Benchmarking Microsoft Licensing Costs
Introduction – Why Benchmarking Matters
Microsoft’s pricing isn’t public or transparent, making it hard to know if you’re getting a fair deal on licenses. Many organizations simply accept Microsoft’s first quote, not realizing it’s often padded.
Without Microsoft licensing cost benchmarks to inform your decisions, you risk silently overpaying year after year. Benchmarking your Microsoft deal, comparing your costs and discounts to what similar companies pay, empowers you with real-world context.
It shifts the conversation from “Here’s your price” to “Here’s what the market price is.” In short, knowing typical pricing and discount ranges gives you leverage to push back and ensure you’re not paying more than your peers. Read our complete guide to Microsoft Pricing & Discounts.
Benchmark data is especially crucial now. Microsoft has moved toward one-size-fits-all pricing and phased out many automatic volume discounts.
That means if you don’t negotiate, a 5,000-seat company could pay roughly the same per license as a 500-seat company. Benchmarking lets you identify if your quote is out of line.
It’s the compass that can keep your negotiations on course toward a fair deal instead of Microsoft’s opaque “just trust us” quote.
If you arm yourself with data on what other organizations are paying, you can enter your renewal discussions confident and skeptical – ready to demand better if needed.
What to Benchmark
When preparing for a Microsoft Enterprise Agreement (EA) renewal or a new licensing deal, consider benchmarking these key factors:
- Percentage Discount Off List Price: How far below Microsoft’s official list price is your quote? This is a core metric – e.g., are you getting 20% off, or just 5%? Larger customers should see bigger off-list discounts.
- Per-User Costs for Microsoft 365 Suites (E3, E5, F3): Calculate your cost per user for major bundles like M365 E3, E5, or the frontline F3. This helps you compare your effective per-seat rate with other organizations. For instance, if you’re paying $34 per user/month for E3 and peers of similar size pay $28, that’s a red flag.
- Azure Unit Rates or Cloud Discounts: If you use Azure, benchmark your cloud pricing. Compare your Azure consumption rates or committed spend discounts to typical market rates. For example, what effective % savings are you getting on Azure compared to pay-as-you-go pricing?
- Add-ons and Workloads (Teams Phone, Security, Dynamics, etc.): Don’t forget all the extras. Benchmark things like Teams Phone System licenses, security add-on suites (EMS, Defender, etc.), or Dynamics 365 module pricing. These add-ons often have smaller discount ranges, but in a big deal, they can be negotiated, too. Ensure you know the typical pricing for any major add-on you’re buying.
By benchmarking these elements, you get a full picture of your Microsoft license cost comparison against industry norms.
It prevents you from fixating only on one part of the deal (say, the Office 365 price) while Microsoft slips in high margins elsewhere (like on Azure or Dynamics). A comprehensive benchmark covers all significant cost drivers in your agreement.
Read how to navigate, Microsoft Price Lists and Discount Levels.
Sources of Benchmarks
How do you find reliable Microsoft license cost comparison data when deals are confidential? Use multiple sources to piece together the benchmark picture:
- Industry Analysts & Research Firms: Firms like Gartner and Forrester, or IT research services, often gather anonymized data on Microsoft licensing. They publish reports or insights on typical discount percentages and pricing trends. These analyst benchmarks can give a credible baseline for what’s “normal” in your industry or region.
- Licensing Consultants: Specialized software licensing consultants or Microsoft negotiation advisors have insider knowledge from many deals. They might share benchmark ranges (e.g., “companies your size usually see 15–25% off on E3”). Engaging a consultant or reading their whitepapers/blogs can provide current benchmark figures drawn from real negotiations.
- Peer Groups and User Forums: Tapping into CIO networks, ITAM/SAM user groups, or procurement forums can be invaluable. Peers in similar organizations may anonymously share what discount or pricing they achieved. Even informal conversations at conferences or online communities can surface ballpark numbers (just ensure no one violates NDAs).
- Internal Deal History: Don’t overlook your own data. Gather your past Microsoft quotes, contracts, and any RFP responses. Your historical pricing trend is a benchmark in itself. Also, if you previously evaluated alternatives (like Google Workspace or AWS) and got competitive quotes, those provide context. Internally tracking the effective price per user from your last agreement gives a target to beat this time around.
