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What you need to know about Microsoft’s pricing and licensing model

Lily Howell Feb 21, 2022 10:00:00 AM
Microsoft Surface tablet on desk with businessman and businesswoman discussing background.

Microsoft is constantly adapting its offering to meet the evolving needs of businesses. As a result, they are in the process of making significant changes to the way you purchase their licences, which will result in price increases and contract changes for organisations that use various products such as Office 365. In this blog, we explain the changes involved why they're happening and how they'll affect your business.

What are the changes?

As a Microsoft Gold Partner, we work closely with Microsoft and supply their Cloud Solutions Provider (CSP) products.

In October 2021, Microsoft announced two significant changes in how CSP products will be consumed and billed, affecting product pricing, terms, cancellations, and agreements. These changes will come into effect from 1st March 2022.

A new licensing model called New Commerce Experience (NCE) will affect Microsoft 365, Office 365, Windows 365, Dynamics 365 and Power Platform subscriptions. You’ll be able to purchase licences monthly (this will attract a significant premium) or under a committed, fixed-term agreement paid for upfront, either annually or monthly.

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

What is the New Commerce Experience?

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

The main points:

New subscription term options: Customers can 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 allowing customers to cancel or reduce seat counts on a monthly basis. 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 select Microsoft 365 subscriptions from March 2022. 36-month subscriptions with upfront payment will be available from March 2022.

Timeline of changes

January 2022: The NCE is made widely available to customers who can begin to purchase their Microsoft products through the new model, but the previous options are still available.

1st 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, effective 1st March 2022. This is the first price increase since the launch of Office 365.

Affected products include:

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

Why are these changes happening, and how will they affect your business?

While these changes will result in a price increase for many businesses, there are considerable benefits to the new system which will help to:

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

Want to know more about the New Commerce Experience?

We’ve already contacted our customers regarding these changes and will be in touch to discuss the course of action for individual businesses.

If you have any queries about the NCE, the price increase, or Microsoft cloud solutions in general, please get in touch! We’ll be happy to help make sure you get the best possible value from your products and services.

Have a query? Contact the team today!