Microsoft has announced sweeping changes to their CSP licensing structure which promises to simplify the product licensing process. For the first time in ten years, Microsoft are rolling out price increases which will be implemented through the New Commerce Experience (NCE) by March 2022.
There are two ways to mitigate this price increase, depending on whether your license renewal dates are before or after March. If your licenses expire before March, you can renew them before then to extend the current pricing until October. If your licenses expire after March, you can take advantage of Microsoft’s promotional pricing and use the NCE to lock-in and protect your costs for up to 36 months.
With the introduction of the New Commerce Experience, Microsoft hopes to consolidate their many licensing models into one, to make the process simpler for customers and partners alike.
So, while this is good news for fans of simplicity, it’s important to understand what this means for your subscriptions before March 2022.
What is the Microsoft CSP Platform?
The Microsoft CSP platform was first introduced six years ago to allow partners to sit at the heart of the customer experience and offer clients more flexibility in their subscriptions. It opened up the option for monthly cloud service subscriptions with a service provider who would then provide support and maintenance aligned to a set of guidelines set by Microsoft.
It also allowed partners to sit between Microsoft and customers, giving the partners the opportunity to differentiate around the services they wrapped around the licensing, delivering a better experience for customers who chose to move to the cloud.
Why change to the New Commerce Experience?
By moving to the New Commerce Experience, Microsoft hopes to make the purchasing experience across all the subscriptions clear and consistent. Currently, each licensing platform is siloed with its own terms and conditions with ‘disparate customer, partner, and field management console experiences’.
So, to unify the process the NCE will require customers to sign the Microsoft Customer Agreement which will apply across all subscriptions. It’ll also introduce new purchasing motions – breadth, enterprise, and self-service. These purchasing motions will give customers the same purchasing experience regardless of which motion they buy through.
An introduction to the ‘New Commerce Experience’
The New Commerce Experience (NCE) was initially launched back in 2019, in Microsoft’s CSP program for Azure plan, Server Subscriptions, and Azure reserved instances. Now, the purchasing experience is being extended to Microsoft 365, Dynamics 365, Power Platform and Windows 365.
The NCE creates a uniform experience whether you purchase Microsoft products through a CSP, the Enterprise Agreement, or directly from Microsoft.
The technical release of NCE launched on the 14th October 2021 on Microsoft 365, Dynamics 365, Power Platform and Windows 365 with introductory promotions available from January 2022 until June 2022. Alongside this launch, Microsoft has introduced an array of new features and functionalities in response to partner requests and customer needs.
The NCE also brings the ability to purchase communications credits via your CSP rather than directly with a company card. This means you can manage a pool of credits for international or premium rate teams calls for easier oversight and budgeting.
All business will need to move to the NCE by October 2022.
For not-for-profit and education customers – a date is yet to be confirmed by Microsoft but the NCE is expected to apply at some point.
How does the current CSP licensing work?
Currently, CSP licenses are primarily offered for 12 months with Dynamics available on a 36-month subscription, as below. This is now called Legacy or Legacy CSP.
This meant that as you bought licenses a new subscription was created for that license type, usually for 12 months. Then, customers had the freedom to go up and down in usage as needed and be charged on a daily basis by consumption until the end of the 12-month subscription.
The price was then protected for the term of the subscription and only be subject to the current price from Microsoft when the time came to renew. But this wasn’t the subject of much focus because there haven’t been many significant price increases since the launch of Office 365 ten years ago.
Customers who’ve added subscriptions over time might have renewal dates scattered throughout the year, which is important to bear in mind when we look at the upcoming price increases.
What does this mean for my subscriptions?
Under the New Commerce Experience the subscription terms are widening to span 1-36 month terms. This allows customers to either avoid being tied into a license longer than they need or get price protection for longer for the products they use most.
This change does mean that the number of licenses can’t be reduced as freely as under the Legacy CSP model. However, customers can combine a core of 12 or 36-month subscriptions supplemented by monthly additions when you need them.
This option is offered at a 20% premium compared to an annual or three-year license but allows customers to change the number of licenses month-to-month. Monthly subscriptions can be converted into 12-month terms if you need to.
On the 12-month plan, customers safeguard the cost of their subscription and make a regular commitment to a number of licenses. This option can be billed monthly or in one upfront sum and the number of licenses can only be reduced at the end of the term.
For services customers plan to use long-term, the 36-month option locks the price in against any future increases within that time. This option can be billed monthly, annually or in one upfront sum and the number of licenses can only be reduced at the end of the term.
For customers on the 12 or 36-month terms, you can increase the number of licenses in your subscription at any time. The additional cost of this increase is applied until the end of your subscription and these seats are locked in for the remainder of your subscription.
If you change your mind, these subscriptions can only be cancelled within the first 72 hours which is then charged pro-rata. Beyond that, the subscription is then locked in for the duration of the term.
Price changes coming in March 2022
The most recent announcements from Microsoft are below.
- Microsoft 365 Business Basic: $6 from $5
- Microsoft 365 Business Premium: $22 from $20
- Office 365 E1: $10 from $8
- Office 365 E3: $23 from $20
- Office 365 E5: $38 from $35
- Microsoft 365 E3: $36 from $32
Unlimited dial-in will be added to the following:
- Microsoft 365 E3 Office 365 E1/E3
- Microsoft 365 F1/F3: Office 365 F3
- Microsoft 365 Business Basic, Business Standard, Business Premium
Microsoft’s promotional offers
To speed up adoption of the NCE, Microsoft will offer two timebound promotions from January 2022, available on commercial seat-based offers in new commerce: a 5% discount on annual-term offers, and monthly term offers priced the same as annual term. Monthly term promotional pricing will be available through June 2022. Annual term promotional pricing will be in effect through March 2022; however, Microsoft reserves the right to extend annual term promotional pricing up to, and including, June 2022.
Please note: The 5% promotional offer does not apply to educational organisations or not-for-profits at this point in time.
How we can help
There are several ways we can help you manage this change and get the most out of the services you use.
The first thing to consider is when to switch to the NCE. The planned changes to the pricing from March are happening alongside the switch to the NCE, rather than because of it. By switching to the NCE slightly earlier customers can mitigate the price increase and benefit from price protection beyond March.
The increased pricing will come into effect when you renew your Legacy CSP subscription, which offers some customers the opportunity to delay this increase depending on their renewal date. If your renewal date is before March 2022, you can renew your current Legacy CSP subscription at the current pricing, until your subscription converts to the NCE in October.
For customers with a renewal date after March 2022 it’s worth considering the promotional pricing Microsoft will be offering to encourage customers to move to the NCE early.
Not sure what’s right for you? Get 1-2-1 advice and review your existing usage in a free Microsoft CSP Licencing Workshop. We’ll work with you to choose the best subscription options for you based on your current and expected usage. Sign up today to stay ahead of the price increase.
Secondly, now’s a great time to consider what Microsoft and third-party services you’re using and see if there’s an opportunity to consolidate them for cost savings. We can help you understand the potential of Microsoft’s extensive suite of tools and make sure you’re getting the best value out of your subscription.
What new capabilities are coming in 2022?
- Hybrid use benefits (HUB)
- Home use program (HUP)
- Multi-Geo add-on
By Tim Hannibal, Chief Partner Officer at Transparity.