Microsoft Enterprise Agreement negotiation; A look at discounts, concessions & support
When you have a Microsoft Enterprise Agreement there will be a time to renegotiate your Enterprise Agreement. When negotiating a Microsoft Enterprise Agreement, Microsoft really only does two things to engage you as a customer. The first is price reductions and the second is contract concessions. If there is a change and it is not documented in a contract concession or an amendment, then it fails to exist in Microsoft buys.
Concessions may be financial, business or legal in nature. Microsoft generally will try to limit the discounts and concessions, and their primary goal will be to have zero discounts and no concessions.
However, Microsoft is more friendly on concessions if they are based on regulatory or strong business reasons.
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How Microsoft’s negotiation model engages organizations
Microsoft’s negotiation model is an exchange engagement sort where for example, if you need to get a concession, you may need 5 to 8 different requests to gain one concession that’s important for you.
Microsoft coming to the table with a strategy, will trade away things that are legal or business, for things like a discount, even though you may think they are not related. These trade aways may also be trading away an increase in limitation of liability for a discount.
Some contract concessions in an EA negotiation
Each customer will have their own specific requirements going into an Enterprise Agreement negotiation. First of all, some of these concessions have to do with profiles. The different customer profiles and how people use the product. Many customers are starting to license Microsoft 365, F3, E3, E5 in the same tenant to match their business requirements, and this has an impact on many different areas.
This impact starts from a price perspective. The F3 is much cheaper than the E5 and using these, there is compliance to consider as well as legal and you may need to get some special consideration from Microsoft. Again, if you are creating different profiles, sharing of the F3 license or devices currently is not allowed.
Also working with profiles has to do with its general management. It’s important as a customer to do profiling and have different groups of users as a result. However, when working on 5 or 6 profiles, it’s actually a full-time job. To manage those profiles, we recommend 2 to 3 profiles for an organization. This helps to best optimize the cost, along with management and user requirements.
Cross tenant licensing is another concession. Commercial, government and business units may have different tenants which may easily be gone across causing duplication or tripling licensing more often.
Another concession is the ramp pricing and a non-standard term for contract. For example, if as a Microsoft customer you are considering moving to E5, this may be such a significant uplift in cost that you might not be able to move to the E5 product right away.
Microsoft deals with that by providing negative declining discounts over a longer time frame. So instead of the standard three-year term, you might be offered a five-year term with big discounts in years one, two, and three going to smaller discounts in years four and five. This allows the customer to offset the big shift of costs as they go on to E5.
Pricing concessions in your EA and how to set expectations
When negotiating on pricing, as an organization you would want to drive the outcome to a level that is in your favor. The discounts you get may be on various levels as known to Microsoft and this should also be known to you and be applied to the terms of the contract. That means if you have a three-year contract, you are getting discounts applied to years one, year two and year three as well. The discounts should be applied to the future pricing table, which includes true-ups and subscription products.
Microsoft does not publish discounts and what levels there are. What they have and provide to customers as a discount are contract obligations within the Microsoft Enterprise agreement and these are not to be shared.
Your discount conversations with Microsoft should be based on size and complexity, whether you are moving to a higher-level SKU or considering different parameters. Microsoft does negotiate holistically, which includes legal, business and pricing.
Also ask for a not to exceed clause during negotiation because if you do not, you could be staring down a massive increase in the future years.
Consider ramping as you negotiate your Enterprise Agreement
As an organization, also try to align your contract to Microsoft’s fiscal year end, which ends in June, so that you could then negotiate when it means the most to Microsoft ramping of products over time. For example, instead of purchasing a product or service at 100% in the first year, consider buying it incrementally or adding up from your initial purchase over the course of a period. You then ramp or add up over 12 months or 18 months or 24 months till you purchase at full capacity as wanted initially. This move by itself actually drives an effective discount to appreciable levels.
Microsoft does not like ramping based on the fact that there’s risk. Your organization could move to another product or vendor or you may engage in ramping over a longer period of time.
Many of the things bought from Microsoft can be bought by component. This you can use to drive discounts for other things and not just for that product. Microsoft negotiation works on a give and take model. You need to look at your business requirements, product requirements, legal requirements, your financials then go to Microsoft with a combined request to get the best deal.
Legal concessions, what to get. Negotiate to protect your EA spending
This you can have a look at as you prepare to go into negotiation or whiles you are negotiating with your lawyer. This is because terms and conditions in there can eventually affect your finances depending on your understanding, interpretation or abiding by the terms.
Legal concessions are usually found in the Microsoft Business and Services agreement. It covers the right to verify, partner confidentiality, the fees, the penalties or a self-audit option. As an organization, take a look at the components and dare request some changes.
For example, ask for a self-audit as a first course of action, not as requested at the discretion of Microsoft. Again, if fees and the penalties that are applied to you could be capped, or a partner fee that Microsoft pays for a partner to come in, also to be capped, or maybe not even included.
Independent experts guiding your EA discounts and concession conversation
Our team of experts, due to years of experience, understand the product terms including the online services and can look at these based on your specific needs.
When asking for a discount, there are a lot of considerations to make which can escape you as an organization due to time constraints but we will pick up on those as experts. For example, if your company suddenly has to downsize or lay off a bunch of people, does it mean you can just go to Microsoft and say you no longer need those licenses now?
The likelihood of this occurring should have been put in your contract right from the initial stage and clarity or some form of agreement made with Microsoft on what to do in such an instance ahead of time.
Even if this is not done and it occurs, is there clarification on what the amendment is and as an organization what does Microsoft say about reducing licensing compared to your initial commitment to the Enterprise Agreement?
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