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The Directions on Microsoft Briefing Podcast
Moving From EA to MCA? Watch Out for These Gotchas
00:22:00
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- [00:20]
A
It's not really a secret that Microsoft is slowly but surely moving most of its commercial customers off enterprise agreements and over to Microsoft customer agreements, or MCAs. To be fair, there are some advantages to MCAs, but there are also a number of gotchas that you may not fully understand until it's too late to try to negotiate to blunt their impact. Today's podcast is all about those gotchas. Welcome to the Directions on Microsoft Briefing Podcast. I'm Mary Jo Foley, the email 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 explain what you need to know about the changes that come with MCAs. If you don't know Dean Dean works with enterprises on their Microsoft Licensing Agreements. He also trains organizations on Microsoft licensing negotiation strategies and tactics. Before he joined Directions on Microsoft, 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 with me today.
- [01:45]
B
It's my pleasure, Mary Jo.
- [01:48]
A
All right, let's dig in. I think it would be very helpful if you could start out by explaining how the structure of the MCA is different from what customers are used to with traditional enterprise agreements.
- [02:02]
B
Now, the traditional Microsoft Enterprise Agreement is a multi layer structure and it encompasses the Microsoft Business and Services Agreement, the MBSA, or if you've got an older version, an mba, an Enterprise Agreement, Enterprise Enrollment or enrollments. Sometimes customers have multiple enrollments, the Product Selection form, the Program Signature form, amendments, and through reference, the Data Protection addendums. And there are two data Protection addendums for people's reference, product Terms, Service Level Agreement, Trust center, and Service Trust Portal. That's what encompasses the we'll just call it the Microsoft Enterprise Agreement Contract Stack. Okay, some of the components are updated monthly such as the Product Terms, and some are evergreen such as the Business and Services Agreement. But there are some basic concepts such as purchase requirements, price setting and how to add and reduce licenses are in this section as well. This contract stack is well over 30 pages and just for the base of the Microsoft MBSA, EA and enrollments that does not include price sheets and amendments. Whereas the Microsoft Customer Agreement is more of a modernized, simplified, streamlined version of that on how to purchase Microsoft Cloud products and services. And really in comparison one is over 30 pages and the MCA is only 10 pages. Not too sure how they stick 30 pages into 10, but they're trying.
- [03:41]
A
So that sounds like one potential advantage, the size of the contract stack. But what else, at least according to Microsoft, is advantageous about MCAs over EAs?
- [03:52]
B
Yeah, and there are some key features that are beneficial for the customer. And let me just give you a little bit of a list. First of all, the MCA is digital and evergreen. So once you sign it, you don't have to sign it again. It doesn't expire like traditional agreements like the Enterprise Agreement that usually have a term of three years. It's modular and flexible or flexible. Customers only need to accept terms relevant to the services they use. So as new products are added, the agreement updates automatically. There's streamlined purchasing. It supports direct purchases from part or from Microsoft, from partner LED purchases via the Cloud Solutions Provider program or self service through the Microsoft website. There's simplified billing and cost management. The MCA consolidates billing appropriate across services and allows for customized invoices and provides tools for budgeting and cost optimization. There's a unified management experience. Customers manage subscriptions and billing and access through centralized portals like the Azure portal or the Microsoft 365 admin center. And there are no minimum purchase requirements. Unlike the traditional volume licensing, MCA has no minimums making it accessible for businesses of all sizes.
- [05:13]
A
Okay, that sounds reasonable and like a good list. But then when we were talking about this podcast you said there it's not all roses, right? There are some potential problems when you move from an EA to an mca. And some of the ones I remember you talking about, like there's no concept of price levels, there's no standard term lengths meaning no single end dates for the same products and then no true up. So I know that you mentioned quite a few of these. Could you kind of go through that list again? What's bad here?
