New pricing changes from Microsoft will mean higher costs for many commercial Office 365 and Microsoft 365 offerings. While some claim the cost increase is justified, the impact on customers’ wallets will be significant – but, for some enterprises, avoidable.
Effective March 1, 2022, Microsoft will increase pricing by anywhere from 8.6 percent to 25 percent for many of its 365 offerings. This is the first price increase the vendor has announced since launching Office 365 (and subsequently Microsoft 365) over a decade ago. These increases, as noted below, will apply globally with local market adjustments for certain regions.
Per Microsoft’s announcement, the decision to raise prices reflects the increased customer value and the continuous re-investment the vendor has made to meet changing customer requirements. For the most part, these assertions are fair and justify Microsoft’s pricing revisions. Since the introduction of Microsoft 365 four years ago, more than 24 apps have been added to the suites as well as 1,400 new features and capabilities.
On average, NPI’s License Optimization Assessment services have helped clients eliminate 10 to 20 percent of toxic spend on their 365 estates. It’s a highly effective way to minimize or neutralize Microsoft’s upcoming price increase.
Microsoft’s price increases are well-aligned with one of its core motivations for enterprise customers – to drive them from O365 to M365 as well as up the M365 stack to its E5 offering. Whether customers choose to move up the stack or not, the cost impact of these changes will be significant for many enterprises.
The next renewal is when most customers will face this price increase. That means customers with renewals occurring prior to March 1, 2022 are “in luck.” Fortunately, there are two ways customer can neutralize or minimize the financial effects:
It’s important to point out how common “bloat” is across enterprise customers’ Microsoft estates, and the waterfall effect it can have on spend. Excess licenses, subpar pricing and discounts, and inflexible contractual T&Cs have a way of getting institutionalized. When Microsoft makes changes to its pricing or licensing – or a customer renews historical licenses in an EA on autopilot (which happens too often) – the cost impact can be significant and exponential.
Considering the scale of Microsoft’s recent price increase, NPI advises enterprise O365/M365 customers to prioritize EA renewal hygiene. This means carefully analyzing usage, right-sizing license and subscription choices accordingly, and optimizing all aspects of their EA for maximum savings.