Microsoft Enterprise Agreement: Watch That True-up

If you have 250 computers in your organization, you probably have a Microsoft Enterprise Agreement (EA). A perpetual license, the EA is designed to standardize the Microsoft products enterprise-wide, while providing the most current version. Microsoft and its resellers love EAs because it brings recurring revenue with its three-year agreement and maintenance fees.

Under an EA, the organization has a standard yearly “True-up”, where full payment is required for any new usage on products included in the EA for the remaining life of the agreement. So, if an additional 100 users were added in Year 1 and they needed (hypothetically) $3,000 worth of licensing for each user per year, the company is expected to pay $600,000 to cover the usage for Year 2 and Year 3. Then, in Year 2, another additional 500 users were added who require $2,000 in licensing for each user per year, Microsoft would expect the company to $1 million upfront.

Some considerations: 

  • Any organization that is expecting significant growth. Like many growth companies, employees are hired immediately to meet a growing demand/need, but the revenue growth is spread over the course of the year.  When faced with paying additional license fees under an EA in one lump sum based on the additional users for the remainder of the contract, it will likely be a financial drain. On the other side of that coin is any company that expects to decrease in size within the three-year term. 

 

  • Ensure that your anniversary date does not coincide with a peak period of temporary workers or temporary machines. In fact, any organization that has peak seasons that cause licensing to fluctuate should consider another type of licensing. Examples of this include: Retailers, cruise ships, camps, resorts, environmental organizations and restaurants.  

 

  • Products needed during the course of the year that are not in your EA may not necessarily need to be put under the EA. Consider the structure of or change in the business. If there are more server licenses than desktop licensing, perhaps purchasing a separate Select Agreement might be more advantageous.

So, who should consider an EA? Any organization that remains consistent in its licensing use and business model. A museum would be an ideal for an EA as the usage and users remain fairly constant.

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