Microsoft 365 pricing, what we know about next year’s price rise

Microsoft 365 pricing is going up for many licence SKUs from March 2022. Jared Spataro, Microsoft’s Corporate Vice President for Microsoft 365, shared this announcement in a blog post on 19 August highlighting the innovations the company has delivered over the last decade.

While there is much to shout about in terms of the services and features available through these commercial products, what everyone really wants to know is how much IT budget Microsoft licensing will now consume.

At the time of writing, Microsoft has only announced figures for its US market, however the changes are global with some local market adjustments. We will update this blog post when we have confirmation on costs for UK customers, but here is what we currently know:

365 pricing plans affected by the price rise

Customers on education and frontline worker plans can breathe a sigh of relief, these plans are not affected. Nor are consumer products at this time. The 365 pricing changes that will go into effect in six months on 1st March 2022 are:

  • Microsoft 365: Business Basic, Business Premium and E3
  • Office 365: E1, E3 and E5

The big question – how much?

We estimate that 365 pricing will rise by between 10% and 20% in 2022 across these core SKUs.

Our understanding is that Nonprofits will continue to benefit from 365 Business Basic for free and receive discounts on other products, albeit at the new price point.

What else is changing?

If you purchase your Microsoft licensing via a Cloud Service Provider (CSP) there are a few additional changes that you need to know about. They are:

Fixed terms and less flexibility

Microsoft is also removing some of the flexibility you may currently enjoy. From March 2022 subscription terms will be rigorously enforced, so you won’t be able to scale your licences down until your subscription renewal date.

If you have a monthly subscription term you will be largely unaffected as you can adjust your licensing month by month. However, you can expect to see the largest increase in price for consuming 365 in this way.

Customers who have an annual subscription term, even when paying on a monthly basis, will benefit from a lower cost per user but won’t be able to reduce the quantity of licences during the term. Of course, you will be allowed to increase the number of licences, but you will have to remain at that level for the duration of your subscription term.

This puts the onus on you and your CSP to ensure you are on the right plan for your needs and factor in any future changes to the business that might impact your licensing. If your CSP is not proactively managing your licence optimisation we recommend that you review your current licensing now, make sure you’re not over-provisioned and explore more cost effective plans if possible. This will go some way to reduce the impact of the price rise in 2022.

We offer a free Microsoft Licence Health Check to review your current usage and make recommendations. Further details can be found here >

Monthly, annual & 3 year terms

Microsoft is introducing a 3 year term, alongside its current monthly and annual subscription terms. This could be beneficial if you are confident that your business won’t need to dramatically reduce licences in the next 12 – 36 months. The longer the subscription term, the lower the cost per user.

We expect that you will be able to pay monthly, annually or upfront, depending on how you want to spread the cost of your Microsoft licensing. Customers currently on an annual subscription plan will continue to be able to pay monthly or annually.

CSPs can offer discounts on the RRP

One of the advantages of purchasing your 365 licensing via a CSP is that we can often offer discounts on the RRP. This won’t change with the price rise, we will still offer discounts depending on your licence requirements and any other services you have from us.

Beat the price rise

Renewing your 365 subscriptions now rather than waiting for next year could be a good way of saving money and beating the price rise for some organisations. Those companies that want to get reduce licensing costs with an annual or 3 year term can renew in the next few weeks or months (from mid-October 2021) with their CSP and lock their 365 pricing in at the current rates for the duration of their term.

We would recommend that you start with a licensing review to ensure you’re on the right plan/s before renewing your current subscriptions, and align your licensing with any strategic plans taking effect in the period covered by your chosen subscription term.

What can you do now about 365 pricing?

Here’s our advice for preparing for the price rise:

  1. Don’t panic, yet! At the time of writing you’ve got 6 months before 365 pricing increases,
  2. Review your current Microsoft plans and usage. Our free 365 Licence Health Check is a good starting point >
  3. Speak to your CSP about how they can help you optimise costs further,
  4. Move plans or scale down licences in October, if you can, to reduce costs before the price rise,
  5. If you currently purchase your 365 plans directly from Microsoft, explore whether a CSP can offer discounts on the RRP with a 364 licensing management and optimisation service.

As more information and confirmation on 365 pricing for UK and EU customers becomes available, we will be updating our blog and social media. Keep checking in for further news or get in touch to discuss your organisation’s licensing in more detail.

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