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Two Massive Changes to Microsoft Pricing That Will Impact Your Budget

Yes, we know that’s a dramatic headline, but this is important stuff. There are two upcoming changes to Microsoft licensing that will likely have big impacts on your budget in 2022…and beyond. Its important that these changes be incorporated into your budget planning now.

Starting on March 1, 2022, all commercial tenants in Microsoft 365 will see changes in pricing as well as the enforcement of term commitments. As you prepare your 2022 budget, make sure these changes are understood, considered and included. Otherwise, you may be in store for some difficult conversations with you CFO!

Price Increase

Microsoft has announced a price increase to many of the Microsoft 365 licenses.  Frankly, this is probably overdue, as it’s the first increase in more than ten years, despite significant improvements and additions of services.  Since its inception, SharePoint has gone through two generational updates, Teams has been launched, and there have been continual security improvements. Microsoft’s announcement stated:

“On March 1, 2022, we will update our list pricing for the following commercial products: Microsoft 365 Business Basic (from $5 to $6 per user), Microsoft 365 Business Premium (from $20 to $22), Office 365 E1 (from $8 to $10), Office 365 E3 (from $20 to $23), Office 365 E5 (from $35 to $38), and Microsoft 365 E3 (from $32 to $36). These increases will apply globally with local market adjustments for certain regions.”

New Commerce Experience – aka Term Commitments

Microsoft is also doing a massive upgrade of its backend provisioning system which will impact the way licenses are managed.  In addition to the new pricing, Microsoft is changing the way it tracks the term of an individual license.  Technically, when a client purchases a license subscription, they are committing to a twelve-month contract.  Traditionally, Microsoft has not enforced this rule, allowing organizations quite a bit of flexibility in increasing and decreasing licenses for a variety of use cases.

Once March 1st arrives, however, the party is over.  As Microsoft rolls out its New Commerce Experience, it will begin enforcing the 12-month license terms.  Now, when an organization purchases a Microsoft 365 license, they will commit to an annual subscription with the option of paying for it either monthly or annually.  As bonus, if you miss the days of your Enterprise Agreement, you can purchase a three year subscription to lock in current pricing.

If an organization needs a true month-to-month subscription for temporary workers, seasonal activity, or for any other reason, the monthly subscription will still be available, but it will come at a 20% premium.  The “good” news is that companies can mix and match subscriptions within their tenant.  So for example, if you needed ten annual Microsoft 365 E3 licenses for full time employees and want to add three more licenses for your summer interns on a monthly subscription, you can do that.

No matter what your scenarios are, from a budgeting perspective, make sure you either assume the higher price for temporary or seasonal employees, or factor in the full annual cost of each license.

What Does It All Mean?

We get it: no one likes price increases, and you definitely don’t want to be locked into services you may not need.  While we unfortunately are just the messenger on these changes, we can still help in a couple of significant ways. First, as a valued Microsoft Gold Partner with strong relationships to the Microsoft team, we are actively providing them feedback about the real-world impact of these changes, especially the term commitments. In addition, we can provide you with detailed assistance and guidance on exactly what these changes will mean to your organization, work with you to develop potential licensing scenarios and provide you with support as you put together your 2022 budget.

Your Next Steps…

These changes go into effect next year so the most important action you can take today is to make sure your budget reflects these changes.  As always, don’t hesitate to contact us with any questions – we’re standing by, ready to help.  Reach out to us at info@c3isit.com