Microsoft’s new Office365 pricing and changes to CSP are causing a stir in many quarters. What’s it all about and who are the winners and losers?

In the latter part of 2021 Microsoft began socialising the idea of price changes for some products in the Office365 portfolio. This second step was after a re-branding exercise in 2020 that changed what we called Office365 to Microsoft365. Price chnages were announced about a year later. So lets try and clear these up, one at a time.

New Naming

In truth this is no more than a branding exercise, as Microsoft have done with all products over the years. Think back to Windows 98, 2000, etc which is now Windows 11. In truth the company are just moving with the times and keeping their products fresh and relevant to the market and their audience. In making these naming changes that is all they did. So the emperor has new clothes…. again. No big deal

Pricing Changes

From March of 2022 (announced in 2021) Microsoft made changes to the pricing for some of it’s office subscriptions. Notable was the fact that not all products received a price increase. Very few of the Enterprise licenses had changes for example. Interestingly the more entry level office licenses were impacted by a 10-20% price increase, still excellent value but an increase all the same. Products like Microsoft365 Essentials (Office Basic Previously) increased by 15% . It would be easy to conclude that on the back of the COVID crisis that forced everyone to work from home Microsoft chose to capitalise on the SME’s newly found dependence on it’s cloud offering and make hey while they could. After all no-one moves away from 365. It works brilliantly and with availability across all platforms it’s integration for any business is wonderfully simple.

Whatever the reasons it’s a price increase and in truth the event itself came and went quietly. Even if a few grumbled at the time

Contract Period

This third piece of the jigsaw is a bigger discussion point, especially for SME’s. Or is it?

The most significant change for companies is actually in the service provider space. Companies like ours. Any business has always been able to purchase office licenses direct from Microsoft or a CSP (Cloud Service Provider). If you chose to purchase direct you paid a lower price if you committed to annual renewals, slightly higher if you wanted month-to-month. Smaller businesses appreciate the flexibility, COVID was a good example where companies shutdown licenses for a period of time to save costs. When conditions turned back in their favour they ramped up licenses again. This was good for end users and good for CSP’s and allowed some goodwill to extend in both directions.

Microsoft are now forcing CSP’s to adopt (minimum) 1 year licenses on all products, a contractual change that will compel all CSP’s to reciprocate with clients. The path of course is not simple (when is it ever). The term changes took effect from March this year for new service lines but will not take effect for all services until March 2023. In essence Microsoft have said variable agreements started before March 2022 can remain in place for another year with the new style contracts taking effect from March 2022 on new service lines.

The Microsoft365 license suite is divided into many service lines (products) 365 Essentials is a service line, 365 basic is another and you license each individually. It’s quite possible that any organisation may for a while have a foot in both camps as they will almost certainly have different service lines that started at different times.

By the way, if you want to keep the flexibility you’ll need to add a 20% premium for each license… The marketeers always have an answer..

Conclusion

For sure clients who’ve taken advantage of the flexibility won’t appreciate this change. Why would you? But also in many respects this brings the options in-line and more consistent. The fact Microsoft did it at all was a slight anomaly, other vendors also want annual licenses too. You might take the perspective that’s it’s more consistent. OK maybe not, it’s a nice bonus that’s been taken away but for most end users this does not make much of a difference

If you are an existing CSP you are probably feeling a little more hard done to. A value add to clients has been removed. More significantly risk has been pushed onto the partner as they are now taking on the obligation of annual contracts too. Like all contractual issues there is a Chinese wall between the relevant parties and end users who don’t pay bills leaves the partner held to their liabilities. Revenues lost but costs still exist!