Prepare for Microsoft’s Enterprise Agreement Changes in 2025
If you’re a business using Microsoft’s Enterprise Agreement (EA), there’s big news you need to be aware of. Starting in January 2025, Microsoft will begin phasing out its EA for specific customers. This change could lead to up to 30% price increases over the next few years. But don’t fret! We’re here to explain what this means for you and how you can best prepare.
The End of Microsoft’s EA: What You Should Know
Microsoft has announced that it will discontinue the EA for a small percentage of clients in direct markets starting in 2025. This change primarily affects organizations in the Level A tier, generally including those with up to 2,400 users. While Microsoft describes this as only impacting a “small percentage,” it could potentially affect tens of thousands of customers globally.
The criteria for which customers will be affected remain vague. Microsoft has not released a definitive list or set of parameters to identify who will be impacted. If you’re in a direct market, you might receive a notification from Microsoft as early as January.
This shift signifies a significant move towards the Microsoft Customer Agreement (MCA), replacing the EA across various industries and organization sizes. The MCA transition has been a long time coming, with over a decade of preparation behind it.
Anticipated Price Increases
Businesses still relying on their EA need to brace for potential price hikes. Overall, end-customer prices are expected to rise by an average of 10% in the first year and between 20% and 30% over the subsequent three years.
EA customers with perpetual use rights who have been paying Software Assurance on additional products like SQL and Windows Servers will feel the most significant impact. These customers have benefited from special “From SA” pricing for Microsoft E1/E3/E5 subscriptions, which are expected to change.
Key Differences in EA, MCA and CSP Licensing Models
Transitioning from EA to MCA or Cloud Solution Provider (CSP) channels introduces key changes. One significant difference is the potential loss of programmatic discounts tied to EA Levels B, C, and D, which reduced prices for larger organizations.
Switching from perpetual to subscription licenses could increase costs, especially without Software Assurance renewal benefits. Customers may also have to pay full price for previously discounted “From SA” subscriptions.
Potential Hidden Costs
Organizations using Azure Stack HCI, legacy Microsoft 365 plans with Teams, and dev/test Azure subscriptions could face unexpected fees under the MCA model.
For larger organizations, EA discounts based on employee size may be eliminated, meaning clients must negotiate for discounts anew with each renewal cycle.
Taking Action Now
With 2025 not far off, it’s crucial to begin preparing for these changes. One of the most strategic moves you can make is considering an early renewal of your EA if it’s up for renewal in 2025. This could lock in current pricing and program terms, potentially saving your organization a significant amount of money.
Even if Microsoft declines an early renewal, requesting a price quote now will provide a valuable benchmark to negotiate your renewal.
While the initial change is set to impact organizations in the Level A tier, it’s anticipated that future phases will affect all three remaining tiers. Preparing now is the best way to mitigate potential risks.
Key Differences Between EA and MCA
Understanding the differences between the EA and MCA models is vital for businesses facing a transition. Here are some of the primary distinctions:
Licensing Flexibility
Under the EA model, businesses could hold perpetual licenses, providing long-term stability and cost benefits. However, the MCA focuses more on subscription-based licenses, which grant access to the latest features but may involve higher costs over time.
Price Adjustments
The MCA often includes annual price adjustments based on Microsoft’s pricing policies and market conditions. In contrast, the EA typically locked in prices for the duration of the agreement, offering more predictable costs.
Discount Structures
Discounts under the EA were substantial for larger organizations due to tier-based pricing. These discounts may not be as significant under the MCA or could require renegotiation, impacting budget planning for many enterprises.
The Impact of MCA on Businesses
Switching to the MCA is not just a pricing adjustment; it has implications across various aspects of business operations.
Budget Planning
With the potential for price increases, businesses will need to revisit their budget planning strategies to accommodate the higher costs of software licensing. This could involve reallocating funds or scaling back in other areas.
IT Strategy
The move to the MCA may require an overhaul of IT strategies, with a focus on maximizing the value of new subscription licenses. Businesses should evaluate their current software usage and explore ways to leverage new features available through the MCA.
Contract Negotiations
Businesses may need to sharpen their negotiation skills as they seek new discounts under the MCA. Engaging with Microsoft representatives early and building a thorough understanding of the new licensing terms will be crucial.
Steps to Mitigate Risks
While the changes may seem daunting, businesses can take proactive steps to mitigate risks and ensure a smooth transition.
Early Engagement with Microsoft
Begin engaging with Microsoft representatives as soon as possible to understand how the changes affect your organization. This will provide clarity and allow time to negotiate best-term terms for your business.
Conduct a Licensing Audit
Perform a comprehensive audit of your current software licenses to identify potential areas for cost savings. This will help you decide which licenses to retain, upgrade, or discontinue under the MCA model.
Explore Alternative Solutions
Consider exploring alternative solutions that may offer competitive pricing or better meet your organization’s needs. This could include cloud-based services, open-source software, or other vendors.
Preparing for the Future
The impending changes to Microsoft’s licensing model mark a significant shift in how businesses access and manage software. While the transition may require adjustments, it also presents opportunities for innovation and growth.
Leveraging New Features
The shift to the MCA model may grant access to new features and capabilities that can enhance productivity and drive innovation. Businesses should explore these opportunities and incorporate them into their strategic planning.
Enhancing Digital Transformation
With the transition to a subscription-based model, businesses can use this opportunity to accelerate their digital transformation efforts. Organizations can stay ahead in a rapidly evolving digital landscape by leveraging the latest tools and technologies.
Building a Resilient Strategy
Building a resilient strategy that embraces change will be key to successfully navigating the transition. This includes fostering a culture of adaptability, investing in employee training, and continuously evaluating technology needs.
The Road Ahead
The upcoming changes to Microsoft’s licensing model are significant, but businesses that prepare and adapt will find themselves well-positioned for success. By staying informed, engaging with Microsoft early, and exploring new opportunities, organizations can mitigate risks and capitalize on the benefits of the MCA model.
Conclusion
The phase-out of Microsoft’s EA and the transition to the MCA present both challenges and opportunities for businesses. By understanding the changes, preparing in advance, and leveraging new technologies, organizations can ensure a smooth transition and maintain a competitive edge.
For businesses directly affected by these changes or those planning ahead, staying informed and proactive is crucial. Consider the steps outlined here and explore further resources to stay ahead of the curve.
We have expert knowledge of discounts or special deals on licensing fees that could potentially save you money in the long run. We will also advise your organization on different licensing options available, helping you choose the most cost-effective option for your specific needs.