- Anonymized Peer Comparisons: If direct info from peers is scarce due to confidentiality, rely on anonymized benchmarks. Many consultancies aggregate deal data without naming companies. For example, a report might say “a global healthcare firm with 10,000 seats got X% off E5.” Such anonymized data lets you compare safely. Always ensure any shared data respects confidentiality – focus on ranges and percentages, not specific company names.
By pulling insights from analysts, consultants, and peer data, you can triangulate a solid benchmark for your Microsoft deal.
The key is multiple data points – one source might be off or have a limited sample size, but several sources together reveal the real story.
This also arms you with credible evidence: you’re not just guessing what a good price is, you have data-backed justification.
Insights into negotiations, Negotiating Multi-Year Pricing with Microsoft: Step-Up Discounts Explained.
Example Benchmarks
To get a sense of where your deal might stand, here are some illustrative benchmark ranges for common Microsoft licenses and commitments.
These ranges are based on what many companies manage to negotiate, though your results will vary depending on size, leverage, and timing:
| License Type | Typical Benchmark Discount | Notes |
|---|---|---|
| Microsoft 365 E3/E5 Suites | 15–30% off list price | Large enterprises (thousands of users) often push toward the higher end (20–30% off). Smaller organizations may only get 5–15%. Microsoft sometimes gives extra E5 discounts (up to ~30%) to encourage upgrades from E3. |
| Azure Consumption Commitments | ~10–20% effective savings | Multi-million dollar Azure commitments can yield 10% or more in discounts/credits. Aggressive negotiators with a competitive cloud alternative (AWS/GCP) have secured higher (20%+), but modest spenders might see <10%. |
| Add-ons & Workloads (Teams Phone, Security suites, Dynamics, etc.) | 0–10% off (often minimal) | Standalone add-ons usually have low discount margins. However, if you bundle these extras into a bigger deal (e.g. include Teams Phone with an E5 renewal), you can sometimes negotiate some percentage off or additional value. |
These benchmarks are for illustration; actual discounts vary. For example, a Fortune 500 company renewing 10,000+ E3/E5 licenses could negotiate ~25% off, especially if they hint at exploring Google Workspace.
In contrast, a 300-seat firm might only get 5% off Microsoft 365 Business Premium because its volume is low.
Azure discounts also swing widely – Microsoft might initially offer only 5% off pay-as-you-go rates, but if they know AWS is courting you, they might match a 15% lower rate or provide credits. The key is knowing these ranges so you recognize a “good” deal versus a mediocre one.
Benchmark by Industry or Size
Not all organizations can achieve the same discounts – your industry and size play a big role in Microsoft’s pricing flexibility.
It’s important to benchmark against peers of a similar profile. For instance, a regulated government agency’s deal might look very different from a tech startup’s.
Here are typical patterns by size and sector, and how you can position yourself:
Regulated Industries: Government, education, and other regulated or public sectors often get tailored pricing. Governments may have pre-negotiated agreements or bulk purchasing programs that result in significant discounts or special licensing terms. Education and nonprofits get academic or charity pricing, which is much lower than commercial list prices. If you’re in these sectors, leverage any available special Microsoft programs and emphasize your public mission or budget constraints to negotiate better rates.
Enterprise (5,000+ seats): Large enterprises typically see 20–30% off major Microsoft 365 licenses as a benchmark. If you have thousands of users, Microsoft highly values your account – use that as leverage. Emphasize your volume and the revenue at stake. Enterprises can request extras, such as price protections, flexible payment terms, or enhanced support, in addition to strong discounts. Don’t settle for a single-digit discount at this scale; peers your size are usually in the twenties (percent off list) for core products.
Mid-Market (500–5,000 seats): Mid-sized organizations might expect roughly 10–20% off in well-negotiated deals. You have some volume leverage, but not as much clout as a Fortune 500. To punch above your weight, highlight your growth trajectory (future spend potential) and consider multi-year commitments. You can also create a competitive atmosphere by evaluating alternatives (e.g. multiple resellers or cloud providers) – showing Microsoft that you’re not a captive customer can push your discount toward the higher end of the typical mid-market range.
