Should You Include Future Affiliates in Your Microsoft Enterprise Enrollment?

By Michael Kegley

Director of Client Services – Microsoft, NPI

August 12, 2021

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If you’ve ever completed a Microsoft Enterprise Agreement (EA), you’re familiar with the Microsoft Enterprise Enrollment – it’s one of the required documents to establish an EA. Like a lot of things Microsoft, it seems straightforward at first. But closer inspection reveals complexity. One example is the option to include “Future Affiliates.”

Let’s start from the beginning. In section 1 of the Enterprise Enrollment, the customer gets to define their Enterprise, specifically, who will be covered by the Enterprise Agreement. The customer can choose from the following:

  • Enrolled Affiliate Only;
  • Enrolled Affiliate and all Affiliates;
  • Enrolled Affiliate and the following Affiliates;
  • Enrolled Affiliate and all Affiliates, with the following Affiliates excluded;

The next section addresses acquisitions and how they will be handled under the Enterprise Agreement:

The options here are: Include Future Affiliates or Exclude Future Affiliates.

If the option to include Future Affiliates is selected, and the customer acquires a company that does not have an Enterprise Agreement of their own, the customer is legally obligated to include all the acquired users via true up on the next anniversary following the acquisition, regardless of the licensing the acquired company may own.

Conversely, if a customer selects the option to exclude Future Affiliates, and the customer acquires a company that does not have an Enterprise Agreement of their own, the customer does NOT have to true the acquired users up on their Enterprise Agreement.  An important caveat to this is at the point where an acquired user becomes indistinguishable from a legacy employee, they would have to be included in the Enterprise Agreement.

If a customer acquires a company that does not have an Enterprise Agreement of their own and wants to include those users in their Enterprise Agreement, Microsoft will have no problem accepting the true up order (and associated revenue).

Why Excluding Future Affiliates in Your Microsoft Enterprise Enrollment is a Safety Net

We often advise clients to choose to exclude Future Affiliates in their Microsoft Enterprise Enrollment. Why? It typically makes sense from a cost and license management perspective. For example, let’s say a customer signed their EA in December. In October, they acquire a 500-user company that does not have an EA of their own. If they chose to include future affiliates, they would be contractually obligated to include all 500 users via true up the following December.

More often than not, however, when a customer acquires another company, there is a transition period as the acquired company is absorbed into the parent company. This transition can take up to a year during which time duplicate positions may be eliminated and parts of the business are reorganized.  So, in our example, by the time the acquired company is fully integrated, the final number of acquired users might have decreased to 350 and the integration is finished by May.

If the acquiring company chose to exclude future affiliates, they are NOT obligated to include the acquired company’s users via true up. Using the example above, if the acquiring company integrates the acquired company’s users, they can do so via the true up process (Microsoft isn’t one to turn down additional revenue). In this scenario, the cost the customer pays to add the acquired users is reduced. For on-premise licenses, the customer would pay the (lower) year 2 true up price. With monthly subscriptions, the customer’s pricing would be lower based on the number of months remaining on the agreement.

Don’t Overlook the Details in Your Microsoft Enterprise Enrollment

This is one example of why every aspect of your EA needs to be carefully inspected. The boxes you check  can have significant implications on your true-up and renewal costs.

If you have questions about the Microsoft Enterprise Enrollment process, NPI can help. Our Microsoft sourcing and license optimization specialists can help you optimize your agreement for flexibility, savings and cost-avoidance over the long term.