Big changes are on the horizon for Microsoft’s Enterprise Agreement (EA).
If your company is currently on an EA for licensing, you may need to rethink your renewal. Back in March of 2018, we published the blog article Microsoft Enterprise Agreement (EA) vs. Cloud Solution Provider (CSP) Licensing Agreement: What's Best for You? and due to the most recent and future changes, the time has come to revisit the topic. SMB customers that currently have a Microsoft Enterprise Agreement (EA will soon be faced with the decision – or be forced – to say goodbye to the EA and hello to an alternative licensing program like Cloud Solution Provider (CSP).
The EA has been the flagship licensing program for many years for companies with more than 250 users or devices looking to standardize their organizations on enterprise products like Windows OS, Office Pro, and the CAL Suites. The EA is beneficial because it offers support and other deployment and training benefits via Software Assurance as well as offering predictable pricing for the 3-year duration of the agreement. If you met that criteria, it was hard to argue why you wouldn’t sign up for an EA, as the discounts far superseded the alternatives. Another benefit with the EA is being able to mix on-premise products and cloud products on the same agreement, which was 100% cloud only until Server Subscriptions was recently added to Cloud Solution Provider Licensing Program (CSP).
CSP has been around for many years now and is designed to be a cloud-based/ subscription model from the ground up - you pay for what you use when you use it. CSP offers flexibility that the EA does not, like being able to reduce your subscription count daily, as opposed to annually on the EA. However, CSP has had a tough time competing with the EA, mainly because better pricing made it worth it for qualified customers.
There are pros and cons to both agreements and neither are one size fits all – but these recent changes may force companies to consider other alternatives.
Recent Changes to Microsoft’s Enterprise Agreement
Raising the Minimum User Count
In 2016, Microsoft first announced that it was raising the minimum user/device count to qualify for an EA from 250 to 500. To ease the transition, they allowed each customer with an EA in place prior to July 1, 2016, to renew for an additional 36 months under the EA. With a few exceptions, this increase from 250 to 500 has gone largely unnoticed.
On July 1st, 2019 the first clients that exercised their 36-month extension and are under 500 seats will no longer qualify for the EA, and this will trickle down to all sub 500 seat clients at their next EA renewal.
Unfortunately, for some companies, there isn’t much of a decision to be made here. If you have an EA today, but less than 500 seats, you need to start thinking about your next renewal. Unless you want to overbuy and pay for at least 500 users/devices to meet the minimum, you will need to seek alternative licensing options, and CSP is a mighty fine option.
Removing Programmatic Discounts
On October 1st, 2018 Microsoft removed the programmatic discounts offered to Level A customers on the EA (customers between 250-2399 seats). Without these built-in discounts, the EA no longer offers superior pricing over other volume license programs without engaging your Microsoft team to negotiate your discounts. EA pricing is very much now on par with other programs like CSP, which have much lower minimum requirements to start the agreement. With similar pricing, companies should start seriously weighing the pros and cons of EA vs. other options. For an example, an EA has more complex contractual paperwork, large upfront annual costs, and minimum flexibility to reduce your subscriptions. So, even if your company qualifies for an EA and has more than 500 seats, these changes might tempt you to seek alternative options.
At the end of the day, if EA-qualified companies can get the pricing to make sense, they will still have to be content with paying upfront annually and will not have the option to reduce subscription counts mid-year. However, there is value in having all your products—both cloud and on-premises—on a single agreement. The EA is a great option for that, but with the programmatic discounts removed, the benefits compared to CSP are dwindling. The aspects that once made the EA hard to deny are no longer there, especially for sub 500 seat users. It would be worth it for companies at least do their homework on the alternatives. For those organization with over 2,400 seats, Microsoft provides an additional programmatic discount that would widen the gap.
The reality of what is coming can be confusing and we can help you navigate. Interlink is here for guidance or to provide more information to help with decision making.
Contact us and talk to our experts to figure out your best option.