SMB (<500 seats): Smaller businesses generally pay closer to list price, sometimes only a few percent off if any. Microsoft’s licensing programs for SMBs (like CSP subscriptions) often have fixed pricing. However, if you’re nearing the upper end of SMB or bundling many Microsoft products, you can ask for a bit of a break. Focus on bundling: Microsoft might give a small concession if you adopt a full package (say, Microsoft 365 plus Azure credits). Also consider working with a Microsoft partner or reseller who might offer a slight discount or added services. Still, realistically, smaller firms won’t see the 20%+ discounts that big enterprises do – the leverage just isn’t the same.
Checklist – Positioning Your Deal by Size & Industry
- ✓ Leverage Your Strengths: Identify what makes Microsoft want your business. Large seat count? Strategic industry logo? Rapid growth? Use those as bargaining chips. (E.g., “As a top player in finance with 6,000 seats, we expect pricing aligned with other large financial firms.”)
- ✓ Enterprise Tactics: If you’re a big enterprise, don’t be shy about pushing back hard. Reference that companies of similar size get ~25% off – make Microsoft justify why your deal should be any higher. Consider consolidating more services into the EA (Windows, Security, Azure) to increase your negotiation leverage.
- ✓ Mid-Market Strategies: If you’re mid-sized, gather any benchmark data from peers or consultants that show the 10–20% range. Let Microsoft know you’re benchmarking. You might say, “Our analysis of similar companies shows around 15% off – we need to see something in that ballpark.” Also, consider playing resellers against each other to obtain the best quote, if applicable.
- ✓ Small Business Tips: If you’re small, you may not get a huge discount, but you can still negotiate value. Ask for things like a longer price lock (so your rates won’t increase for a few years) or toss in a request for a minor discount, saying, “We know we’re not your largest client, but if you can help us now, we’ll remember it as we grow.” Even a 5% break is better than nothing.
- ✓ Industry Considerations: Use industry context. Public sector or education? Mention budget cycles, bidding rules, or public pricing expectations to seek lower rates. Highly regulated industry? Emphasize that compliance needs force you to consider E5 or extra features – if Microsoft wants you to adopt them, they need to meet a target price. Essentially, show that you know what similar organizations are paying, and insist on a competitive deal for yours.
Signs You’re Overpaying
How can you tell if you’re paying the “Microsoft tax” and leaving money on the table? Look for these warning signs in your current agreement or quote:
- Paying List Price at Scale: If you have hundreds or thousands of users but are paying full Microsoft list prices, that’s a glaring sign. Large organizations should virtually never pay the public web price for Microsoft 365 or Azure.
- Higher Unit Costs than Published Rates: Compare your per-user or per-core costs to any publicly available pricing (for instance, Microsoft 365 E3’s web direct price is around $36/user/month). If your effective rate is higher than the online price or even equal to it despite your volume, you’re likely overpaying.
- Below-Peer Discounts: Perhaps you did get a discount, but how does it stack up? If similar companies usually get ~20% off and you got 5%, Microsoft might have taken advantage of information asymmetry. A too-small discount is effectively overpaying compared to the market.
- Lack of Clarity on Discount: If your Microsoft proposal is so convoluted that you can’t tell what your real discount is, be cautious. Sometimes, Microsoft bundles software and services in a way that obscures the effective unit costs. If you can’t pinpoint your percentage off list (or your sales rep evades the question), it’s a red flag that you may not be getting a great deal.
Other subtle signs include Microsoft not pushing back at all in negotiation (if they accept your first counteroffer, you probably aimed too low), or discovering you’re getting fewer add-ons/freebies than peers (like others got free training seats or planning services included, and you didn’t). Always scrutinize your deal for these clues, and if you spot them, it’s time to double down on negotiation and bring benchmark data to the table.
Using Benchmarks in Negotiation
So you’ve gathered some benchmark intel – how do you actually use it to improve your deal? Here are some negotiation tactics to maximize the value of your benchmark data:
- Keep Specifics Close to the Chest: You don’t want to show Microsoft a printout of someone else’s contract; that could breach confidentiality and tip your hand too much. Instead, reference benchmarks in general terms. For example, say “Peers of our size are seeing closer to 25% off – we’ll need to be in that range” rather than “Company XYZ got 27% off and we want the same.” This way, you make your point without over-sharing the source.
- Anchor the Conversation: Use the benchmark as a starting point for talks. If you know the industry average discount is 20%, begin by asking for more – say 25–30%. By anchoring high (but within a plausible range), you leave room to “concede” down to that average. Microsoft will see that you’re informed and have a basis for your ask. It dispels the myth of their first quote being the best you can do.
