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The Directions on Microsoft Briefing Podcast
Microsoft Licensing and Negotiation: A Year in Review
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Foreign.
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As 2025 comes to a close, it's a good time to look back on what's been going on in the Microsoft licensing and negotiation space. Our team here at Directions has thoughts about what the tea leaves are telling us. What's hot and what's not when it comes to your Microsoft contracts. I have the perfect guest to help answer that very question. Welcome to the Directions on Microsoft Briefing podcast. I'm Mary Jo Foley, the editor in Chief here at Directions. I'm your host for this series of podcasts. For those interested in the Microsoft enterprise IT ecosystem, we've got Directions on Microsoft licensing expert and negotiator Dean Bedwell as our guest today to share his observations from the front lines about what's happening with Microsoft negotiation tactics, levers and more. Dean works with the enterprises on Microsoft licensing agreements. He also trains organizations on Microsoft licensing negotiation strategies and tactics. Before he joined Directions on Microsoft Team, Dean was President of Software Asset Advisors, a software licensing consultancy. And before that, Dean spent 11 years at Microsoft managing the Canadian Business Desk where he was responsible for negotiating agreements with Microsoft's largest enterprise and public sector customers. Hi Dean, thank you so much for doing the podcast again with me today.
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It's my pleasure, Mary Jo.
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Alright, let's talk about some of the big changes that happen in 2025 around EAs, MCAs and even there were a lot of changes. There are some constants. One you've mentioned quite a bit is that Microsoft is still willing to negotiate with at least some organizations around the terms of their contracts. So I'm curious what kind of companies are in the best position to negotiate and why?
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That's a great question. To be in a position of strength when negotiating with Microsoft, there are some basic negotiation levers that really aid in your journey. And yes, Microsoft is still negotiating many items as it relates to contract negotiations. Whether you continue with your enterprise agreement or your Microsoft customer agreement, the fundamentals actually remain the same. Size is actually not the main factor. Large and small customers can still negotiate with Microsoft. But some of the things you have to keep in mind as you negotiate is are you an iconic brand? Are you a Pepsi? Are you a Starbucks? Does Microsoft need the revenue? Are you using more Azure, more Microsoft E5? When are you deploying? Do you have competitive alternatives and are you adopting the Microsoft focused products in the security area? Copilot or Azure? Once you have a clear picture of what you're going to license from a product perspective along with your negotiation levers, then you can start negotiating. I know this is cliche but in this case, knowledge is truly power.
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Okay, so I'm curious. So one of the things you mentioned is competitive alternatives. And I'm curious, in 2025, does that really matter or does Microsoft say, oh yeah, sure, you're saying you're going to go to Ada, AWS or Google Cloud, but that's basically impossible once you're all in with Azure. So is it still a thing that customers should worry about having a competitive alternative when they negotiate?
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Yeah, competitive alternatives are absolutely critical. They may not be the one and only thing as a negotiation lever, but they're a major one. But it's not just a competitive alternative. You have to make it a viable competitive alternative. A veiled threat of I'm moving to AWS or Google Workspace or Google Cloud just doesn't work. You need to do things like start a pilot with that technology, do an rfi, an RFP so that it hits the street and let that competitor and Microsoft win. Build a plan to migrate to that technology even if you aren't going to do it. So Microsoft thinks that it's a viable competitive alternative. You also have to think of it is, is this competitive alternative in really the Microsoft product group that they're interested in? You know, if you're talking to Microsoft and Power Platform pops up, well, maybe it's a competition with UiPath or if you're dealing with Power BI, maybe it's Tableau or CRM. You're looking at Salesforce. It can't just be some small little technology. It has to be something that's important to Microsoft. And right now the big things that are important to Microsoft are Security Copilot and Azure. Picking a competitive, viable alternative in that area and doing some of the things that I've mentioned will actually help you get a better deal with Microsoft.
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Okay, cool. All right, let's talk about some of the other trends you're seeing. What about things like length of contracts? Is that changing? Can and should companies try to get longer term contracts with Microsoft or is this now way more difficult because of the move that they're taking on to push companies to MCAs from EAS?
