Microsoft's (NASDAQ: MSFT) Enterprise Agreement can be a cost-saving mechanism for some organizations, but for others it results in software overpayments, warns Cynthia Farren. Farren outlines five benefits and three drawbacks inherent in the three-year EA, in a post at Network World.

The EA's benefits over other volume licensing programs include better discounts, enhanced Software Assurance, no additional reseller markup, and annualized three-year contract costs. What's more, the agreement can make software management easier because it includes an annual "true-up" clause. This clause lets customers deploy technologies as needed. Each year on the anniversary of the agreement, you have to account for the products that are part of the EA. For "enterprise products," you report increases in devices or users on a "true-up" order and pay a lump sum that covers the remainder of the contract.

The true-up clause's payment timing can be a major drawback, however, adding considerable unexpected costs. Too often organizations do not keep deployments under control and wind up paying more than they planned for. A "product added at the time of signing the EA would be charged for three years, but the cost for it is spread over the three years of the contract. However, at the year 1 True-up, that same product would be charged for 2.5 years and must be paid for in a lump payment," Farren explains.

Another drawback to the EA is that it locks organizations into paying for all users and desktops for Enterprise products. One way to avoid over-licensing is by clearly defining your "enterprise" and making sure that devices or users who don't need the software are not included in the agreement. 

"Make certain that you clearly identify your needs as an organization," Farren cautions. "Who is using what technology and how can they be segmented (or does segmenting even make sense...if not, an EA is probably not for you)?"

For more:
- see Cynthia Farren's post at Network World

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