Microsoft is making a fundamental shift in how it structures pricing across its cloud services. Starting November 1, 2025, the company will eliminate volume-based pricing tiers (Levels B, C, and D) for Online Services purchased through Enterprise Agreement (EA), Microsoft Products and Services Agreement (MPSA), and China's OSPA. All customers, regardless of size or seat count, will be charged the Level A price – the same as the public list price shown on Microsoft.com.
This change means large enterprises that previously qualified for automatic discounts due to their volume purchases will see significant cost increases. Depending on licensing tier and product mix, the effective loss in discounting could range from 6% to 15% or more. For organizations with hundreds of thousands of seats, this could translate into millions of dollars in added annual spend.
Microsoft presents this as a move toward pricing transparency and consistency across geographies, partner channels, and agreement types. But for CIOs and procurement leaders, it represents a loss of one of the most valuable levers for cost optimization and a clear indication that Microsoft is rebalancing its revenue model in favor of consumption-driven and value-aligned pricing.
Strategic Implications: What's Changing and Why It Matters
Historically, Microsoft pricing has been tiered based on customer size. Under the EA and other agreements, customers with more seats enjoyed automatic pricing benefits through tiered volume discounts. These tiers (B, C, and D) were embedded in the contractual fabric of Microsoft agreements for decades.
The new policy unifies list pricing across multiple licensing vehicles, erasing the legacy volume-based structures. From November 2025 onward, Online Services like Microsoft 365, Dynamics 365, Windows 365, and many Azure-related offerings will no longer carry embedded tier-based discounts.
This change shifts the value proposition of large enterprise agreements. Volume, on its own, will no longer unlock better pricing. Instead, Microsoft will prioritize consumption volume, strategic alignment, and platform adoption as criteria for special pricing considerations or investment funding. In effect, Microsoft is transitioning from a size-based pricing model to one based on strategic alignment and future growth potential.
Organizations that rely heavily on Microsoft 365, Power Platform, and Dynamics services will be hit hardest if they had previously benefited from tier D pricing. If an organization was paying 12% below list price and now faces Level A pricing, this differential becomes a major budgetary line item.
Moreover, Microsoft's ability to drive uniformity in pricing empowers its own sellers. By setting a global floor price and eliminating variance, Microsoft simplifies quoting and reduces customer leverage during renewal cycles. Negotiation becomes less about price and more about value exchange.
What Enterprises Should Do Now: Proactive Mitigation Strategies
CIOs and licensing leaders must approach this change with strategic urgency. The pricing shift requires both immediate planning and long-term adaptation of procurement, IT financial management, and negotiation approaches.
First, understand your exposure. Calculate how many seats are currently benefitting from discounted pricing under tiers B through D. For example, if you hold 25,000 Microsoft 365 E5 seats at a 12% discount and that discount evaporates, the financial impact could exceed $3 million per year.
Second, revisit your renewal timeline. If your EA renews before November 2025, consider renewing early. Locking in another three-year term under the current model could preserve legacy discounting through 2028. Many vendors will honour renewal terms made in advance, especially if positioned as a strategic partnership.
Third, strengthen your internal license optimization strategy. Ensure that your Microsoft 365 license allocations reflect actual usage patterns. This is the time to validate that all users assigned to E5 plans truly require advanced security, compliance, and analytics features. Many organizations find that up to 30% of their users can be downgraded without impact. Similarly, eliminate inactive or orphaned licenses that may persist due to incomplete deprovisioning processes.
Fourth, shift your negotiation strategy. Instead of pressing for volume-based discounts, focus on value-aligned concessions. Microsoft is increasingly willing to offer investment funding, pilot programs, or enhanced technical support in exchange for commitments to Copilot, Azure AI services, or security bundle adoption. Focus on commitments that are aligned with your roadmap, not just Microsoft's targets.
Fifth, consider alternative licensing channels such as the Cloud Solution Provider (CSP) model or Microsoft Customer Agreement for Enterprise (MCA-E). While these agreements offer fewer baked-in benefits, they may provide increased flexibility and shorter terms. The trade-off is higher management overhead and fewer predictable discounts, but CSPs may still offer promotional pricing and services that offset the lack of tier-based EA pricing.
Evolving Enterprise Licensing Strategy in a Post-Discount World
This policy change marks a larger evolution in Microsoft's commercial strategy. It signals a shift away from transactional volume licensing toward usage-based cloud partnerships. It also positions Microsoft to harmonize its enterprise and SMB pricing, eliminating arbitrage opportunities that have historically favored larger organizations.
In this new landscape, strategic alignment with Microsoft becomes the most valuable currency. Enterprises that adopt Microsoft cloud-native technologies, expand Azure workloads, or integrate advanced security and compliance services will have greater leverage to negotiate favorable commercial terms.
The financial management of Microsoft spend will also become more complex. Organizations will need to invest in more sophisticated license management platforms that monitor usage, track underutilized features, and model various cost scenarios. Traditional EA-centric SAM tools must be enhanced with FinOps capabilities to align consumption with value delivery.
Furthermore, IT and procurement teams must collaborate more closely. Procurement must understand the technical roadmap and identify opportunities to extract value from strategic Microsoft investments. Likewise, IT must be more disciplined in planning deployment roadmaps that unlock entitlements without creating budgetary waste.
This requires a new operating model for software vendor management: one that is cross-functional, data-driven, and deeply attuned to both enterprise priorities and vendor incentives.
Tactical Actions CIOs Should Consider
Looking Ahead: A Permanent Change to the Pricing Paradigm
Microsoft's decision to eliminate tier-based pricing is not a temporary adjustment. It reflects a deeper philosophical shift in how the company structures enterprise relationships. As Microsoft pushes for simplicity and transparency in pricing, the burden is now on enterprises to extract value through alignment, not volume.
For large organizations, this is a wake-up call. Volume will no longer be enough. To secure favorable terms, enterprises must demonstrate commitment, clarity of vision, and proactive execution.
The end of automatic discounts marks the beginning of a more nuanced era in Microsoft licensing. CIOs who evolve their strategies, build internal optimization capabilities, and align closely with Microsoft’s ecosystem will not only mitigate cost increases but also unlock new sources of value.
Now more than ever, licensing is no longer just a procurement function—it’s a strategic discipline that impacts financial health, operational agility, and digital transformation success.
2Data is an independent software licensing advisory specializing in Microsoft, Oracle, SAP, Salesforce and IBM optimization. We help companies reduce contract costs, manage risk, and simplify their software licensing.
