What to Know About Office 365 Price Increases, Licensing Commitments and How to Lock in Your Current Price
Microsoft announced a few months ago that they have re-imagined the way organizations will transact and subscribe to its fast-growing cloud solutions. This latest initiative is known as the New Commerce Experience, aka NCE. The goal of the Microsoft CSP changes is to provide more flexibility with monthly or annual terms to procure software subscriptions to meet the needs of today’s changing business.
Some Background
Microsoft’s vision with the New Commerce Experience (NCE) is to unify its cloud licensing, known as the Cloud Solutions Provider “CSP” program, with other channels of purchasing licenses. CSP will become the primary channel for buying Microsoft 365, Azure and Dynamics solutions.
The new customer experience brings licensing choices and changes including monthly, annual and three-year subscription terms. The new long-term contract under the CSP model will bring price predictability and lock-in, unlike the monthly price, which will now be offered as premium pricing.
As many customers are learning now about the Microsoft 365 price increase in March 2022 (10% increase on average), now is a suitable time to revisit your options and lock in today’s pricing or face a substantial increase in the next few months.
The key Microsoft CSP changes are:
- Price increase for month-to-month subscriptions will increase by 20%, although a promotion is introduced to keep the legacy pricing active until June 2022.
- Cancellation policies are now enforced 72 hours from ordering. If subscriptions are not cancelled within 72 hours, they will remain for the entire subscription term.
- Seat reduction policy change. Previously clients could reduce subscriptions at any time with prorated billing; with NCE, organizations can only increase the current seat number.
Here is a summary of NCE licensing options with promotional pricing available:
| Payment Plan | Monthly | 1-Year | 3-Year |
|---|---|---|---|
| Schedule | Month to Month | Annual billing in advance | Annual billing yearly |
| Commitment | Month to Month | Term lock-in for 1 year | Term lock-in for 3 years |
| Cancellation rights | After 72 hours, billed thru the month | After 72 hours, no cancellation, commitment to full term | After 72 hours, no cancellation, commitment to full term |
| Changes permitted | After 72 hours, | Only increase qty (minimum qty cannot be decreased during the term). Increase is prorated | Only increase qty (minimum qty cannot be decreased during the term). Increase is prorated |
| Pricing | 20% premium | Standard list price at time of purchase (can lock in today’s pricing thru March 2022) | Standard list price at time of purchase (organization can lock in today’s pricing thru March 2022) |
| Promotion | 16% discount lock-in thru June 2022 | 5% promotion to convert to annual commitment and billing | 3 year’s terms for Office 365 are not yet announced |
Our Recommendation for Current and New Microsoft CSP Customers
Microsoft NCS initiative started in January 2022 and now gives businesses few options to purchase and manage Microsoft 365 licensing. At Withum, we have years of experience with Microsoft licensing and can help you navigate the most cost-effective options for your organization ahead of your renewal date.
Here Are Some Considerations:
Monthly
This option is what most of our customers have been using since moving to the CSP program. You can add/\ or remove licenses monthly. Starting in April 2022 (or June 2022 with a promotion), the monthly option will cost 20% more than the current pricing. This option will remain relevant for businesses with a fluctuating workforce or those who want to have a lower commitment. Many organizations may choose to mix and match annual with a monthly commitment.
Yearly
This annual option is new for CSP and will require an annual commitment of quantity that can only be increased (not decreased). New licenses will be added with a pro-rata annual fee to match the term. Upgrade within the suite is possible, for instance moving from Business Standard to Premium or E3 to E5.
3-Years
This option is a 3-year commitment (although it has been available for Dynamics for many years) and payment is flexible (yearly or 3-years in advance). This option is ideal for a company looking to have a predictable 3-year term and little fluctuations in the workforce. At this time, this option is only available for Dynamics subscriptions and Azure reserved instances and will soon be extended to Microsoft 365.
So, What Does All This Mean for Me?
For many of our customers, flexibility has been a key advantage of the current CSP model; it is important to note that commitment can be combined. For instance, for organizations with a fluctuating workforce, you can combine yearly commitment with monthly commitment to keep some flexibility. In addition, organizations can upgrade within an annual commitment – for example, upgrade from E3 to E5 mid-term.
Key dates for the changes are summarized below:
January 2022 – new pricing and promotions become effective. Generally, a 5% discount is available for any customer wanting to migrate to an annual subscription for any subscription up to 2,400 seats (2,400 seats is the new down limit for any new Enterprise Agreement).
March 2022 – any new subscriptions are only available thru NCE.
July 2022 – renewal must take place within NCE.
June 2023 – all legacy subscriptions are retired.
Microsoft licensing is complex, and the change in the CSP program is making things more complicated. Binging years of experience working through complex licensing programs, we are ready to assist you and lock in your current price for a period of time.
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Still have questions? Schedule a meeting with us to learn more.