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As I look back over the last year, you know, directions on Microsoft is seeing a number of trends and in this section we'll probably talk about a number of those. And right now let's talk about the two that you've asked about the longer term contracts. First, why do you want to do a longer term contract? It actually fixes the price and so you don't have to negotiate in that Duration I want to add a new product. It's or a new license. It's already priced. Now usually the enterprise contracts are three years. Enterprise agreements are three years in duration and you may have an option for an additional three years. This has some issues that are related. Basically when you do that option of the three years you're not negotiating the sort of the terms are, they're carried forward but you still have to negotiate pricing. I'm not sure why someone would do this because it's really one of those things that you need some other things to negotiate to trade away. And when you're transitioning to higher level SKUs or moving to a new product that's significantly more in price from let's say Microsoft 365E3 to E5 Microsoft may offer a non standard term. 5 years is becoming more common and it seems that Microsoft sellers can do this without significant management or deal manager involvement. Now the MCA is sort of another animal. You have to be careful on how you add products. You may end up with different terms for different and sometimes the same product. You may have a contract that is evergreen in the MCA but different end dates for let's say Microsoft 365 versus oh it ends at this time. But the basic of doing longer term contracts is absolutely important because it does fix pricing for you. Okay, now I do want to just talk a little bit about, you know, discounts because you open the door to say, you know, contracts and some things that we're doing. And so Microsoft, another trend that we're seeing may discount Copilot. Now when Copilot first came out, discounting was limited. It was usually single digits were common. It wasn't the larger level of discount. In addition, when Copilot first came out, you purchased Copilot through the Microsoft customer agreement. And as we've talked about in a previous podcast, this comes with other issues that are related to the mca. But it seems that Copilot is a product looking for a solution. Many customers are in the early stages of review and trial and Microsoft is pushing some customers to make some significant customer purchases. But it's not like Microsoft 365 yet. Right now Microsoft may discount Copilot similar to Microsoft 365. And it would be prudent for customers to think about asking for discounts for Copilot that are in the range of 35 to 40%. That might be more realistic. Wow.
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Okay. We realized we were already at that level. That's very interesting. Okay, I want to take this moment to Take a quick break so I can talk for a minute about why you should make it a priority in 2026 to attend one of our Directions on Microsoft Licensing and Negotiation boot camps. As of November 1, 2025, Microsoft eliminated tiered volume discounts for online services in the EA and the mca. Unless you're prepared, this change could mean you're facing a potential 6 to 12% price increase on your core Microsoft Cloud services like Microsoft 365, Azure and Dynamics 300. So what's your best defense here? It's to invest in Microsoft licensing expertise. Our next in person directions on Microsoft Licensing Boot Camp is happening in Los Angeles from February 3rd to 5th, 2026. You should send your IT procurement and ITAM leaders so they can learn how to deal with the new Microsoft licensing realities. You'll learn things like how to control your Azure consumption costs so that you can cut your largest Microsoft Cloud spend. Component will help you master things like the strict licensing rules for high cost products like copilot and Microsoft 365 add ons while making sure you stay compliant and maximize your organization's ROI without overbuying. And we will help you craft a tailored framework for your renewal strategy so you can secure concessions like we're talking about today that can offset those lost volume discounts. If you'd like to secure your spot today, go to directions on Microsoft.com training. You'll get to talk to Dean there and our other Microsoft licensing experts. And if you can't make February in Los Angeles, we have other boot camps coming up in Washington D.C. and Chicago in 2026 too. Okay, back to Dean's list of naughty and nice licensing and negotiation trends. So we've just been talking about contract terms and Copilot, but I'm curious about some of the other trends you've been seeing this year around discounting other Microsoft products like Azure, Microsoft 365, E5 and so on.
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Yeah, discounting other products is another trend we're seeing where you know, Microsoft is actually reserving the higher level discounts for products like E5 and Azure and Copilot and what we call it Directions. Some of the batteries nodding included products like Power BI Dynamics and Power Platform. We believe in what we're seeing Microsoft is that discounting on traditional products like SQL Server and Windows Server are being offered and regardless of size of the customer are being offered limited discounts. In most cases, customers should expect discounts on these products to be either non existent or or low single digits.
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Okay, that makes sense with the push Away from on prem to cloud. Okay. So I've heard from customers that they assume if they purchase more from Microsoft, they're in a better position when it comes to negotiating with them. But I've heard you say deployment is really king, not the amount that a company commits to buy. Could you explain that a little bit more?
