Many Australian organisations faced a significant price increase earlier this year as Microsoft made big changes to how it bills, terms and renews Microsoft 365 and Office 365 subscriptions and licences.
Microsoft have made a host of improvements, adding numerous apps to their product suit, without any significant changes to their pricing over the past 10 years. This updated pricing reflects the increased value being delivered to customers through these innovations.
With the new pricing in effect, Microsoft has also moved term subscriptions into its New Commerce Experience (NCE) model.
What does the price increase look like for the Australian market?
Microsoft announced its global licence price increases in the middle of 2021. They were expressed in US$ and varied from $1 to $4 per user per month dependent on the plan. This equated to a 20% increase for lower tier licences and a 12.5% increase for the more expensive high end tier licences.
What Microsoft 365 and Office 365 licences were affected?
Microsoft did not increase the pricing on every plan. It has left the Microsoft 365 F3 for frontline workers, as well as it's most expensive, comprehensive subscription plan, Microsoft 365 E5, untouched.
Also unaffected are consumer and education-specific plans, although these are expected to increase sooner rather than later.
Why did Microsoft increase M365 pricing?
Microsoft made a strong case for its price increase pointing out that Office 365 was first released in 2011 and 24 apps and 1,400+ new features have been added since — without any substantial price increases. The most noticeable of these additions include
Microsoft Teams was added to the M365 suite at no additional cost in November 2016. Teams now has over 250 million monthly active users (MAU) and has been the cornerstone of many work-from-home strategies during the pandemic. It’s the only solution that weaves together meetings, calls, chats, other collaboration tools, and the ability to automate business processes. (At MobileCorp we use Teams, Teams Calling, as well as Dynamics 365 and some Power BI apps.)
Security features have are critical for enterprises in an increasingly complex cybersecurity landscape. Built-in mobile device management (MDM) and other management tools like Microsoft Endpoint Manager help admins support remote and hybrid workforces. Capabilities like data loss prevention (DLP) for email and documents, sensitivity labels, and message encryption to help keep important data within the organisation have been added. Compliance additions to help organisations reduce risk and respond to increasing regulatory requirements include Content Search, eDiscovery, and core Litigation Hold.
Innovation Growing innovation includes the advancement of artificial intelligence. Microsoft has added new cloud-powered AI that automatically creates maps, charts, and tables in Excel, and sorts email and removes clutter in Outlook. There has also been AI-powered real-time translation, captions, and transcription make collaboration and communication more accessible.
What is NCE and how does it affect Microsoft subscription term pricing?
The second big shift by Microsoft was the expansion of its New Commerce Experience subscription term/renewal model to include Microsoft 365, Dynamics 365, Windows 365, and the Power Platform.
Under the NCE model, subscribers who commit to annual or 3-year terms will avoid a new 20% premium that will be applied to monthly subscriptions.
Subscribers who lock into 12-month or 36-month terms will have guaranteed pricing over that term, but only with payment of the full term upfront.
Microsoft positions the NEC model as a 20% cost saving to counter the fact that there are no options to decrease seat counts during the term (although increases and upgrades are possible mid-term).
The key changes
• Subscription prices rise by 10-25% depending on the subscription. • Microsoft will enforce ‘annual commitment’ terms • Introduce a month by month plan for flexibility. This will be 20% more than the ‘equivalent’ monthly price of an annual term (including the price rises from 1 March 2022 so impact could be 35%). • You can also have a combination of annual and monthly subscriptions.
Some Indicative price rises
• Microsoft 365 Business Basic the price will rise by 20% • Microsoft 365 Business Premium the price will rise by 10% • Office 365 E1 the price will rise by 25% • Office 365 E3 the price will rise by 15% • Office 365 E5 the price will rise by 9% • Microsoft 365 E3 the price will rise by 12.5%
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