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Office 365: New Model, New Prices

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If your organization depends on Microsoft’s Office 365, or MS 365 Enterprise or SMB, you should be aware of some coming changes and the associated costs.

Over the past several months Microsoft has been migrating towards a model called the New Commerce Experience (NCE). The stated goals are to provide resellers with new ways to simplify and manage subscriptions. It’s really a two-pronged effort by MS to steer enterprises towards higher-end versions of the products (which will have smaller cost increases), and away from monthly subscriptions in favor of annual plans.

The short version of the story is that continuing to subscribe on a month to month basis will carry at least a 20% premium beginning on March 1st.

For one example, the cost to your reseller of a basic, monthly Office 365 E1 plan will jump from $8 to $10. Two dollars may not seem like much, but it’s a 25% bump. Multiply that by your number of seats and by the 12 months in a year and you’re looking at a potentially big chunk of change.

There’s a further complication for many businesses, also: Many organizations subscribe to Microsoft’s products via an authorized reseller, such as their managed services provider, and there are plenty of good reasons to do so. In these cases the MSP pays the subscription fee directly to Microsoft and bills the client firm. With the shift away from monthly pricing and towards an annual model, though, that presents a potential problem.

Say your annual agreement with your MSP begins on January 1st but your MS 365 subscription renews in June. Should you decide to change providers, your current MSP could be left holding a pretty large bag of your obligation to Microsoft. Don’t be surprised if your MSP asks about realigning these two agreements.

For Microsoft, the annual model will help with projections, as business sales account for a majority of their revenue. It’s not like they’ve been struggling, though … growth topped 20% in each of the last four quarters, and MS stock is up 46% this year (source: CNBC).

In fairness, Microsoft has added many features to these suites over the years, a fact to which they dedicate the first 800 words of a blog post announcing the price increase. Just remember when you get the news from your MSP … don’t kill the messenger.

Want to know more about the best MS subscription model for your business? Contact Hill Tech Solutions.

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