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Since writing this blog, MicroAge Cloud Services Director Rick Trujillo has also created a comprehensive six-minute video on the topic. If you prefer watching over reading, you can play it here.
Microsoft’s partner community is arguably its most valuable addendum, and for years the Cloud Solutions Provider (CSP) program has become the core model for organizations purchasing cloud services. Relationship-focused support and consulting services to help clients zero in on unique goals and requirements to modernize the cloud environment are all key attributes for a good CSP partner.
CSP Partners also own the responsibility of staying on top of the constant and abundant changes in Microsoft processes and technologies and understanding and explaining them in a comprehensive way.
As Microsoft continues to drive focus on the management of cloud services and expand the ecosystem of products that are available in Microsoft 365, Dynamics 365, and Power Platform, the tech mammoth is making some pricing and sourcing adjustments that may change the way your organization consumes its cloud environment.
Major Changes are Coming from Microsoft to the Way You Consume and Pay for M365 and Office 365
Recent announcements and updates from Microsoft reveal changes to Office 365 and M365 plans and pricing in three key areas:
- A price increase is coming on March 1st of 2022 for six of the core Office 365 and M365 Plans.
- June 30th of 2022 will bring the introduction of the New Commerce Experience (NCE) including price adjustments depending on how the client purchases and manages their licensing.
- Clients who qualify for Microsoft Enterprise agreements with 2,400 seats or fewer who can benefit from additional support and insight can now consider working with a CSP partner in the NCE program instead of entering or renewing an EA contract with Microsoft.
Keep reading for a thorough breakdown of each of these updates and how they relate to each other.
The Price Increase
To Microsoft’s credit, it hasn’t raised prices on any of its cloud services for some time. Meanwhile, Microsoft has been continually adding features and new products to these services, so the price increase (for the growing value and ROI) is possibly long overdue. The price increase itself is only impacting six of the core Office 365 and Microsoft 365 plans, including:
- Microsoft 365 Business Basic (up from $5 to $6 per user)
- Microsoft 365 Business Premium (up from $20 to $22 per user)
- Office 365 E1 (up from $8 to $10 per user)
- Office 365 E3 (up from $20 to $23 per user)
- Office 365 E5 (up from $35 to $38 per user)
- Microsoft 365 E3 (up from $32 to $36 per user)
March 1st, 2022 marks the official start date for the pricing increase on these specific Office 365 and M365 plans.
So, does this mean if you currently own any of these license plans that on March 1st, your pricing will go up automatically? Not exactly.
If you are a Microsoft customer who prepays for your licensing a year at a time (annual prepay), then this price increase will not go into effect until your annual term renews on or after March 1st of 2022.
If you are a Microsoft customer on a month-to-month license payment plan, whether you know it or not, behind the scenes you are actually on an annual subscription model. While you are not obligated to stay on the annual subscription basis and can cancel and make license adjustments at any time, if you check your admin center in the licensing section, you will notice that each monthly plan still shows an expiration date sometime in the future. Meaning the price increase will not take effect on your monthly plan until the subscription renews on or after March 1st of 2022.
All of that said, if you provision or upgrade any of these products on or after March 1st of 2022, then you are subject to an instant price increase. So, timing is key, and planning is important.
New Commerce Experience (NCE)
This one is trickier, just bear in mind that the NCE program is different from the previously mentioned model on price increase, although they do stack in some cases.
NCE impacts all cloud products for O365, M365, D365, and Power Platform in that the client must evaluate how they want to transact these products long term. There are a couple of options to consider, taking effect on June 30th, 2022.
- You can continue month-to-month payments for these products, however, there is a premium for this level of flexibility. Items to note:
- A 20% price increase will impact these products.
- This premium is on top of the price increase for the six O365 and M365 plans previously mentioned.
- You can commit to an annual or multi-year agreement for certain products, rather than pay month to month. Items to note if you commit to annual or multi-year:
- You are not subject to the 20% price increase
- You can pay all upfront or still have the option of paying off the commitment monthly. Either way, you are responsible for paying the entire commitment, even if you try to cancel early.
- Your partner for the subscription, whether Microsoft Direct or a CSP provider cannot be changed during the term of the commitment.
- You are price-locked for the products provisioned during the term of the commitment.
- You can increase license counts at any time, but you cannot reduce license counts until the committed term is up for renewal.
- You can upgrade products in the committed plan at any time.
- If you commit to NCE after June 30th, 2022, you are also subject to the price increase for the six O365 and M365 plans detailed above.
Remember, if you are currently a cloud services customer with Microsoft, you already have a subscription in place for your products. Whether you are paying upfront annually or monthly, the price increase for the six plans and NCE won’t take effect until the renewal date of your subscriptions, on or after June 30th, 2022 for NCE specifically.
The official deadline to fully transition to the NCE program for all Microsoft clients is February 1, 2023.
For decades, the Microsoft Enterprise Agreement has been positioned and sold as the most cost-effective and benefit-driven program. The agreement does include some caveats like long-term commitment (three years), large annual payments, and lack of flexibility (license reductions done annually). Still, for large clients, EA is an important option to consider, mainly due to volume discounts.
Starting on June 30th, 2022, the Enterprise agreement for clients 2,400 seats or fewer will be price leveled to match the upcoming New Commerce Experience (NCE) changes. That means existing or potential EA clients may not see the volume pricing benefits they would have experienced before. With that in mind, the relationship and support-focused CSP model with NCE must be carefully evaluated.
Clients who have fewer than 2,400 seats can still have an EA, the minimum seat count is 500 seats, however, it may not be as beneficial as the legacy EA model after June 30th, 2022.
Your Action Items Now
In summary, as simple as you try to make it, the pricing and program changes are challenging to understand and assess. It is critical to consult a partner that carries Microsoft licensing expertise, gold certifications, forward-thinking services, and a willingness and ability to explore options with your user benefits in mind.
Don’t wait, now is the time to understand the impact of Microsoft licensing changes on your business and to consider early adoption of these programs with a reliable partner.
About the Author
Rick Trujillo is the MicroAge cloud services and connected workforce director, heading up our cloud initiatives and partnering with IT leaders to maintain their momentum and competitive edge. Rick has more than three decades of experience in technology and is dedicated to supporting organizations in driving their cloud-first approach while maximizing performance and value.
Our Microsoft gold-certified, award-winning cloud experts are ready to help you explore and assess the right long-term options for your organization’s Office 365 and M365 approaches, ensuring you unleash the greatest value and benefits while you keep your focus on your customers.