Most enterprise Microsoft customers are familiar with true-ups, but what about the inverse? Is a Microsoft true-down even an option? As is usually the case with Microsoft, the truth is in the fine print and the confusion in the grey area. In this post, I’d like to bring some clarity to the topic and discuss if and when it’s possible to reduce license commitments during the term of your EA enrollment.
Let’s start with a quick refresh of the vendor’s true-up process for the purposes of comparison. Microsoft’s Enterprise Agreement program makes it easy for customers to add new products to their EA over the enrollment term. There are a number of ways to accomplish this, the easiest of which is to simply submit a true-up. Customers are required to submit a true-up at least once annually. One of the benefits of the Enterprise Agreement program is that you are able to begin using incremental copies of the on-premise products at any time, only reporting the true-up at the first, second and third agreement anniversary dates.
Pricing is typically locked in. When you sign your EA, Microsoft provides a “Future Pricing” table on your Customer Price Sheet that applies to true-up quantities. For on-premise products, Microsoft provides annual pricing – the amount due at the Year 1 true-up, Year 2 true-up, and the final Year 3 true-up due at the end of the enrollment. A submitted true-up order pays for the license use for the remainder of the agreement term. Microsoft also provides the monthly cost of any subscription products in the Future Pricing table. You are required to submit an order for any incremental subscription products in the month in which you first use the incremental copies. But what happens if you need to reduce the quantities of ordered products? Does a Microsoft true-down exist?
Microsoft True-Down Myths and Realities
Microsoft is all about growth, and absent any previously agreed concession that permits you to reduce the quantities of the ordered products, you generally do not have the ability to submit a true-down for enterprise-wide purchases. Microsoft does not offer a true-down for its on-premise products and, despite many claims to the contrary, you cannot reduce the subscription counts for Enterprise products.
Let’s take a look at the language in the Enterprise Enrollment. This language can be found in Section 2g(iv), Order Requirements/True-Up Requirements/Subscription License Reductions:
|(iv) Subscription License reductions. Enrolled Affiliate may reduce the quantity of Subscription Licenses at the Enrollment anniversary date on a prospective basis if permitted in the Product Terms, as follows:|
1) For Subscription Licenses that are part of an Enterprise-wide purchase, Licenses may be reduced if the total quantity of Licenses and Software Assurance for an applicable group meets or exceeds the quantity of Qualified Devices or Qualified Users (if ordering user-based Licenses) identified on the Product Selection Form, and includes any additional Qualified Devices and Qualified Users added in any prior true-up orders. Step-up Licenses and add-on Subscription Licenses do not count towards this total count.
2) For Enterprise Online Services in a given Product pool that are not a part of an Enterprise-wide purchase, Licenses can be reduced as long as the initial order minimum requirements are maintained.
3) For Additional Products available as Subscription Licenses, Enrolled Affiliate may reduce the Licenses. If the License count is reduced to zero, then Enrolled Affiliate’s use of the applicable Subscription License will be cancelled. Invoices will be adjusted to reflect any reductions in Subscription Licenses at the true-up order Enrollment anniversary date and effective as of such date.
The language in Section 1 would have us believe that it’s possible to reduce quantities, but the reality is that this scenario is extremely, extremely rare. Let’s say you start your agreement with 10,000 users and add 2,000 in Year 1. You can never now go below 12,000 users for the Enterprise-wide subscription products (e.g. M365 E3 or E5). I suppose if you ordered a similar number of on-premise License & Software Assurance products of Office, Windows and the Enterprise CAL, Microsoft might consider that you have met this requirement – yet no one will ever buy this way. So, note to self, if you hear somebody at Microsoft claim you can reduce the Enterprise-wide subscription products, challenge them (or get it in writing)!
Products in Section 2 & Section 3 can be reduced, yet look to the paragraph above Section 1, 2, & 3: “…if permitted in the Product Terms….” This brings us to an important point. Microsoft’s Product Terms are updated often and quietly. Up until 2021, Microsoft updated and published this document on a monthly basis. But as of February 2021, Microsoft moved the Product Terms online. You can find them here. Constant monitoring is required to stay abreast of changes to product use rights – including which products/services are “reduction-eligible.”
What is “Reduction Eligible” and Why Is It Important?
It is possible to achieve license reductions for some Microsoft offerings outside of an enterprise-wide purchase. We’re essentially talking about Additional Online Subscription products – things like Visio Online, Project Online, Dynamics 365, and more. In many cases (but not all), you are able to reduce your subscription commitment, even down to zero. In order to reduce the quantities though, you may only do this at the agreement anniversary and – importantly – the Product Terms for the product in question must be “Reduction Eligible.”
You can determine which subscription products qualify by searching here. One thing you’ll notice is that not all products are eligible, even products within the same family. Take a look at the Dynamics 365 Services:
Product Conditions – Program Specific
|Extended Term Eligible||All, except Microsoft Relationship Sales|
|Qualified User Exemption||None|
|Reduction Eligible||All, except Microsoft Relationship Sales|
|Reduction Eligible (SCE)||All, except Microsoft Relationship Sales|
You can reduce quantities for all products in this family except the Relationship Sales product, which is approximately $130 per user per month.
In the Absence of a Microsoft True-Down, Plan Carefully
Without a standardized way to reduce license counts across your Microsoft estate, in-depth usage analysis and demand planning becomes increasingly important. So does understanding how certain products are connected to discounts and other concessions. A change in license counts can trigger a waterfall effect on costs that go beyond simple price per license calculations. It also underscores the importance of having an in-depth understanding of Microsoft’s licensing options and Product Terms – both of which are complex and subject to frequent changes.
Questions on how to right-size your Microsoft estate? We can help. NPI’s Microsoft licensing experts can answer your questions.
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