SmartSpend Bulletin™
Are Microsoft Enterprise Agreements Going Away?
Microsoft’s decision to phase out the EA option for certain Level A customers may be a sign of bigger changes on the horizon. While Microsoft has framed this as an effort to simplify licensing, the shift to EA alternatives will have significant implications. As we examine Microsoft’s latest moves, the question isn’t just which customers are being impacted today – but whether Microsoft’s largest customers will soon face similar pressures to transition away from the traditional EA framework.
Are Microsoft EAs really going away? It’s a fair question. In late 2024, Microsoft announced: “Beginning January 1, 2025, a small percentage of Cloud Enterprise Agreements (EA) in direct markets will no longer be eligible for renewal under the existing EA framework.”
There are two things we want to point out. First, Microsoft hasn’t officially defined what Cloud EA means. We can assume it refers to EAs that include only Online Services and Azure – no on-premises licenses, special amendments, or discounts.
Second, there have been rumblings for a while now that Microsoft wants to eliminate the EA option for Level A customers (500 – 2,399 users/devices). The vendor wants to move these customers to MCA-based licensing or CSP. The MCA (Microsoft Customer Agreement) is a simplified, direct-buy option from Microsoft. It’s essentially a bigger version of CSP – there are no price bands, no Software Assurance, no From SA SKUs to renew, no discounts or amendments. As Microsoft puts it: “For enterprise customers, the Microsoft Customer Agreement for enterprise (MCA-E, the digital evolution of the traditional EA), will provide the optimal, streamlined solution.”
We’ll dive deeper into the implications of switching to MCA-E later, but let’s address the big question.
Will Large Enterprise Customers Be Forced Off EAs in 2025?
So far, none of our clients have been forced off their EAs. However, we’ve heard reports of large resellers being instructed not to provide EA renewal quotes and instead directing Level A customers to Microsoft for alternative options.
Is this widespread? No. Is it concerning? Yes, but the sky isn’t falling yet.
A full sunset of the EA in 2025 seems unlikely, though it’s possible. Current EA contracts include conflicting guidance about what happens after enrollment expiration:
End of Enrollment term and termination.
General. At the Expiration Date, Enrolled Affiliate must immediately order and pay for Licenses for Products it has used but has not previously submitted an order, except as otherwise provided in this Enrollment.
Renewal option. At the Expiration Date of the initial term, Enrolled Affiliate can renew Products and Services by renewing the Enrollment for one additional 36 full calendar month term or signing a new Enrollment. Microsoft must receive a Renewal Form, Product Selection Form, and renewal order prior to or at the Expiration Date. The renewal term will start on the day following the Expiration Date. Microsoft will not unreasonably reject any renewal. Microsoft may make changes to this program that will make it necessary for Customer and its Enrolled Affiliates to enter into new agreements and Enrollments at renewal.
We interpret this to mean Microsoft cannot unreasonably deny a 36-month renewal. If the vendor enforces the “enter into new agreements” clause, it could trigger customer litigation due to the significant differences between the EA and MCA-E or CSP options.
In short, Microsoft seems motivated to steer Level A customers away from EAs – unless those customers significantly increase spending on the products Microsoft prioritizes.
Pay Attention – And Get Smart About EA Alternatives
In any case, Microsoft enterprise customers should pay close attention to how this change plays out in the coming months. They should also familiarize themselves with Microsoft’s EA alternatives.
Customers will lose some of the benefits they have under their EA when they move to MCA-E or CSP. In some cases, customers will have to string together multiple license types to try to approximate the pricing and benefits they get with the EA.
Another potential pitfall for customers who are required to go from an EA to an MCA-based license agreement is that they may be considered a “net new” customer by Microsoft. This means that under the MCA, they could be required to buy M365 E3/E5 without Teams and buy Teams separately, which will add a few dollars per user per month. CSPs may be able to help some organizations renew existing subscriptions with Teams, but they won't be able to help organizations moving from EA to CSP to buy brand new subscriptions with Teams.
Three Key Changes for EA Customers Moving to MCA
1. Pricing and Discounts:
- Lower Costs for Some: Some customers might pay the same or even less under the MCA, thanks to the flexibility offered by Cloud Solution Provider (CSP) partners and the ability to purchase on a month-to-month basis. For instance, customers might save on temporary needs, like hiring summer employees.
- Higher Costs for Others: Despite potential savings, some customers could see their overall costs rise. MCA customers may lose benefits like the favorable terms offered under EA for on-premises products with Software Assurance (SA), or they could face complexity due to managing multiple contracts with different resellers.
2. Licensing Complexity:
- Loss of Flexibility: MCA agreements are simpler and shorter than EAs, but customers may lose access to certain programmatic discounts and products. For example, the MCA does not allow customers to renew SA for perpetual licenses like Windows Server and SQL Server, which could force organizations to migrate to higher-cost server subscriptions or use additional programs like Open Value.
- Microsoft 365 Licensing Challenges: Moving from an EA to an MCA could disrupt how Microsoft 365 licenses are purchased. EA customers enjoy broader options and preferential rights for Microsoft 365, which may not be available under the MCA. This could lead to customers needing to use multiple programs to replicate the same coverage, leading to higher overall costs.
- Teams Licensing Issues: The shift from EA to MCA could classify a company as a "net new customer," which would prevent them from bundling Microsoft Teams with Microsoft 365. This would force companies to repurchase Teams separately, resulting in higher costs due to the split licensing for net new customers.
3. Contract and Purchase Process:
- Simplified Contracts: One of the main selling points of the MCA is its simplified structure, with much shorter contracts (about 9 pages vs. 30 pages for an EA) and automatic renewals. This contrasts with the complex negotiations involved in renewing an EA.
- Multiple Contracts for Some: Customers may need to work with multiple resellers or licensing programs to maintain similar coverage, adding potential hassle and increasing the risk of higher costs due to the lack of integrated deals.
Conclusion
The removal of the EA option for certain Level A customers may be just the beginning. Microsoft’s broader strategy appears to be aimed at reshaping enterprise licensing, making it essential for organizations to closely monitor these developments. If Microsoft is willing to sunset EAs for one segment, it raises concerns about whether larger enterprise customers will be next. Understanding these potential shifts – and proactively evaluating alternative licensing options – will be critical to avoiding unexpected cost increases and operational disruptions.
We will be keeping a close eye on Microsoft’s behavior in the coming months, and how serious they are about moving their largest customers away from the EA. To stay current, register for one of our upcoming Microsoft Licensing webinars or contact us.
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