Author: Phil Downe
In August 2021, well into the 2nd year of a global pandemic and immediately after exceeding all expectations for sales and profits for YE on June 30, 2021, Microsoft announced significant price increases to most of its Office 365 (O365) product line.
The new prices go into effect on March 1, 2022
• Microsoft 365 Business Basic (from $5 to$6 per user) +20%
• Microsoft 365 Business Premium (from $20 to $22) +10%
• Office 365 E1 (from $8 to $10) +25%
• Office 365 E3 (from $20 to $23) +15%
• Office 365 E5 (from $35 to $38) +8.5%
• Microsoft 365 E3 (from $32 to $36) +12.5%
• Microsoft 365 E5 - $57 - stays flat!
In previous articles and blogs, we have referred to this tactic as the “Land ‘N Expand” ploy.
You will notice M365 E5 was not increased.That is obviously where Microsoft hopes to move you next.
The generous Microsoft discounts of the past are also in short supply. Let’s take O365 E3 as an example.
Generous discounts in the 25% to 35% range were commonplace when Microsoft wanted to encourage a client to move from on-premises, perpetual,Office365 licenses to the more strategically appealing(for Microsoft) subscription-based versions of Office. The more Microsoft wanted you to move the higher the discounts became, especially as an end-of-quarter approached or if there was also some Azure or Microsoft Dynamics spend.
Now that most clients are already in the cloud, with Office and Azure, those double- digit, leveraged discounts are disappearing fast.
Microsoft sales teams are attempting to justify renewals prior to the price increases taking effect with the rationale that if you don’t lock in now for 36 months at the 5% discount, then you will be faced with the 15% price increase (E3) and again only a 5% discount in March of 2022.
That drop in discount from 30% back when you had some leverage, to 5% now, when you probably do not have much leverage, if you’re into your 2nd or 3rd Enterprise Agreement, (EA) is effectively a 35.7% price increase.
Anyone having their MicrosoftEA renewal coming after the new O365 prices go into effect will suffer even more if you cannot build leverage.Combining the frugal 5% discount with the 15% price increase compared to the more generous, leveraged discounts of the past results in an effective price increase of 56.1%.
We recommend you start protesting the price increases early. Suggest this type of predatory pricing behavior will bar Microsoft from future software competitions. Look for opportunities for leverage. Evaluate additional Azure spend if applicable or suggest that it will all go to AWS, if you feel you are being treated unfairly.
Finally, look for opportunities to optimize your environment. Consolidate under-utilized servers.Run appropriate software asset management, (SAM) tools and look for low CPU or RAM usage and unused licenses.We often find 10% to 20% of assigned licenses either sitting idle, or being grossly under-utilized, when a more economical version would suffice.
Start the analysis early to avoid running out of time if some server consolidation efforts or alternate solutions prove to be more of a challenge.