Hands up who’s happy about the recent announcement from Microsoft regarding its New Commerce Experience (NCE)?
No, we didn’t think so. Even a quick skim of the facts will reveal the glaring point that software licenses are going to go up in price. Significantly. Businesses are rightly concerned about these changes.
We’re not going to gloss over the fact that this is going to hit many businesses where it hurts. But it isn’t all bad news. In this post, we give a calm and spin-free assessment of the facts. We’ll try to pin down how much this change is going to cost you and present the pros (because there are some) and the cons of these big developments.
In a sentence or two, what’s happening?
Microsoft is moving away from its current flexible Cloud Solution Provider (CSP) licensing model to new fixed term and flexible contract terms under its New Commerce Experience (NCE). This change will affect new and existing contracts.
There are three important things to note about this development:
- Prices are going up
- Prices will differ according to your commitment level to a product (monthly, yearly or multiyear), with longer commitments reducing the price
- Cancellation policies are stricter. You will be required to pay until the end of a commitment period and opportunities to make changes to a plan are severely restricted
The NCE is aimed at commercial organisations only. Schools are unaffected by these changes.
Which products are going up in price?
Microsoft is raising the price of six of its most popular products. We have no choice but to reflect these changes ourselves, although as we explain further below we will work as hard as we possibly can to find the most cost-effective approach for you. The products increasing in price are:
- Office 365 Business Basic – 20*%
- Office 365 Business Premium– 10*%
- Office 365 E1 – 25*%
- Office 365 E3 – 15*%
- Office 365 E5 – 8.5*%
- Microsoft 365 E3 – 12.5*%
*Approximate %
When will this increase kick in?
Price increases start from 1 March 2022 for new subscribers. However, if you are an existing subscriber your increase will change on an anniversary date based on when you first ordered the service.
What are the subscription options? (And which is the most cost-effective?)
As part of the new NCE model, Microsoft is offering a wider range of subscription options. If you are willing to commit to a longer subscription, you’ll pay less. Or, if you want to look at it the other way around, you’ll be penalised for shorter commitments. Here’s how it works.
- Monthly subscribers will pay the full increase PLUS an 18% premium
- Annual subscribers will pay the full increase
- Multiyear options (launching mid to late 2022) are likely to pay the full increase
Is there a downside to taking a longer subscription?
In the spirit of ‘there’s no such thing as a free lunch’, you will inevitably lose flexibility by taking out the longer/cheaper subscription.
- Monthly subscribers will be able to make changes to licenses in a 72-hour window once per month from the start of the contract date. This is the most flexible and expensive option.
- Annual subscribers will be able to make changes to licenses in a 72-hour window once per year from the start of the contract date.
- Multi-year subscribers can make changes in a 72-hour window at the end of their 36-month term.
For all plans, you can make seat additions at any time, but reductions can only occur during the 72-hour window. You won’t be able to move supplier or cancel your contract mid agreement.
As you can imagine, IT providers will need to take a very responsible approach to selling these packages to customers, given the commitments they entail.
Are there any other ways I can avoid these cost increases?
Microsoft is offering a 5% discount for annual Microsoft 365 subscriptions until 31 March. If you commit before 31 March, you will be able to lock in this discount for your annual Microsoft 365 subscription.
Why is Microsoft doing this?
To be fair, it is the first price increase in five years. Microsoft has also added several new features to products in the last 12 to 18 months. Finally, given that Microsoft was likely to increase prices at some time, the various subscription options do provide flexibility for users, and a better deal for a longer term-commitment.
What is the industry saying about it?
Many of the world’s leading IT providers have voiced strong concerns about the timing of this price rise. Microsoft is posting record profits and businesses are continuing to experience many difficulties following the pandemic. While some had encouraged customers to lobby Microsoft, more recently they are accepting it is unlikely that the technology giant will revoke these changes. The reality now is trying to navigate this new model to find the best approach for customers.
What do you think about it?
Our technical director, Richard Geyman, shares the above concerns. We’ve always based our business model on bringing value to customers and we are acutely aware how these changes are going to hit many of them – hard. However, the reality is that these products are fundamental to a modern business IT environment.
Says Richard, ‘For some time, we’ve heard rumblings in the industry that Microsoft wanted to increase 365 pricing and that their large distributors were opposed to their proposed licensing models.
Previously, the details were opaque and only now does this latest announcement clarify Microsoft’s intention to secure annual commitments from clients, via much higher pricing of the monthly subscription. Whilst this reduces flexibility for customers who experience more volatile staff numbers, it also transfers greater risk to Microsoft Partners – if a client goes out of business, Intersys will be left holding a license.
However, the maturing Microsoft 365 and Cloud platform remains a bedrock for many organisations, removing many single points of failure and allowing them to thrive in a distributed computing environment. This distribution is something we’ve long championed for business continuity purposes, put into effect by the pandemic, and which we hope will continue to provide clients with a resilient and robust infrastructure as part of their IT estates.’
What should I do now?
Talk to your IT provider as soon as possible.
If you are an Intersys customer – or would like to join us – pick up the phone and we can explain how the NCE will affect you and the best course of action. The changes will impact businesses differently, depending on their circumstances and payment cycles, and it can be very tricky to work out the right way forward. We will assess your situation and needs, talk you through the options and come up with a plan that is the right fit for you in terms of the cost/flexibility trade off. We’ll also secure any promotional deals available – but don’t delay, as these offers are time-sensitive and expiring within days.