- Cite Industry Norms and Expectations: This can help frame your requests as standard practice. E.g., “Our board expects us to secure pricing in line with industry benchmarks,” or “Given what we’re hearing in the market, a 15% discount is viewed as a baseline for deals like this.” This puts psychological pressure on the seller by implying their offer is an outlier or will be judged externally.
- Leverage Competing Options: If benchmarks show better deals are out there, subtly remind Microsoft that you have options. Perhaps mention you’re also benchmarking against moving certain workloads to another cloud or splitting licenses through a partner. For instance, “At these prices, we might consider shifting some users to a month-to-month cloud solution – unless we can get more competitive EA terms.” Microsoft will understand they could lose business, which strengthens your position.
- Use Benchmarks for Concessions, Not Just Price: Pricing benchmarks can also support asks for non-price items. For example, if peers all got a 3-year price lock and you only got a 1-year, push for parity. Or if others got consulting days or support credits, request those by saying, “Typically, enterprises get X included – we’d like that too to be on par with the market.” Benchmarks justify that your asks aren’t pie-in-the-sky; they’re based on what others have achieved.
Finally, maintain a confident, data-driven tone in negotiations. When Microsoft reps realize you’ve done your homework on Microsoft EA pricing benchmarks, they’re more likely to treat your demands seriously.
It shifts the dynamic from a one-sided sales pitch to a fact-based business discussion. Just remember to use the data as a guide and leverage – not as an ultimatum that backs Microsoft into a corner (you want them to work with you to meet your goals).
Caution – Apples to Apples
While benchmarks are powerful, they must be applied carefully. Always ensure you’re comparing apples to apples when evaluating your deal against a benchmark.
Some factors that can skew comparisons include:
- Software Assurance (SA): Are the prices you’re comparing including Software Assurance or not? SA (which provides upgrades and support) can add cost. Make sure a peer’s “per user” cost that you’re eyeing includes the same elements as yours. An EA might bundle SA by default, whereas CSP pricing might not. Adjust for those differences.
- Local Currency and Region: Microsoft pricing varies by region and currency. A 20% discount in the US might still be more expensive in absolute dollars than a 15% discount in a country with lower list prices. Additionally, currency exchange rates and local market conditions can impact deals. When benchmarking globally, convert to a common currency and consider local market factors.
- Cloud vs. On-Prem Splits: An organization heavily using cloud services (Microsoft 365, Azure) might negotiate different discounts than one buying traditional on-premises licenses. Cloud subscriptions often have different discount dynamics (sometimes smaller, since Microsoft prefers recurring revenue). If you’re comparing your mostly-cloud deal to someone’s mostly-on-prem deal, the benchmarks might not align perfectly. Break out cloud versus on-prem components if needed and benchmark those separately.
- Contract Terms and Extras: Check if the benchmark deal had any special terms. For example, a peer’s EA might be a 3-year commitment with a certain ramp-up plan, whereas you’re looking at an annual subscription model. Or maybe they agreed to an Azure consumption target that earned them extra discount points. These context details matter. Always normalize the comparison – remove or account for any extra commitments, longer terms, or unique incentives that could make one deal cheaper than another.
In essence, benchmarks are a guide, not a gospel. Use them with full awareness of context. If a number looks way different (higher or lower), ask why – don’t just assume Microsoft is short-changing you.
Perhaps that peer deal included a big one-time promo or is in a sector with special pricing.
Adjust for the differences so you know the true “market rate” for a customer like you.
This way, you avoid misapplying data and can confidently counter Microsoft’s proposals with fair, apples-to-apples comparisons.
FAQs
Q: How do I know if my Microsoft discount is competitive?
A: Compare it against known benchmarks for organizations of your size/industry. If you have a 10% discount, but most of your peers receive 20%, yours is not very competitive. Also, see if your unit costs are lower than buying direct from Microsoft’s website – if not, that’s a sign. Using independent benchmark reports or consulting services to validate your discount is another effective step. In short, you know it’s competitive when it aligns with what others in similar circumstances are paying (and ideally beats the average a bit).
Q: Do Azure discounts and benchmarks work the same way as Office 365?