- [05:43]
B
This is a very long list. I will go through some of these at a high level and I know we are going to deal with a couple more detailed later on in this podcast. First of all, there is no standard term and what I mean by no standard term. The Enterprise Agreement is three years. The MCA does not have term like the Enterprise Agreement and so you may end up having various end dates for the exact same product which might not fit your budgetary requirements. At a customer level, Software Assurance products may not be included in the mca. So purchase of Windows Server Software Assurance or SQL Server Software Assurance or Office Software Assurance does not include it. The from SA SKU in the Microsoft customer agreement is not included. So the from SA SKU for the Microsoft 365 E3 or E5 that has a programmatic price discount is not included which may lead to higher prices. There's no concept of price levels which were retired. The price levels retired in November 1st of all of 2025 which now you start to think that this can also lead to higher price levels. It's not going to be one thing. There'll be regular price increases, there'll be SKUs that now you can't buy in the MCA and there's no more price levels. People will be probably challenged with the pricing here. There's no concepts of true ups. Whereas in the MBSA you want to add there is a process to add net new products whether subscription or or license and software assurance. In the MCA you just go add the product and potentially renegotiate price. At that time it is more difficult to gain concessions on the mca. We'll talk a little bit about that later on. One big one is that the MCA supersedes any other end user licensing agreement. You might think you signed it just for the Copilot pilot a couple of years ago or just for the Azure, but it does supersede and there are some things that you need to be aware of such as the license verification and the new license verification is a little bit draconian. Confidential agreement is also is with the auditor in the license verification is not there. So they've taken some things out. Also in the license verification they could look back and there are penalties. They could apply retroactively not just moving forward. The one year moratorium for audit has been removed. They've also moved some of the terms to things like the data protection addendum and the data protection addendum is updated multiple times during the year. But now they've taken it where it used to be on the enterprise agreement that they've moved to something that is updated multiple times which is more beneficial for Microsoft than it is for you because they could change these things at any point in time. Warranty changes that may be detrimental to the customer have occurred. Price setting With Microsoft as a partner there is now cancellation fee. Some products bill automatically unless otherwise instructed. Use rights that apply will need legal review by the customer because for some products it's rights when you start to use the product well, if they come out with a new version of an online service and you load that up, all of a sudden you've accepted those terms which you might not want to applicable law State of Washington. Now that's the standard language in the Enterprise Agreement, but sometimes customers do negotiate that to their area, such as Michigan or New York. Order of precedence has changed. The data protection addendum is now first and the product terms have been moved to the third position, which could have some impact to organizations. There are many more items that have changed and the customer's business and legal will need to review all of these. But that was a short list.
- [10:02]
A
That was a short list. Yikes. All right, I'm going to take advantage of that and take a break and then after the break going to delve into a few of these that Dean just mentioned. So I want to talk about why I think 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 Enterprise Agreement and mca. As Dean mentioned earlier, unless you are prepared for this, this change could mean you're facing a potential 12% price increase on your core Microsoft Cloud services like M365, Azure and Dynamics 365. So what's your best defense? It's to invest in Microsoft licensing expertise. Our next in person licensing boot camp is happening in Los Angeles February 3rd to 5th, 2026. You should send your IT procurement and ITAM leaders to learn how you can deal with these new Microsoft licensing realities. You'll learn things like how to control your Azure consumption cost so that you can cut your largest Microsoft cloud spend component. We'll help you master things like the strict licensing rules for high cost products like Copilot and Microsoft 365 add ons while ensuring you're compliant and you maximize your organization's ROI without overbuying. And we'll help you craft a tailored framework for your renewal strategy so you can secure concessions that offset lost volume discounts. If you want to secure your spot Today, go to directionsonmicrosoft.com training. You'll get to talk to Dean and our other directions licensing experts there. And if you can't make February in Los Angeles, we've got boot camps coming up in Washington D.C. and Chicago in 2026 too. All right, back to Dean and this long list of MCA gotchas. So Dean, I want to dig into a couple of the many that you mentioned here. The software assurance products and from SA SKUs seem like a big deal as they may not be included in MCA contracts. Could you elaborate a bit more on what that impact could be on customers if these changes happen.
- [12:22]
B
Yeah, basically Microsoft is doing a price increase, right? It's not a formal price increase where they're saying the price list is now increased by 10% which they generally do over a three year time frame for the products. But the from SA SKU had an inherent programmatic 15% reduction in cost and that was to basically provide customers some value from their long purchase history of buying Microsoft desktop products, basically Office360 or Office. But now with the movement away from the FROM SA because because you go to the mca you'll be buying a full user subscription license which is really, if you do the 15% reduction, it's actually a 17% increase in the cost that you're going to pay. Combine that with that loss of the programmatic levels being retired, customers should expect to pay more or have a very good negotiation stance with multiple negotiation levers to gain some relief. Otherwise you will just be paying for more for the exact same product.
- [13:36]
A
Okay, I liked when you mentioned that MCA license negotiation, I mean sorry, verification might be more quote draconian than EA verification. I got to hear more about that. What do you mean?
