- Microsoft plans to gradually move Enterprise Agreement customers to the Microsoft Customer Agreement.
- Large customers will have to review their entire Microsoft relationship, set a strategy, and get backing from the CIO and other senior leaders.
- In-house counsel will have to assess the new agreement, and then review changes multiple times a year.
- Even Enterprise Agreement veterans may need outside help for the transition.
Microsoft is gradually phasing out the traditional Enterprise Agreement (EA) that most customers use for volume purchasing. Replacement programs all depend on the Microsoft Customer Agreement (MCA), whose legal terms present challenges to customers coming from the EA. IT asset managers and purchasing professionals will need to review the entire Microsoft relationship, plan a transition strategy, and obtain support from the CIO and other senior managers. They will have to work closely with corporate legal counsel to understand how the MCA will affect the organization, and to address ongoing changes in the agreement itself. Outside advisors can help this process by focusing on the most important parts of the MCA and their impact.
The transition to the MCA will affect every aspect of volume purchasing, including legal terms, product choice, discounts, and procedures. This report focuses strictly on differences of legal terms in three areas that will affect many customers. These in turn will influence the customer’s timing and strategy (see “When Should We Move to the MCA?”).
What Should We Focus On?
Comparing the EA contract stack (fig. 1) and the CA stack (see fig. 2) takes multiple weeks. It has to be done for each customer, because every customer’s EA stack is unique. The customer’s in-house counsel will have to focus on specific areas, depending on the business and other factors. However, most organizations will have to review the areas of change discussed below.
Microsoft May Suspend Your Service at Any Time
In an EA, Microsoft has the right to end the contract and end service on 60 days notice for any reason, or on 30 days “for cause”, meaning in response to a customer breach.
In an MCA, Microsoft may also “suspend “service for cause without breaching the contract.
This can happen without notice when the customer’s payment method is declined, or when Microsoft believes it must act to protect customer data or its own services. Otherwise, 30 days’ notice is required before service is suspended.
Suspension gives Microsoft a stick to move customers along. Customers who respond slowly in a license audit or other dispute may find crucial services cut until they comply.
Audits Lose Guardrails
In an EA, basic business terms are set by the Microsoft Business and Services Agreement (MBSA) or the older MBA which it replaced. The MBSA includes rules governing audits of the customer’s license requirements and usage by Microsoft or its partners. For example, Microsoft promises to make “best efforts to not interfere with operations”, and to limit the frequency of audits (“Microsoft will not require Customer to engage in another verification for at least one year”)
In an MCA, these and many other audit restrictions are gone. This opens up the potential for disruptive “fishing expedition” audits. The biggest source of trouble may not be Microsoft, but resellers auditing customers on its behalf. The shift to the MCA has deprived traditional EA resellers of license revenue; some may try to compensate by more frequent audits in the guise of “software asset management” engagements.
Legal Terms Change at Any Time
In an EA, many legal terms were fixed for the enrollment term, typically every three years. For example, some privacy and data residency guarantees were in the MBSA, which remained static for many years.
In an MCA, customers must accept new legal terms more frequently, even several times a month. For example, the privacy and data residency guarantees that were in the MBSA have moved to the the Data Protection Addendum (DPA), which changes several times a year. Other legal terms moved to the Product Terms, which can changes multiple times each month. The upshot: Documents that an in-house attorney might review every year (or even every three years) must now be reviewed at least quarterly.
Directions Recommends
Line up in-house counsel resources now. Historically, some customers have involved their legal departments heavily in EA negotiation, others much less. In the EA-MCA transition period, all customers will need to rely on legal to evaluate the initial impact of the MCA, and to regularly evaluate changes to the MCA stack after its adoption.
Consider outside “paralegal” assistance. Licensing experts like Directions on Microsoft may not offer legal advice, but they can multiply the effectiveness of an organization’s own purchasing team and legal counsel. Their knowledge of the contract stacks and how they impact IT and business can help focus on the most important parts of the stack ,and highlight adverse changes quickly.
Engage the CIO and other C-level executives. For many customers, Microsoft is the most significant IT supplier. The transition to the MCA has the potential to upset that relationship. Whatever transition strategy the customer adopts should have full support from the CIO and others who depend on that relationship.
Advice for EA-MCA transitions and related services are outlined at “Microsoft Advisory & Negotiation“.
EA-MCA transition risks and strategy are previewed in the Directions podcast episode at “Moving From EA to MCA? Watch Out for These Gotchas“.
The start of the EA-MCA transition is outlined at “Mid-size orgs: Your Enterprise Agreement days are numbered“.
EA-MCA transition of cloud services is summarized at “Want to sign an Azure Consumption agreement? Soon, MCA may be your only option” and (for Directions members) “Transitioning Microsoft 365 from an EA to an MCA“
The basics of a traditional EA are reviewed at “Deep Dive: Microsoft EA Negotiation“.