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Microsoft’s “new commerce experience” for 365 services: not just price increases

Microsoft stated in August that it is increasing prices for Microsoft 365 (formerly known as Office 365), the increase being around 20%, from March 1 2022. The company argues that prices have not changed substantially for ten years – perhaps contentious since it has introduced premium plans that are more expensive – and that “this updated pricing reflects the increased value we have delivered to our customers over the past 10 years.”

There has been inflation of around 2% per annum since 2011 and there have been need features, so a price increase is not unreasonable. However there are some other changes in the pipeline that are more difficult. This is the thing called the New Commerce Experience that impacts both customers and resellers. Finding out what has really changed is not that easy but if you dig through the fluff about “agility” and “alignment” and “streamlining”, there are some standout changes:

  • Customers that want the flexibility to reduce seat count will pay 20% more. Until now, it has been possible to reduce seat count without penalty, even though Microsoft presents its pricing as for an “annual term.” With NCE, customers can either pay by the month with premium prices but the ability to reduce seat count with a month’s notice, or pay less but commit to seats for one or three years. During that period, seat count can be increased but not decreased.

    Reasonable? The problem perhaps is that it means giving up one of the benefits of cloud, which is elasticity. Or at least, you can still have elasticity but it is going to cost more. We have also seen this with reserved instance pricing on AWS, Azure and Google Cloud Platform: the price comes down substantially if you commit to paying for one year or more.

  • There will be no cancellation allowed after the first 72 hours of a term, as explained here. This may impact partners more than customers. Scenario: partner sells 1,000 seats of Microsoft 365 for a 3-year term to some company. Three months into the term, the company goes bust. Partners are saying that this leaves them on the hook for the remaining cost. Here, for example, Australian distributor Dicker Data states that “If a customer (who has the agreement with Microsoft) no longer want or can finish the payment of the contract (bankruptcy for example), the partner will incur the costs of paying the remainder of the contract to Microsoft.”

One hopes that such matters are negotiable, but it is a significant risk especially in these unpredictable times of pandemic and climate change.

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