What is the Microsoft New Commerce Experience and how will it impact your business?
Microsoft is making significant changes to its licensing and subscription model that will impact how customers purchase and manage Microsoft 365 licenses. As a part of the New Commerce Experience (NCE), Microsoft is increasing the price by 20% to incentivize their newest subscription model called the Annual Term Subscription (ATS).
- Microsoft 365 monthly subscription prices will increase by 20% for customers choosing to remain on month-to-month Microsoft Cloud product software subscriptions. Customers who commit to annual or multi-year subscriptions are not subject to the 20% price increase.
- Customers may pay all the annual fee upfront or still pay monthly for the yearly commitment.
- Microsoft 365 subscription pricing has not increased since its launch as Office 365 in 2012. According to Microsoft, the primary reason for the price increase is due to the increased security needed to protect customer data and information.
How does this impact me and my business?
If your business uses any of the below Microsoft 365 subscriptions, the change will impact how you license those plans moving forward.
When will we need to alter our Microsoft 365 subscription?
On March 10, 2022, Microsoft will remove Cloud Solution Provider (CSP) partners’ (I.e., Louisville Geek’s) ability to order new month-to-month subscriptions. On July 1, 2022, CSP partners will no longer be able to renew existing month-to-month subscriptions.
[ If you are a current Microsoft 365 plan subscriber, you will want to make a decision by June 30, 2022, as to whether your organization will continue licensing its Microsoft 365 month-to-month or convert to an annual plan, because after that, Microsoft will begin charging month-to-month subscribers at the higher rate.]
Can our business choose to remain month-to-month?
Yes, however, there will be a 20-percent price hike for customers who want to remain on the current monthly subscriptions. It is important to note that this 20-percent increase is in addition to the 15-percent price increase for Microsoft 365 commercial plans, which goes into effect March 1, 2022.
If we commit to an annual plan, can we still pay monthly?
Yes, Microsoft will allow you to pay monthly as long as you agree to an annual or multi-year agreement.
What is the monthly price increase for the impacted month-to-month plans?
- Microsoft 365 Business Basic – from $5 to $6 per user
- Microsoft 365 Business Premium – from $20 to $22 per user
- Office 365 E1 – from $8 to $10 per user
- Office 365 E3 – from $20 to $23 per user
- Office 365 E5 – from $35 to $38 per user
- Microsoft 365 E3 – from $32 to $36 per user
What happens if we sign an annual contract, but we decide we no longer need the services?
A recent CNBC article states that Microsoft intends to collect the full yearly payment despite customers who may attempt to opt out part way through the year.
Can companies have some seats on monthly terms and others on annual?
Yes, you could have both a monthly term and an annual term subscription for the same seat-based offer at the same time with the appropriate number of seats in each term to accommodate permanent and seasonal employees.
Does the 36-month subscription have any discounts?
Though there’s no systematic discount for a three-year term subscription compared to an annual-term subscription or for either upfront or monthly payments, the greatest benefit of a three-year term subscription is that it locks the original purchase price in for 36 months.
What are the benefits for customers?
Microsoft plans to bring three-year terms to Microsoft 365 and other seat-based offers so that partners can help customers lock in their pricing for three years instead of just one.
Also planned is consumption-based billing for some components of seat-based offers, along with Hybrid Benefits and Home Use Program discounts, as well as a multi-geography add-on for the Microsoft 365 product suite.
Why is Microsoft making this change?
Microsoft is pushing Microsoft 365 subscribers toward annual subscriptions to avoid price increases. The new initiative is designed to standardize different licensing programs, and it brings new tools to help partners simplify and manage subscriptions.
What is Microsoft saying?
According to Microsoft, “since its launch a decade ago, Office 365 has grown to over 300 million commercial paid seats. Along the way, we have continuously re-invested to meet the changing needs of our customers. Four years ago, we introduced Microsoft 365 to bring together the best of Office, Windows, and Enterprise Mobility and Security (EMS). That same year we added Microsoft Teams as the only integrated solution where you can meet, chat, call, collaborate and automate business processes—right in the flow of work. In fact, since introducing Microsoft 365 we have added 24 apps to the suites—Microsoft Teams, Power Apps, Power BI, Power Automate, Stream, Planner, Visio, OneDrive, Yammer and Whiteboard—and have released over 1,400 new features and capabilities in three key areas”.
How will this impact our business?
New SKUs and the reality of price increases on monthly subscriptions will require organizations to evaluate their use of their Microsoft cloud software and try to forecast the right option (monthly, annual, or even multi-year) for their needs.
What are partners and customers saying about NCE?
Reddit is a place where many Microsoft partners go to complain, and there’s no shortage of content on this topic. Currently, a Change.org petition has nearly 1,900 signatures from partners protesting the NCE.
Does this impact educational or non-profit plans?
There are no changes to pricing for education and non-profit plans at this time.
What are the refund policies for cancellation?
A partner can receive a prorated refund of the initial subscription payment of the term only within the first 72 hours after the order is placed or renewed (proration calculated daily). After 72 hours of the term, the subscription can’t be canceled and payment for the remainder of the term must be made.
Will there be any special pricing or discounts to encourage partners to move existing business or put new orders on new commerce in CSP?
Yes, starting in January 2022, monthly and annual term commercial seat-based offers in new commerce will be priced at a discount— monthly term offers at the regular price of annual term offers (instead of the usual 20-percent premium pricing) and a 5-percent discount off annual term offers. These discounts will apply to all seat-based offer types except Windows 365 and for up to 2,400 seats per subscription. Monthly term promotional pricing will be in effect through June 2022; annual term promotional pricing will be in effect through March 2022 with the possibility of being extended through June 2022 (with advance notice provided to partners).