up with a CSP agreement, which offers less flexibility and fewer opportunities for negotiation. However, I want to emphasise the importance of how and when you position this new company with 2,000 employees.

It's crucial to identify the right account team based on your market. Different regions have different practices. For instance, negotiations in Norway could yield different outcomes than negotiations in Turkey. Similarly, results can vary between Finland and France, especially within the European market.

This variability can extend to different regions in the U.S., too. The account team you engage with and your location within the U.S. will impact your negotiations significantly. Therefore, connecting with the right person at Microsoft for your specific situation is essential. Your success will depend on geography and the sector that the 2,000 users belong to.

Are you planning to incorporate Azure? Are you a substantial cloud user? For example, are you spending 40 to 50 million dollars annually on Azure or AWS? Consider whether you need E5, E3, or Copilot licenses. You might still be able to enrol in an EA quickly, but a CSP is also a valid option. I wouldn't want you to misunderstand it; while CSP agreements involve less negotiation and are channel-driven, they aren't a bad choice.

Do you use Azure Hybrid Use Benefit properly?

Alexander: I want to discuss Azure Hybrid Use Benefits. Daryl mentioned that servers are no longer a priority for Microsoft; they can't be leveraged as they once were. Instead, he emphasised the importance of optimisation.

We often find that Azure Hybrid Use Benefits are poorly understood, and there are two extremes in how they're perceived. On one end, some organisations don't use them at all. Recently, we stopped one organisation from cancelling its licenses. They no longer need them on-premises, but they are a major Azure client. They were about to cancel thousands of licenses, but they are actually consuming even more in Azure.

Following our advice, they transferred Windows Server Standard licenses to Azure instead of cancelling Software Assurance. It's not a secret—especially for those experienced in this area—that using your own licenses for Azure virtual machines can lead to discounts of up to 95% on the licensing portion alone.

Before renewing your licenses or providing Microsoft with Bill of Material numbers, examine your Azure virtual machine consumption and assess which licenses you can apply to Azure to reduce costs. Don't make the mistake of cancelling existing licenses; doing so could result in significantly higher costs in the future. There may be a way to recover from it by buying new subscription licenses, but it will cost you double the original price. Therefore, it's not a wise decision.

Conversely, we see that some cloud managers do not fully understand licensing. They see an opportunity to save by simply ticking the box, stating, "We have a license", without verifying their actual license stock. However, Microsoft knows these numbers often do not align with reality.

Currently, I would assess this as a medium risk. Microsoft is not actively pursuing audits in the enterprise sector, but that could change anytime. They have access to all your Azure Hybrid Benefit data, including Enterprise Agreements, and can easily compare your reported license counts with their records. This oversight could result in non-compliance.

Utilise your Azure Hybrid Use Benefits properly. If you're not using them now, start taking advantage of them. It will help reduce your costs before any negotiations begin. It's a straightforward opportunity for savings.

The essence of our advice for 2025

Alexander: Daryl, you have two minutes. Your closing statement, please.

Daryl: Ensure that your budget for Microsoft in 2025 is accurate. Don't underestimate your rising costs. Prepare your executive management team for what is ahead, and you need to elevate your approach for the upcoming negotiations. The terms you negotiated three or five years ago, especially if you had a five-year agreement, are not applicable now.

Plan ahead and think outside the box. Return to the fundamentals of preparation and strategy, and consider your alternatives. There are always options that you can bring to the table.

Alexander: Fantastic. Thank you very much, Daryl. I also want to extend my gratitude to everyone who participated today and for your questions in the chat.

Our next event will be in two weeks, where we will discuss five quick wins to reduce Azure consumption in the next 30 to 90 days—efforts you can undertake almost immediately to lower your Azure bill significantly.

Thanks again, everyone. Goodbye, and let's cue the music.

Daryl: Thank you, everyone.