Microsoft 365 licensing and pricing changes coming

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Microsoft have recently announced a number of changes recently, which will shortly be coming into effect that Microsoft customers need to be aware of. This includes a price increase for commercial Microsoft 365 plans and updates to how Microsoft 365, Dynamics 365 and Power Platform are licensed through CSP. This article will give an overview of all the changes coming, dig into the detail around the changes and highlight what you need to be considering ahead of the changes.

Updated: This article was updated 7th October following timeline changes from Microsoft, pushing the general availability of NCE back from 14th October 2021 to January 2022 and moving the promotions to January-June 2022. We are awaiting confirmation if NCE comes into effect in March 2022 as originally planned.

As a short overview, the key changes we will be discussing include:

  • A price increase (of roughly 15%) coming to Office 365 and Microsoft 365 commercial customers from 1st March 2022 – except for Microsoft 365 E5 and Frontline SKUs
  • The ‘New Commerce Experience (NCE)’ coming into effect from 1st March 2022* (but available from January 2022) which outlines new term commitments
    • Monthly term commitments to give the flexibility to increase and decrease your licence count but at a 20% price premium
    • Annual and 3-year term commitments to give competitive pricing to long-term customers but no flexibility to reduce license numbers
    • The ability to ‘mix and match’ long-term and monthly commitments to manage staffing fluctuations, such as seasonal staff

*This date may change as Microsoft have moved the general availability back from 14th October to January 2022, we are awaiting confirmation.

New pricing coming into effect 1st March 2022

At the end of August, Microsoft announced that they will be increasing the cost of commercial Microsoft 365 licences, which will come into effect on 1st March 2022. Educational, nonprofit and consumer plans are not impacted by this change, but government plans will be impacted with the increase being phased in.

This price increase is the first major price change since Office 365 was launched in 2011, however UK customers will remember an increase in line with exchange rates a few years ago. The reason for the price increase is the increased value and investment into Microsoft 365 with Microsoft having launched and included many new applications and services in their Microsoft 365 subscriptions, such as Teams, Stream, and Planner to name a few.

On average, these increases are roughly 15% however do vary slightly plan to plan. Currently UK pricing is not confirmed, as this will likely be released closer to the launch date to tie into exchange rates however US pricing has been released, which can be used as a benchmark:

  • Office 365 E1 – Going from $8 to $10 (25% increase)
  • Office 365 E3 – Going from $20 to $23 (15% increase)
  • Office 365 E5 – Going from $35 to $38 (9% increase)
  • Microsoft 365 Business Basic – Going from up to $5 to $6 (20% increase)
  • Microsoft 365 Business Premium – Going from $20 to $22 (10% increase)
  • Microsoft 365 E3 – Going from $32 to $36 (12.5% increase)
  • Microsoft 365 E5 – will not see a price increase and remains at $57
  • Frontline plans are not affected

CSP Licensing changes: New Commerce Experience

In 2019, Microsoft launched the New Commerce Experience (NCE) for Microsoft Azure to simplify licensing management and have now announced that this will expand to include Microsoft 365, Dynamics 365 and Power Platform. This NCE will become available from January 2022 and then become the requirement from 1st March 2022* for all new and renewing subscriptions.
As part of the NCE, customers can choose from three different term commitments, which will be enforced by Microsoft.

  • Monthly – This gives the flexibility to increase and decrease the number of licences every month but comes with a 20% premium.
  • Annual – This commits you to a number of licences at a more attractive price for the annual term, however, does mean that if staff numbers change and drop below the baseline you will still need to pay the baseline level. This can be paid upfront or monthly.
  • 3-Year – As above but with a 3-year commitment. This can be paid upfront, annually, or monthly.
    It is worth noting that you can ‘mix and match’ subscriptions, which is a useful option for organisations where staffing levels can fluctuate. For example, you could commit to an annual or 3-year term for ‘core’ staff to lock in the best price and then have a monthly commitment to license fluctuating staffing levels, such as seasonal staff.

Key Dates

  • January 2022 – The New Commerce Experience (NCE) will become available for Microsoft 365, Dynamics 365 and Power Platform.
  • 1st March 2022* – All new and renewing CSP subscriptions for Microsoft 365, Dynamics 365 and Power Platform must be via the NCE.

*This date may change as Microsoft have moved the general availability back from 14th October to January 2022, we are awaiting confirmation.

What do I need to do next?

To prepare for the changes you need to talk to your Microsoft partner so that you can determine the best licensing option and benefit from any early discounts. The right option will depend on how much you rely on the flexibility to change license levels – if you can happily commit to a longer-term with a stable baseline then the annual or multi-year term will give you better value. However, if you need the flexibility to increase and decrease each month then you need to be aware of the 20% price increase that will come with this. Of course, there is also the option to mix and match too.

Microsoft will be launching introductory promotions to customers between January 2022 to June 2022 to offer discounts on long-term commitment, which also has the benefit of deferring the March 2022 price increase for the term.

Contact us

If you have any questions or are looking for a new Microsoft partner to help with your licensing and Microsoft technologies, get in touch with our team today.

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