Understanding the Microsoft Enterprise Agreement True-Up and Reservation Process

By Dan Brewster

Director of Client Services, Microsoft, NPI

December 12, 2019

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(Note: This post was originally published in September 2018 and has been updated to reflect current Microsoft sourcing best practices.)

Microsoft’s EA program is designed for firms that are making large commitments to Microsoft products. There are three types of products one may purchase under the Enterprise Agreement: Enterprise Products, Additional Products and Online Services.

The “Enterprise Product” is what makes an Enterprise Agreement, well, “enterprise.” There are several products that are classified as enterprise-level – Office Professional, the Windows Operating System, the Core or Enterprise Client Access License, and some Office 365 subscriptions. A customer must elect to purchase an “enterprise” product for all of its Qualified Users or Qualified Devices. You wouldn’t be able to say, for example, we have 10,000 devices but let’s sign an EA for 5,000 devices. The “Additional Product” covers most other products – Visio, Project, Windows Server, Exchange Server, etc. – and these products may be purchased on an à la carte basis.

You will receive perpetual use rights for Enterprise and Additional Products at the conclusion of the Enterprise Agreement. Online Services, however, are those products for which you will receive temporary use rights only during the term of the agreement. You never receive perpetual licenses for an Online Services product. Microsoft is, of course, moving to a subscription model for many of its products, especially the Microsoft 365 products.

One of the benefits of the EA program is that you are only required to count the perpetual deployed licenses once a year. Said another way, once you have added a perpetual license to the agreement, you are permitted to deploy as many instances as you wish throughout the year. However, you are required to count the number of incremental licenses deployed and submit payment to Microsoft at the end of the year. The Online Services products are typically licensed on a monthly basis, yet Microsoft does permit you to place a reservation (essentially placing an order) in the month in which you begin to use the incremental Online Services and defer payment under the end of the year.

So, how do you count the number of deployed instances of Microsoft products? Some clients utilize sophisticated asset management systems that enable them to scan their environment and create deployment reports on the fly. Others keep careful records of incremental deployments throughout the year. The larger the organization, the more complex the process. Ultimately, though, at the end of the year, you are required to submit a true-up report to Microsoft and pay for any incremental usage.

Adding New Products to Your Microsoft EA

Customers executing the Microsoft EA should be aware that the agreement has strictly defined processes for adding new products to the agreement. You may “add products” for products not previously ordered, or you may add incremental usage for previously ordered products via the annual “true-up” process:

f. Adding Products.

(i) Adding new Products not previously ordered. New Enterprise Products or Enterprise Online Services may be added at any time by contacting a Microsoft Account Manager or Software Advisor.  New Additional Products, other than Online Services, may be used if an order is placed in the month the Product is first used.  For Additional Products that are Online Services, an initial order for the Online Service is required prior to use.

(ii) Adding Licenses for previously ordered Products.  Additional Licenses for previously ordered Products other than Online Services may be added at any time but must be included in the next true-up order.  Additional Licenses for Online Services must be ordered prior to use unless the Online Services are (1) identified as eligible for true-up in the Product Terms or (2) included as part of other Licenses.  

g. True-up Requirements.  Enrolled Affiliate must submit an annual true-up order that accounts for any changes since the initial order or last order.  If there are no changes, then an update statement must be submitted instead of a true-up order.

(i) Enterprise Products. For Enterprise Products, Enrolled Affiliate must determine the number of Qualified Devices and Qualified Users (if ordering user-based Licenses) at the time the true-up order is placed and must order additional Licenses for all Qualified Devices and Qualified Users that are not already covered by existing Licenses, including any Enterprise Online Services.

(ii) Additional Products. For Additional Products that have been previously ordered under this Enrollment, Enrolled Affiliate must determine the maximum number of Additional Products used since the latter of the initial order, the last true-up order or the prior anniversary date and submit a true-up order that accounts for any increase

(iii) Online Services. For Online Services identified as eligible for true-up in the Product Terms, Enrolled Affiliate may reserve the additional Licenses prior to use, and payment may be deferred until the next true-up order. Microsoft will provide a report of Reserved Licenses in excess of existing orders to Enrolled Affiliate and its Software Advisor. Reserved Licenses will be invoiced retroactively to the month in which they were reserved.

This is an area of licensing that NPI frequently has to help clients think through.

Timing Considerations for Your Next Microsoft Enterprise Agreement True-up

When is the true-up due to Microsoft? The latest Enterprise Enrollment states the following:

(iv) True-up order Period.  The true-up order or update statement must be received by Microsoft between 60 and 30 days prior to each Enrollment anniversary date.  The third-year true-up order or update statement is due within 30 days prior to the Expiration Date, and any license reservations within this 30-day period will not be accepted.  Enrolled Affiliate may submit true-up orders more often to account for increases in Product usage, but an annual true-up order or update statement must still be submitted during the annual order period.

This seems clear, indicating that for the first two years of your agreement the true-up is due at least 30 days prior to the agreement anniversary. The third year true-up? Within 30 days prior to the expiration date. Note use of the word “within” 30 days prior to expiration date versus “by.” Microsoft often (mistakenly) uses the latter interpretation and will inform customers this statement means the report is due 30 days before the agreement expires. While it is reasonable for Microsoft to understand the final year growth in order to prepare a Customer Price Sheet for the renewal agreement, your obligation is to simply submit before the agreement expires.

Online Reservations are the method used to add incremental users for online products, with the requirement that orders must be submitted on a monthly basis (in order to activate incremental users within the Microsoft portal). Using this method, payment is deferred until the next agreement anniversary date. Note that Microsoft does not permit license reservations to be added in the final month of the agreement. While most customers will know how many users they will need in that last month (and request a new reservation in the second-to-last month of the enrollment), sometimes very large customers may expect extended negotiations that may go past the agreement expiration date.

If you believe this may happen with your organization (it’s not terribly uncommon), it will be important to submit a reservation in the second-to-last month to cover your run rate for the last month, and perhaps the first month of the renewal agreement. Granted you’ll only be paying through the end of the current enrollment term, but you’ll have the benefit of being able to add those incremental users in the last month of the enrollment to tide you over for the last month, and – perhaps – the 1st month of the renewal term while you are still negotiating your renewal agreement.

Remember: Microsoft EA true-ups shouldn’t be conducted on autopilot. Like any Microsoft purchase or renewal, there’s opportunity for optimization.