The model that sits behind every credible Microsoft renewal recommendation. Year by year cash, indexation, currency, audit reserve, optionality value. Built against actual consumption telemetry and a defensible forward forecast, not against Microsoft list price.
Microsoft enterprise agreements default to a three year term. The MACC structure aligns to it. Software assurance benefit value compounds over it. Reserved instance discount tiers are priced against it. The three year TCO is the right unit of analysis because it matches the contract term and because it is short enough to forecast with credible confidence. Five year exposure is a different document for a different purpose.
By SKU. By geography if applicable. Modeled against active user count, not entitled user count. Add ons stacked explicitly. Copilot pilot or production status surfaced as a separate line.
Trailing twelve months consumed. Forward three years modeled in a base case, an upside case, and a downside case. Reserved instance and savings plan coverage modeled as separate line items with their own term assumptions.
By module. Tenant and user count assumptions. Step ups in years two and three named explicitly.
Server CAL stack, SQL Server, Cloud PC, AVD. Migration to cloud vehicles modeled against retained on premises footprint.
Visual Studio, GitHub Enterprise, Copilot Business. Often modest in dollar terms, often material in negotiation terms.
Power BI Premium capacity, Power Apps per user or per app, Power Automate. Capacity modeled against utilization.
An honest reserve line for mid term true ups and the contingent cost of an audit. The TCO that omits this line is the TCO Microsoft prefers you to use.
The single largest driver in the practice. Right sizing the M365 stack against actual active users typically moves the three year TCO by ten to twenty percent. Right sizing happens at the renewal or it does not happen at all.
The MACC commitment is a two way decision. Too shallow and the discount band suffers. Too deep and the overage exposure compounds. The right commit depth moves the three year cloud TCO meaningfully.
The cap negotiated against the default uplift is a compounding lever. A two percent cap versus a five percent cap is a material number across a three year term on a large estate.
A credible three year TCO needs five data sets pulled before the modeling work begins. The data is rarely in one place. Pulling it cleanly is week one work and is the difference between a model that survives the renewal conversation and a model that collapses under the first peer review.
The current MLS pulled inside the last sixty days. Reconciled against the customer agreement. Reconciled against the internal ITAM record. Discrepancies become the first set of questions Microsoft is asked to answer.
Trailing ninety days of active usage telemetry by SKU. Defines the right size opportunity and the credible forward forecast.
Trailing twelve months of consumed Azure spend by service category, by environment, by business unit. Reserved instance and savings plan coverage by workload.
A defensible three year forecast for headcount, for cloud migration, for AI workload growth, and for any major business event that materially affects Microsoft consumption. Built bottom up from business unit plans, not top down from finance run rate.
What comparable organizations are paying on similar renewals this quarter. Sourced from signed contracts where possible. The benchmark constrains the assumption set and informs the negotiation target.
A single scenario is propaganda. Three scenarios is analysis. The model surfaces the cash exposure across three explicitly named negotiation outcomes and lets the CFO and CIO understand the distribution rather than a point estimate.
The TCO model is the joint output of the practice and the client analyst team. The practice contributes the framework, the benchmark band, and the Microsoft posture read. The client contributes the consumption data, the forecast, and the institutional knowledge of where the business is heading. The engagement model below is the format the practice uses across most three year TCO builds.
The practice supports the client in pulling the five data sets the model requires. License statement reconciliation. M365 telemetry. Azure consumption history. Forward forecast. Benchmark band. Discrepancies between data sources are identified and resolved before modeling work begins.
The do nothing baseline is built first. Every subsequent scenario is calibrated against the baseline. The baseline includes the indexation default, the consumption forecast as currently planned, and the SKU mix as currently entitled.
The achievable and aggressive negotiation scenarios are constructed. Each scenario includes the structural protections, the right size discount, and the negotiated indexation cap that produces it. Scenarios are stress tested against the assumption register.
The model is prepared for CIO and CFO presentation. Sensitivity grids. Year over year curves. A one page summary that lands cleanly in the board memo template. The model becomes the analytical foundation for the renewal conversation that follows.
Two analyst calls. We model the three year cash exposure against the renewal that is on the table, not against list price.