What Microsoft agreement to choose in 2024?
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 is still pitched as the most flexible agreement, but since March 2022, monthly subscription plans have been made 20% more expensive than the annual options. Can your budget still afford that without reviewing the licensing strategy?
Choosing a "less ideal" agreement may lock you with unfavourable terms for the duration of the subscription and affect your bottom line.
Let's look at the current state of Microsoft agreements and go through the IT procurement considerations for 2024.
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 2024.
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 you have your cloud spending 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.
The strategic choice you may have to make is 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 or CSP must account for the commitments and limitations imposed by the terms of Microsoft EA. It happens rather 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 uncaught during the permitted cancellation period.
Organisations between 500 and 2400 employees
Despite the rumours that Microsoft can make Enterprise Agreement unavailable for companies and organisations below 2400 employees, the entry barrier remains at 500 seats.
However, Microsoft's marketing and sales strategy has been evolving since a couple of years ago, and if you fall into the 500-2400 range, you may have already been approached by Microsoft partners with compelling offers to switch to CSP.
As this range corresponds to the basic no-discount "Level A" on the Enterprise Agreement price list, the costs of Microsoft CSP licenses 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 renewing such licenses. Subscription options for some of the 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 and EA licensing terms for the same products, some differences remain, which is a 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, and 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 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 also only reasonable above about 250 seats. Does this mean that you absolutely must switch to 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.
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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.