Summary
Is it a good idea to switch some or all of your Microsoft licensing to CSP in 2026?
"But we're still buying the same Microsoft licences, aren't we?"
Oh, you'll be surprised!
Very little information is catered to customers
Procurement, especially IT procurement, has no time for nitty-gritty licensing details. Things are overwhelming enough, and there are hundreds of vendors to manage.
See, Microsoft and Microsoft partners know that, too. I bet you haven't been told more than half of what I'm about to explain in this article.
Just look at the content around CSP and Microsoft licensing out there. How much of it is aimed at you, the "end customer" who has no time for extra detail and wants to understand if she's getting a fair deal behind all the smoke and mirrors of "Buying the VALUE"?
You'll find that 99% of the available information is catered to Microsoft Partners. It explains how to sell, not how to approach buying licences. It doesn't even mention the breaking changes between the Enterprise Agreement you've been dealing with for the last 20 years and the CSP program.
The differences are not purely commercial. Quite a few of them affect licensing compliance, and even your IT strategy may have to be reconsidered accordingly.
Same products, different rules.
Our protagonist
I'll tell you a story about a friend and a long-term client. To respect her privacy, let's call her Jennifer.
First, a few facts:
Jennifer has been procuring Microsoft licences for 18 years, mainly through an Enterprise Agreement. From time to time, purely for economic reasons, she would authorise an alternative purchase under other Microsoft agreements, such as Open or MPSA. The licensing terms and conditions between them and EA are alike, so it's almost always been a question of what is strategically cheaper.
Jennifer still has an on-premise server estate, almost entirely virtualised. Her team also migrated a significant portion of the business workloads to Azure and AWS.
A few years ago, she switched all users to Microsoft 365. However, her IT estate still has a few legacy Office servers and desktop products.
She is also not new to CSP, but its share in the licensing estate is below 10%. She first adopted CSP for its flexibility – the ability to cancel licenses at any time on a monthly billing schedule. That, however, changed around 2022, and annual subscriptions aren't as flexible anymore — you cannot simply cancel licenses until the term expires.
Jennifer's conundrum
Since 2022, Jennifer has constantly been considering whether it is a good idea to move her entire Microsoft licensing portfolio to CSP. She has come to terms with its predominantly subscription-based (OPEX) model.
Moreover, she is constantly under pressure from multiple directions. Microsoft itself is actively discouraging EA renewals, particularly for organisations with fewer than 2,400 seats, pushing customers towards MCA-E or CSP instead. Her incumbent LSP is feeling the squeeze, too. Microsoft is suffocating the traditional LSP business model, and Jennifer's LSP is already transitioning to become a CSP. On top of that, various outsourcers and IT companies supporting her systems are all advocating for CSP.
And here's why.
Microsoft sees the Enterprise Agreement as an outdated vehicle. CSP and MCA-E are more lucrative for them.
Traditionally, most of you would go to an LSP to buy licences, rather than go directly to Microsoft. That's how EA works – through LSPs. But since Microsoft wants to kill EA and push everyone to CSP and MCA-E, they're also suffocating the traditional LSP business.
CSP is a broader program that is also predominantly indirect. As a result, there are more CSPs than LSPs. You can even have multiple CSPs that simultaneously provide you with services and licences.
The entire programme was designed for Microsoft licences to be embedded inside the services you get from your IT outsourcers and suppliers. Many of them are now CSPs. Even hardware manufacturers like Lenovo and HP have also become major players in the CSP space due to the massive shift from hardware purchases to the Cloud.
And of course, LSPs are transitioning to become CSPs. For them, it's a matter of survival.
So, Jennifer is constantly pushed towards CSP from all sides.
Preparation
To address Jennifer's concerns, we sat with her and strategically reviewed the entire picture.
It wasn't our first exercise. We first did it together with Jennifer in 2022. Her new EA term was about to expire in June 2025, and we had to look at the same question all over again. Except this time, a lot had changed.
As a best practice, before considering any licensing changes, you should document all milestones, key dates, and projects.
Here's Jennifer's list, reduced to keep it simple:
Her Enterprise Agreement was about to expire in June 2025.
She'd already migrated a significant chunk to Azure. Now she planned to move another 20-30% by the end of 2025.
Since 2022, she'd moved all development to the Cloud.
There were no more Office Servers on premises.
In reality, you'll probably have a much longer list. And although not everything in your plans may affect your licensing choices, we suggest writing down everything.
Then, we looked at the servers. We don't usually begin with the servers, especially in 2025, but I promised you a real story, so that's how it went.
Servers
Microsoft Servers may be split into five major groups. The next three are still relevant in 2025. Most of you will have them:
Operating Systems: Windows Server
System Management (looking after the servers): System Center
Database: SQL Server
In addition, you may also have:
Dynamics: relevant to many, but in 2025, it is already mainly in the Cloud, at least in the Western hemisphere.
Office Servers like Exchange and SharePoint. These are a dying breed with the migration to Microsoft 365. Jennifer had already decommissioned all of hers, although some organisations still have them on-premise.
