Summary
If you work in IT procurement or are responsible for digital transformation strategy, choosing the correct licensing agreements is probably one of your top priorities. And if it isn't, it should become one.
Why? Most current Microsoft licensing agreements require one- or three-year commitments, whether through the contractual term or the pricing and subscription rules.
Microsoft CSP and its "big brother" MCA-E are pitched as the most flexible agreement, but since March 2022, monthly subscription plans have been 20% more expensive than annual options. Plus, starting in April 2025, monthly billing on annual subscriptions will have an additional 5% premium.
Can your budget still afford that without reviewing the licensing strategy?
Choosing a "less ideal" agreement may lock you into unfavourable terms for the duration of the subscription, which can affect your bottom line.
Let's look at the current state of Microsoft agreements and review the IT procurement considerations for 2025.
Large and medium-large organisations
If your organisation has more than 2400 employees, Microsoft Enterprise Agreement remains the most reasonable choice at the beginning of 2025.
It has built-in volume discounts, spread payments, and a delayed "true-up" facility—the ability to delay payments for increased usage until the anniversary. All these are very compelling to CFOs as they help with planning and budgeting, considering that your cloud spending is under reasonable control.
In addition, Microsoft EA licensing terms are still better than, for example, the terms of Microsoft CSP for the same products.
It may seem strange if you are not a licensing expert, but Microsoft licensing terms depend on the type of the agreement.
You may have to choose strategically between a Microsoft Enterprise Agreement and a Microsoft Enterprise Subscription Agreement. Those with a significant portfolio of legacy server licenses should consider renewing Software Assurance instead of switching to server subscriptions even if they move to the cloud. Plus, you should know that the Enterprise Agreement allows you to mix subscription Microsoft 365 licenses for modern desktops with renewing your legacy server licenses.
Large organisations should also consider a mix of EA with alternative agreements but do it with care. Any augmentation with MPSA, CSP, and MCA-E must account for the commitments and limitations imposed by the terms of Microsoft EA. It happens too often when departments with independent budgets order licenses through alternative licensing channels that they may not use due to the commitments made in EA. The money is virtually unrecoverable if such a mistake is not caught during the permitted cancellation period.
Organisations between 500 and 2400 employees
The entry barrier to the Microsoft Enterprise Agreement at the beginning of 2025 officially remains 500 seats. However, there is a significant movement in this segment, with Microsoft using various tactics to move such clients to CSP or MCA-E, and if you fall into this range, be prepared that your next EA renewal may be prohibited. You may be forced into an alternative agreement.
As this range corresponds to the basic no-discount "Level A" on the Enterprise Agreement price list, the costs of Microsoft CSP licenses or their MCA-E equivalents may be comparable to what you are used to paying through EA. However, before committing to a complete switch, you should consider a few things.
If you maintain on-premises or hosted server infrastructure with legacy systems, CSP does not allow you to renew such licenses. Subscription options for some server software are simply unavailable, and for the rest, they may be more expensive than renewing licenses through the Microsoft Enterprise Agreement.
Although Microsoft removed some of the most absurd differences between CSP/MCA and EA licensing terms for the same products, some differences remain, which is a compliance risk when you switch from EA to CSP.
Negotiating CSP discounts may also be more difficult, as value-added services provided by CSP partners may obscure the costs. It highly depends on their flexibility and desire to negotiate. Those of you who are used to negotiating with traditional LSPs will have to adapt your strategies.
If Microsoft convinces you to move to MCA-E, which has the same licensing terms as CSP but is transacted directly with Microsoft, your whole negotiation will be with Microsoft and Microsoft only. As one of the pitfalls, Microsoft might insist on a draconian NDA, undermining your ability to use independent third parties in your negotiation.
If you are not cloud-centric and prefer dealing with traditional servers and desktops, MPSA may still be a reasonable alternative. However, sticking with pure MPSA may impact your ability to migrate to the cloud should you consider it. In that case, adding Microsoft CSP to MPSA will be the most natural progression.
Organisations below 500 seats
Smaller businesses don't have access to the Microsoft Enterprise Agreement, and MPSA is only reasonable for organisations above 250 seats. Does this mean that you absolutely must go for Microsoft CSP? No, it doesn't.
Do not overlook that Open Value and Open Value Subscription agreements are still available. They are somewhat equivalent to Microsoft EA and EAS for smaller organisations and may provide better discounts and benefits than, for example, MPSA.
CSP, however, will probably be your first choice.
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We are a deliberately independent consultancy. We do not sell or benefit from Microsoft licences or services; therefore, we have no conflict of interest when we advise you.