Navigating Microsoft’s Pricing and Licensing Changes for Office 365 and Dynamics 365 – U.S.
Microsoft recently announced price changes to its Office 365 (O365), Microsoft 365 (M365), and Dynamics 365 (D365) cloud products available in the Cloud Solutions Provider (CSP) program, effective in March 2022. This includes a price increase on certain M365 & O365 products, and new licensing options for D365 that may impact customer budgets. This article summarizes the changes and potential impacts to your Microsoft licensing strategies:
- What did Microsoft change, and why?
- Which prices are increasing, and when?
- What other changes did Microsoft make?
- How can I optimize spend on Microsoft licenses going forward?
Below is critical information to consider as you weigh options for renewing your Microsoft cloud subscriptions in 2022. We encourage you to contact Stoneridge Software to discuss your situation! For Canadian Clients please reference this Pricing and Licensing Changes blog.
What is the Change to the New Commerce Experience & Why
This year Microsoft is launching its “New Commerce Experience” (NCE) for the Cloud Solution Provider program, which includes a price increase on certain O365 & M365 licenses, and new pricing options for D365. Microsoft explains that the pricing for its Office products has not changed substantially in the last 10 years, while in the meantime they’ve added many valuable features such as communication & collaboration tools, security & compliance options, plus AI & automation capabilities.
NCE does provide a price break in exchange for a customer’s commitment to maintain (or increase) their license quantities on either a 12 or 36-month subscription until end of term, or alternatively, NCE charges a higher premium price on monthly subscriptions if flexibility is needed to reduce license quantities more frequently.
Which Prices are Increasing and When?
Per-user pricing for the following subscription licenses will increase in March 2022:
Note that your current CSP pricing is protected until your subscriptions expire. To ease transitioning to the new model, Microsoft has extended the date that renewals must be placed on the NCE program from March 2022 until July 2022. Until then, renewing customers have the option to utilize the legacy CSP licensing options if they prefer (see also ‘Strategizing Costs’ below).
In contrast, any net-new orders must be placed on NCE starting in March 2022. Microsoft has also launched two temporary NCE promotions: 1) a waiver of the increased monthly NCE pricing until July 2022, and 2) a -5% discount on the annual NCE pricing if the subscription is purchased before the offer expires in March 2022 (note - Microsoft says it may consider extending the latter offer up to June 2022).
What Other Changes Did Microsoft Make?
NCE products are available in monthly, 12-month (annual), or 36-month (multi-year) subscriptions that can be paid on a monthly basis or prepaid annually. In each of these scenarios, the customer is committed to the original license quantities for the entire subscription term. NCE license quantities can be increased but not decreased until the subscription renews, and a subscription cannot be cancelled mid-term.
This is very different from the legacy CSP model in which license quantities could be added or reduced as needed, and subscriptions could be cancelled at any time. It’s a significant change that can impact a customer’s license planning & budgeting cycles, and care should be taking prior to subscription renewals to strategize the ongoing costs.
Strategizing Your Renewal Costs
The scenarios outlined below can help you consider options for your next renewal:
- Legacy CSP Renewal. If your subscription expires prior to July 2022, you have the option to renew it using the legacy CSP licensing model. Advantages include flexibility to reduce license quantities for another 12 months, or with some products up to 36 months, and if the subscription renews before March 2022 this may also preserve your original pricing on some products.
- Scenario 1 – monthly NCE. If you need flexibility to reduce quantities with all of your licenses, you should plan on at least a +20% price increase in your annual budget. See the examples below.
- Scenario 2 – annual NCE. If your employee count is highly stable from year to year, you may want to consider the annual license. A key difference is you can add but not reduce license quantities during the subscription term, and you cannot cancel the subscription until it expires naturally. If your subscription renews before March 2022, an advantage may include preserving your original pricing on some products – see the examples below.
- Scenario 3 – blend of monthly and annual NCE. If your business has some predictable seasonality, you may want to consider having a portion of your licenses on the higher-priced monthly subscription to allow reductions as needed. For example, if one-fourth of your workforce is only needed on a seasonal basis, then ~25% of the licenses could be on monthly subscriptions and the remaining licenses for your core employees committed on annual subscriptions. As you can see in the example below, this approach may help you minimize impacts of the increased prices.
Examples - NCE Renewal Scenarios BEFORE the March price increase
Examples - NCE Renewal Scenarios AFTER the March price increase
Planning for Success
If you have questions about licensing Microsoft products, our seasoned experts can provide guidance based on your unique situation. Reach out to Stoneridge Software anytime to explore next steps!
Watch the Video on the New Commerce Experience from our Licensing Experts
If you have immediate questions you can reach out to your Stoneridge account manager or Contact our Team here.