Let's start with the simplest of them all – Office servers. Even though Jennifer no longer had them, they're worth discussing.
Office Servers
Jennifer decommissioned all her Office servers between 2022 and 2025, migrating everything to native Microsoft 365 services in the Cloud.
But if you still have on-premises Office servers, here's what you need to know. It may not be evident if you are not a Microsoft licensing professional.
Microsoft 365 E3 and E5 plans, when procured through an Enterprise Agreement, allow you to run unlimited on-premises Office servers for all licensed users.
And here's the first consideration when you switch to CSP: the same Microsoft 365 packages procured through CSP don't grant these rights. See, same products, same licences, different rules.
If your servers are virtualised, which plays a significant role when choosing the correct licences, you have the following options:
You could purchase new Office Server licences. However, since the servers are virtualised, you would need licences with maintenance (Software Assurance) that aren't available in CSP. So, this option would not offer a clean break from pre-CSP licensing.
You could decommission on-premises Office Servers before the EA renewal date by migrating them to the native Microsoft 365 services in the Cloud.
You could move Office server workloads to physical servers and use legacy licences, but that would likely conflict with a modern IT strategy.
Fortunately, the cost of these licences is relatively low. It wouldn't break the bank, but it's still something to consider.
Please remember: at this stage, we aren't making any decisions yet. We are only writing down our options.
Windows Server and System Center
Now, let's move on to the most essential and considerably expensive part of the server estate:
Windows Server,
System Center.
We are looking at them together because they often go hand in hand. In Jennifer's case, the organisation's IT uses System Center to manage almost every server.
In addition, there's a discounted bundle – Core Infrastructure Suite – that includes both products.
On top of that, Jennifer had a Server and Cloud Enrollment, which gave her an additional discount of around 10%. Server and Cloud Enrollment is an Enrollment in an Enterprise Agreement. It's not a one-size-fits-all solution, and it may not necessarily work in your case. But it is beneficial for Jennifer's organisation.
Now, let's look at what CSP offers.
System Center is now available in CSP – it was introduced in October 2023. Core Infrastructure Suite is still unavailable. As a consequence, the discount of about 15% that she had been getting thus far is still unavailable, too.
Windows Server Datacenter, which you use on virtualised server farms, is now available in CSP as a subscription, too, providing you with version upgrade rights (the ability to upgrade Windows Server to the latest version) and Azure Hybrid Benefit (the ability to "bring your own licenses" to Azure, which provides a noticeable cost reduction).
However, switching to CSP subscription licences is more expensive than renewing Software Assurance on existing Server and Cloud Enrollment or Core Infrastructure Suite licences. Is that a definite deal-breaker? As usual with Microsoft licensing, there is no "one size fits all" answer that would apply to everyone's situation.
She could decide to stop renewing Software Assurance on the Core Infrastructure Suite Datacenter licenses regardless of her chosen licensing agreement. The licenses themselves were perpetual, and nobody would take them from her.
Plus, in my not-so-humble opinion, Azure Hybrid Benefit is the only practical benefit of Software Assurance (maintenance) for Windows Server.
Version upgrades, the other benefit, don't happen that often. Also, Microsoft had only recently released Windows Server 2025, the version Jennifer may upgrade to even if she drops Software Assurance.
However, we should not discount the fact that she was migrating to Azure and could reduce costs with Azure Hybrid Benefits.
The number of physical servers was being reduced, freeing up Core Infrastructure Standard licenses. If Jennifer renewed Software Assurance on them, she could reuse these licenses in Azure to achieve considerable cost savings. Plus, she's already been doing that since 2022, reducing her Azure Windows Server licensing bills by up to 75%.
The problem with switching to CSP is that it does not offer Software Assurance, so a like-for-like renewal from EA to CSP is not possible. Is there an alternative option in CSP? Yes. Windows Server Datacenter subscription licences are now available in CSP. You may take them to Azure. They are even named "Subscription licenses for Azure." They are also cheaper than Azure pay-as-you-go licensing.
All this in mind, before making any decisions, consider these:
A realistic timeframe to migrate to Azure,
A realistic timeframe for "freeing up" the on-premises licences,
The number of licences you need in Azure,
The cost of renewal of Software Assurance for Windows Server,
Then, compare it to the gradual (I emphasise, GRADUAL) increase in the requirement for Windows Server licences in Azure. You won't need all these licences in one day.
As you may notice, it is a multi-variable, time-dependent calculation.
You may have also noticed that switching to CSP isn't necessarily painful regarding Windows Server and System Center. If Jennifer didn't renew these licences in an Enterprise Agreement, the sky wouldn't fall on Earth. Fortunately, it's a question of cost, not compliance.
SQL Server
But when it comes to the database servers, it's different.
Microsoft SQL Server, when it's virtualised, requires Software Assurance. It also needs Software Assurance for resilient, business-critical solutions involving disaster recovery and high availability.
So, Jennifer could not simply cancel her Enterprise Agreement without a plan. She had to renew SQL Server in an Enterprise Agreement or a separate volume agreement or switch to subscription licences in CSP.