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Yeah, deployments are really the king at Microsoft right now. As we've talked to Microsoft account reps and different Microsoft people that it is really the deployments that are driving their behaviors. Now, you might think it is the amount that you've purchased. You know, how much revenue did I give Microsoft? And yes, as you go up the chain, revenue is very important. However, deployment is what's driving the salespeople and the feed people with the feet on the street. It's not what you've purchased, it's what you've deployed that is what's driving their incentive plan. And to aid ensuring that customers are deploying, Microsoft may even ask that you put an amendment together to lock in deployments and may even say no deployment, no discount. And so what we're seeing and what Microsoft is trying to do is to not just sell you the product, but to get you to use the product. It's not so much about buying E5, it's about using the security and the compliance things. That's what the salespeople are driven towards.
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Okay, so we, we cannot talk about 2025 trends without talking about EAs and whether they have a future. So, Dean, are EAS dead? Everyone wants to know that answer.
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Is the enterprise agreement dead? Well, like every Microsoft question, the answer is it depends. The EA is a volume license construct that's been around for, I don't know, 25 years. It's still a viable offering by Microsoft. And Microsoft is renewing customers with enterprise agreements even now. But Microsoft is pushing the Microsoft Customer Agreement or MCA as an alternative. And really, the arrow's been fired. The future is the Microsoft Customer Agreement, but As I said, EAs are still being signed. Now, if you're a smaller customer, the MCA might not be an alternative, but it might be your only choice. And that's because you might not have an account rep to talk to anymore. And so you'll need to go to a CSP provider, cloud solutions provider, to execute a purchase using the MCA as a vehicle. Now, whether you're doing an MCA Direct with Microsoft or use it to purchase through a cloud solutions provider, it is really the MCA is the future. And although the EAs are still being signed, and that includes the enterprise enrollments underneath the EA contract stack or their server and cloud enrollment. It appears the MCA is the future. At some point in time, most customers will be transitioned to an mca.
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Okay, finally, let's talk a little bit about product changes over the past year and what you think this means for 2025. So here at Directions on Microsoft, we published more than 150 reports this year about different product and licensing changes that Microsoft has undertaken. So I'm curious, were there any of those reports that you feel are worth calling out for customers to check out?
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Yeah, you know, there are just too many to call out. Already this quarter we've produced 39 reports and in just December the following reports that I'll list discuss financial considerations that organizations, management and senior IT people should know for planning and cost management. Some of the reports like Understanding Purview Data Governance, Power BI Report Server Licensing changes that offer potential cost savings Azure Copilot agents that simplify Azure Operations and Optimization how new agent pricing options Affect costs Understanding Pay as you go billing for Microsoft 365 Copilot Lite agents, goodbye SQL reporting services and hello to Power BI Reporting Server or CoPilot plus and PC Check for applications you know. In that report it talks about how you may have to think about your purchases of computers because you may have a CAPEX purchase to buy new computers to take advantage of some of the new Copilot features. Directions on Microsoft produces reports on product features, how to license them and the business impact. And I've given you a list of seven different ones, but there are a number of ones that companies need to review on a regular basis so they could say what's the best way to move forward in my organization from a Microsoft perspective.
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Okay, on that note, I want to say thank you so much, Dean. I am looking forward to hearing lots more from you in 2026, all about Microsoft licensing and negotiations.
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So thanks again and thank you very much for allowing us to do this. And as a preview to next year we will probably be increasing the frequency of some of these things with to be Determined has not signed another individual that many customers will know in the market. So thank you very much. Mary Jo oh you.
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You've got my journalist hackles raised now on that one. All right. I would like to remind our listeners that they can find lots more coverage of all things Microsoft related on directions on Microsoft.com thank you so much for listening. If you have questions, questions, comments or any topics that you would like to hear the directions analysts cover in one of these podcasts, please do not hesitate to contact me via X or Blue Sky. Directions on Microsoft is also on LinkedIn, so make sure you follow us there and give us a follow at DirectionsMSFT on X or directions on Microsoft on BlueSky to keep up with all of the latest Microsoft Enterprise product and licensing information. Thanks again.