- [13:50]
B
Now unlike the traditional EA contract stack where there is a penalty for the non compliance and then you move forward with the new license count and whatever that payment is moving forward, the MCA allows backdating. So let me give you an example. Let's say you use Windows Server Data center and you apply the Azure use benefit to license a copy of Windows Server Data center in Azure. But you might over allocate which Microsoft will allow. You may find yourself in a non compliant situation. You might have purchased and have rights to 1000 Windows data centers and you might deploy to 1200 data centers in the cloud. That means you're not compliant by the 200 in the cloud. Now Microsoft not only will charge you the 125% penalty for that difference, but they can backdate it to as long as it's been in existence. So if you'd done that three years ago, they will take that penalty and multiply it by 36. Ouch. You may think that you signed the MCA only for Copilot back in the day when Copilot first came out. But the first paragraph of the MCA says it supersedes all other contracts, which basically means you've now adopted this draconian backdating for all products if they do a license verification.
- [15:24]
A
Well, that seems very severe. Okay, now you also talked about a bunch of things we could call the changes that I would put in the legal basket things like Use rights, warranty changes, cancellation fees and things like that. So could you walk our listeners through how these changes might affect them?
- [15:47]
B
Yeah, this is actually a really long conversation because the whole idea here is Microsoft negotiate things holistically and they also approve things together. They don't approve legal separate from the business concessions, separate from the financials. And because of that, customers need to take a look at the MCA and run it by legal to make sure that they understand what they're adopting. What does that warranty mean? What does that license verification mean? What does this mean with reference to things like limitation of liability? Because those things have changed and so all customers should have their legal review and do a comparison. Just as an aside, directions does have a comprehensive outline of the changes and the potential impact. And I if you do need to see that, please reach out to your salesperson. The legal items are all just items in the negotiation list though that need to be negotiated along with the business concessions like a longer term or financial such as a price, discount or payment terms. They all need to be negotiated together. First step is get legal to review your MCA and then build a negotiation outline because there will be some things that you have to have in there from the legal side. And one comment is sometimes people think that it's legal and I got to go just negotiate the legal. But sometimes Microsoft relates the legal terms directly to the financial terms. Things like limitation of liability and increasing the limitation of liability. Microsoft will directly relate that to discount and say if they're receiving more risk because they're increasing the limitation of liability, they have to reduce discount. You need a negotiation plan so you can have this all together. Have your lawyers review that legal part of the mca.
- [17:51]
A
Okay, good advice there. All right, so all up. Do you think it's going to be more difficult for customers to get concessions on the MCA than it was with the ea? And if so, why?
- [18:04]
B
If this was a text, this would all be in capitals and bolded. Absolutely. Yes.
- [18:12]
A
Okay.
- [18:13]
B
Most small customers will do an MCA with the cloud solutions provider. The partner may not be able to offer some concessions because they can't. Those customers that deal directly with Microsoft, unless they are large, may not be offered concessions. It may be a take it or leave it negotiation. And I'm not too sure how you get out of Microsoft 365 in a very timely fashion if you decide to leave it. In addition, customers may not have an account manager. They may only have an AI agent. As I've called in previous podcasts, Clippy in the cloud and concessions will be limited. It's our experience Microsoft is trying to make all customers use the standard contract with standard pricing. Think of Microsoft software as a utility and everybody here gets a hydro bill monthly. But you don't negotiate your rate, you just pay. Microsoft has given guidance internally and is operating to move people so that they're becoming a utility and you sign a standard contract with no concessions.
- [19:23]
A
Okay, that sounds dire. Any final thoughts to share before we end?
- [19:30]
B
You know, if I had one final thought, I would tell you that preparation for renewal is paramount. Whether you're moving to an DMCA with the CSP, an MCA Direct, or renewing your EA. If you do not prepare, you may be at a disadvantage. And I like a quote by Benjamin Franklin, by failing to prepare, you're preparing to fail. You need to have a well thought out plan. You need to know the products you're going to buy. You need to know the financial requests, the legal requests, the business business requests. And you need to understand how you are going to negotiate all of those so that you can get the best deal with Microsoft.
- [20:15]
A
All right, on that note, let's call it. Thank you so much Dean. There are a lot of good tips here for customers who are moving now or soon from EAS to mcas. So thanks.
- [20:26]
B
Thank you.
- [20:28]
A
I would like to remind our listeners 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, comments or any topics 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 for all of the latest Microsoft Enterprise product and licensing information. Thanks again.