All you need to know about Microsoft’s changes to licensing and pricing

Business needs change and evolve and so Microsoft is always looking to keep up with this constantly evolving picture by adapting its offering.  Some big changes are on the way and they’ll affect how you purchase Microsoft licences.  Microsoft is always looking to keep up with this constantly evolving picture by adapting its offering.  Some big changes are on the way and they’ll affect how you purchase Microsoft licences.  These include price increases and contract changes for organisations that use various products such as Office 365.

We’re going to simplify those changes and break it down so you can understand what’s involved and avoid this immediate price increase.

It’s also important the transition is as smooth as it can be.

What are the changes?

As a Microsoft Partner, we work closely with them to deliver their Cloud Solutions Provider (CSP) products.

Back in October 2021, Microsoft announced that two major changes around the way CSP products will be consumed and billed were happening.  These affected product pricing, terms, cancellations and agreements, which would come into effect from the 1^st of March 2022.  They are as follows:

• There will be a new licensing model called New Commerce Experience (NCE).  This affects:
  • Office 365
  • Microsoft 365
  • Dynamics 365
  • Windows 365
  • Power Platform subscriptions.

You will be able to purchase licences monthly (this will attract a significant premium) or under a committed, fixed-term agreement paid for upfront, annually, or monthly.

• There will also be price increases for certain Microsoft products, such as some Office 365 and Microsoft 365 options. However please note that these price increases are separate from the New Commerce Experience announcement.

What is the New Commerce Experience?

The New Commerce Experience (NCE) is a ‘per-seat’ model for Microsoft 365, Dynamics 365, Windows 365 and Power Platform subscriptions.

The main points are as follows:

• New subscription term options.  Businesses can choose to commit to monthly subscriptions, annual subscriptions (paid monthly or upfront), or 36-month* subscriptions
• New monthly-term offers.  For a 20% premium, Microsoft will offer monthly subscriptions which allow customers to cancel or reduce seat counts on a monthly basis, and these can be combined with annual subscriptions to help balance costs
• Consistent cancellation policies.  You will no longer be able to decrease the number of seats you have purchased mid-term – any cancellations must be made within 72 hours of purchase

*36-month terms are available for Dynamics 365 from January 2022, and for select Microsoft 365 subscriptions from March 2022.   36-month subscriptions with upfront payment will be available from March 2022.

 When are the changes are taking place?

• January 2022.  The NCE has been made widely available to customers who can begin to purchase their Microsoft products through the new model.  The previous options are still available though.
• 1^st March 2022.  From this date, any new subscription orders must be purchased through the NCE model.
• February 2023.  All Microsoft customers still using legacy subscriptions will be transitioned to the NCE per-seat model.

 Price increases for Microsoft products

Alongside the NCE announcement, Microsoft also announced that there would be a price increase of around 20% for certain Microsoft products (also known as SKUs).  These are effective from 1^st March 2022. This is the first price increase since the launch of Office 365. Affected SKUs include:

• Microsoft 365 E3
• Office 365 E5
• Office 365 E3
• Office 365 E1
• Microsoft 365 Business Basic
• Microsoft 365 Business Premium

 How do you avoid a price increase?

Since the NCE model is available now but price increases for Microsoft products don’t come into effect until the 1^st of March 2022, if you move to the NCE model before this date, you won’t be subject to the price increase until after the term of the committed agreement.

This avoidance will only be short term because ultimately, you won’t be able to avoid a price increase entirely for the affected SKUs as all customers will be subject to the price increase after the new term of the NCE agreement.  However you can at least postpone this until after the new committed term.

Why are these changes happening?

Changes and price increases are largely seen as a negative, but there are plenty of benefits to the new system which will help to:

• Simplify the licensing process
• Provide cost savings for longer-term commitments
• Allow greater choice and flexibility in how customers purchase
• Enable growth through digital transformation and flexible buying opportunities

Do you want to know more about the New Commerce Experience?

As your IT Support provider, we’re on hand to help and advise you, so if you have any questions or concerns about these changes, please do not hesitate to get in touch. 

We’re here to ensure you’re always Smarter through Technology.