A: Azure can be a bit different. Microsoft 365 (Office 365) discounts are often more straightforward as a percentage off the license list price. Azure, being a consumption-based service, often utilizes credits or committed spend discounts. Benchmarks for Azure might say “X% savings for a $Y million commitment.” The concept is similar – you want to know if you’re getting, say, 15% off Azure versus the typical 10% – but it’s not always apples to apples with seat licenses. Still, you should absolutely benchmark Azure rates; just tailor the approach (e.g., per-unit cost of key Azure services or overall effective discount on your Azure spend).
Q: Can mid-size companies benchmark against large enterprise deals?
A: They can as a reference point, but it’s important to set expectations. A mid-size firm (say 1,000 users) might hear that a 50,000-user enterprise got 30% off – that’s not a realistic target for the mid-size firm due to volume differences. However, you can still learn strategies from large deals and see if any pieces apply (maybe the large enterprise got a certain concession you could also ask for on a smaller scale). Primarily, mid-size companies should benchmark against similarly sized peers. Use large enterprise data for context or inspiration, but not as the direct bar for your deal.
Q: How often should we benchmark our Microsoft pricing?
A: Ideally, before every renewal or major purchase. Microsoft’s pricing and discounting trends evolve every year. What was a good deal three years ago might be subpar today if Microsoft adjusted pricing models or if your company grew. By benchmarking ahead of each EA renewal (typically every 3 years) or big license expansion, you’ll always negotiate with current market information. It’s also wise to do a light benchmark annually or whenever Microsoft announces significant price changes – just to ensure you’re still in line and consider mid-term adjustments if needed.
Q: Is benchmark data alone enough to secure better discounts?
A: Benchmark data is a powerful tool, but it works best combined with a solid negotiation strategy. Simply telling Microsoft “I know others pay less” won’t automatically make them cave–you need to pair that knowledge with leverage and a collaborative yet firm approach. For example, having benchmark data helps you confidently push back and walk away from a bad offer. Still, you also need executive support (willingness to consider alternatives) and timing (like negotiating at Microsoft’s quarter-end) to maximize impact. Think of benchmarks as the evidence behind your requests. They strengthen your case, but you still have to make the case and advocate for your organization’s interests.
Five Expert Recommendations
To wrap up, here are five expert tips to ensure you’re getting the best deal on Microsoft licensing using benchmarks and smart negotiation tactics:
- Always establish your baseline unit cost before negotiating. Calculate what you’re currently paying per user or per service. This is your internal benchmark to improve upon. It also helps convert Microsoft’s complex proposals into simple terms (e.g., “We’re paying $300/user/year now; we want to get to $250”). Know your starting point so you can measure any “savings” properly.
- Compare your discounts against peer benchmarks by size and industry. Don’t accept Microsoft’s word on a “standard” discount. If you’re offered 10% off, confirm whether similar organizations are receiving 15–20% off. Use that peer data to set your target – and share those expectations with Microsoft. It signals that you demand a deal in line with your industry’s best practices.
- Leverage Azure commits and volume to push percentages higher. Microsoft often gives more when you bundle more. If you can commit to a certain Azure spend or consider adopting an additional Microsoft product, use that as a bargaining chip for deeper discounts. For instance, “If we commit $2M to Azure, we expect a higher discount on our M365 licenses.” Your total Microsoft footprint can unlock cross-product savings.
- Don’t accept “standard” – use benchmarks to demand better. Microsoft reps might say, “This is our standard offer.” Treat that as a starting point, not the final word. If benchmarks show you can do better, politely but firmly insist on it. This may require reaching out to Microsoft’s management if necessary. Remember, “standard” often just means “what others who didn’t negotiate got.”
- Document negotiated benchmarks in your contract to protect pricing at true-up. Once you win a better price or discount, make sure it’s clearly written in the agreement. For example, if you negotiated a 25% discount on E5 licenses, ensure the contract specifies the per-user price or the discount percentage. This prevents misunderstandings later (such as at true-up or renewal time) and holds Microsoft to the agreed-upon benchmark. It’s your insurance that the hard-won pricing doesn’t creep up quietly.
By following these recommendations, you’ll be well-positioned to benchmark your Microsoft licensing costs effectively and negotiate with confidence. In the end, the goal is to ensure you’re not overpaying and that your deal is right-sized and competitive.
Microsoft’s opacity around pricing can be frustrating, but with the right data and approach, you can cut through it and secure an agreement that treats you fairly – or even gives you an edge over your peers.
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