The calculation she had to do was a simple cost comparison of these options.
Fortunately, CSP's licensing terms and conditions for SQL Server and Windows Server are not that different from those in an Enterprise Agreement. You only need to remember two things:
Software Assurance is not available in CSP; if you need it, most of the equivalent benefits are included in subscription licences.
Thus, you should never consider perpetual licences in CSP if you need Software Assurance equivalent benefits.
And that concludes our server considerations.
Desktops - Microsoft 365
On the desktops, Jennifer's organisation uses Windows 11. As I said before, when she renewed her Enterprise Agreement the previous time in 2022, she chose a mix of Microsoft 365 E3 and E5, which include both these components plus some handy security features.
As we analysed Jennifer's situation, we wrote down a few things about her IT infrastructure that could impact her licensing decisions. Let's focus on the following two:
In addition to desktops and laptops, Jennifer's organisation uses virtual machines with mostly Windows 10 and 11. Those machines are virtualised on their on-premise servers in a so-called "VDI infrastructure". This was an issue at the previous renewal as CSP did not allow on-premises VDIs, so we had to review it again.
Due to historical and compatibility reasons, some users needed Microsoft Office Professional Plus. If you are unfamiliar with Microsoft licensing, it's a different product from Office 365, requiring separate licenses. However, when Jennifer switched to Microsoft 365 E3 and E5 six years ago, she bought the so-called "From SA" licences. Those licenses allow users licensed for Microsoft 365 to install Office Professional Plus on their desktops and laptops.
As long as Jennifer stayed in an Enterprise Agreement, she didn't need to change anything.
But if she switched to CSP now, one of these use cases would become non-compliant. Remember, same products, different rules in CSP.
On-premises VDI is now allowed in CSP, so that's no longer an issue.
However, Microsoft 365 E3 and E5 in CSP do not have the "From SA" option; therefore, Microsoft Office Professional Plus usage would become non-compliant.
Cost and flexibility considerations
If that is not enough food for thought, there are also cost and flexibility considerations.
After the introduction of the "New Commerce Experience", CSP customers have the following options:
Monthly term. Its price can change every month. It is also 20% more expensive than the annual option.
Annual term. The price is fixed for a year. No reduction is permitted until the end of the subscription. You can pay upfront or monthly. However, since April 2025, if you choose monthly billing on an annual subscription, Microsoft charges an additional 5% premium on top of the annual price.
3-year term. As you may have guessed, the price is fixed for three years. And again, no reduction is permitted until the end.
There is no more flexibility CSP customers had in previous years.
How does that compare to the Enterprise Agreement? Well, the EA is more flexible. The price is fixed for three years, but reductions are permitted at each anniversary. In the current uncertain economy, the EA is a lower risk.
What did Jennifer do?
So you may be wondering what Jennifer decided to do. How did this exercise affect her desire to switch to CSP?
In 2022, after weighing all the factors and securing an additional discount we negotiated with the LSP, Jennifer stayed with the Enterprise Agreement.
Now, in 2025, she faced the same question again. Except this time, the pressure from Microsoft to move away from EA was much stronger. Microsoft is actively pushing customers towards CSP and MCA-E, making EA renewals increasingly difficult to secure.
Still, Jennifer renewed her EA once more. This time, we negotiated the discount directly with Microsoft.
Why? Despite Microsoft's push, the fundamental problems with CSP remain:
Firstly, we are offered licences that are effectively crippled compared to their Enterprise Agreement equivalents.
Secondly, some enterprise-grade products are missing from the CSP entirely: Core Infrastructure Suite is a good example.
And thirdly, Microsoft 365 subscriptions in the New Commerce Experience are less appealing than in the Enterprise Agreement.
To be fair, CSP is improving, and we're witnessing easier transitions. But Enterprise Agreements still remain strong.
Would the outcome be the same for you? Not necessarily. Microsoft licensing has many variables and moving parts, and everyone's story is unique.
But something has affected everyone's options in recent years, and that is Microsoft's strategic shift away from the Enterprise Agreement.
What about you?
We recommend the following, as we do with each client of ours:
Have a clear and realistic plan for your IT transformations for at least three years ahead,
Make sure your licensing team and your Cloud team are not competing for attention – they must collaborate,
Understand what licensing terms and conditions your infrastructure currently requires and what it will require in the next three years,
Account for Azure Hybrid Benefit, don't ignore the cost savings opportunity,
Compare all options financially: talk to CSPs and LSPs (if your LSP hasn't transitioned yet), get all their offers and compare them,
And don't forget the differences in Terms and Conditions, or you may find yourself in a peculiar situation when it's already too late.
Talk to an independent Microsoft licensing expert
EA vs CSP is a tricky subject, and it's better to know how it can affect you before you switch. The advice you get must be unbiased. CSPs will pull you towards CSP – that's their business model. Even reading articles on CSP websites may bias you towards meeting their sales targets.
We are an independent consulting business that does not sell licences or Cloud services. That is on purpose, so our advice is unbiased.
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