The day that many have been expecting/dreading is here – the first “proper” Microsoft 365 price increase has been announced.
Microsoft’s logic is that, since the introduction of Office 365 in 2011, they have added 1,400 new features and twenty-four new apps. Microsoft list the original contents of Office 365 as:
And also point out that Microsoft 365 now contains apps including:
- Power Apps/Automate/BI (Power Platform)
Of course, with both Power Platform and Visio it is a sub-set of the functionality that’s included, and many organisations will also be spending significant amounts on the full licensing of these products.
As for added features, just looking at Teams alone it’s clear many of the products are better now than they were in previous years.
What are the new prices?
They will take effect from March 2022 (the same time that the EA/CSP changes kick in), and the new post Microsoft 365 price increase list prices will be:
|Product||Current price||New price||% Increase|
|Microsoft 365 Business Basic||$5||$6||20%|
|Microsoft 365 Business Premium||$20||$22||10%|
|Office 365 E1||$8||$10||25%|
|Office 365 E3||$20||$23||15%|
|Office 365 E5||$35||$38||8.6%|
|Microsoft 365 E3||$32||$36||12.5%|
There are no price increases for Microsoft 365 E5 or the “F” SKUs. This is probably because they’re both still relatively embryonic – MS recently stated that M365 E5 comprises 8% of the installed base – and they don’t want to introduce any barriers to adoption.
The SKUs listed above however are all firmly established, and Microsoft clearly believe that the customer base can sustain a price increase.
Is the price increase fair?
This is a tricky question. Vendor lock-in is a real concern – the idea that once a software vendor has you fully on the hook, they’re free to do whatever they want to their customers including raising prices and restricting usage.
This has long existed on-premises – Oracle and SAP are common examples – but the rise of cloud subscriptions and SaaS has made it more of a concern for many. Being at a vendor’s mercy is not a great place to be and the subscription nature of SaaS has heightened this worry as you can no longer simply stop paying and remain on the version of software you currently have.
Against the increase
It’s unlikely that many customers will really be in a position to say “right – everyone stop using Microsoft 365, we’re moving to Google Workspace” …even with a 6-month heads-up. The reason being that the products have become integrated into the business, serving as a platform for other products and processes, and being a part of the users’ workflows.
While it’s long been the case that on-premises software becomes integral to customers, the substantial difference with SaaS is there is no option to gain perpetual rights. If you stop paying, you lose all rights and there’s no buy-out option to turn them into perpetual licenses.
For the increase
No-one likes a price increase; spending more money on things is rarely anyone’s preference, especially when it’s the same thing. However, if one looks at it objectively – if you want a provider to continue to invest in the product, bringing new features and functionality…then surely price increases make sense? If a provider keeps adding new capabilities and never raises the price, then it seems that one of two scenarios are true:
- They’ve built in a massive amount of margin and so you were over-paying from the start
- There’ll come a point where they stop improving the product
Neither of which customers want.
As we saw above, Microsoft have added a large number of new apps and features to the 365 suites over the years. If you’re using even a small portion of these and realising the business benefits then you’ll want Microsoft to keep adding the new features and apps, to help you keep growing your business – and it’s likely the Microsoft 365 price increase is part of keeping that happening.
If these Microsoft 365 price increase announcements become too regular and/or excessive, my tune will surely change! However, if they continue to add new apps and features – that customers want – and keep price increases reasonable and few and far between – it seems ok to me.
However, doing it a month after announcing nearly $70 billion annual operating income probably isn’t the greatest timing! While I think the principle of such an increase is sound, if you can make that much money currently…do you really need to increase the price? Just because you can doesn’t mean you should…
Whatever your view on this (and feel free to share them on this LinkedIn post) , it is absolutely a terrific opportunity to review your Microsoft spend and strategy. Use this Microsoft 365 price increase as a reason to review what you have, what you’re using, and what you’re planning to purchase (and use) over the next 3-5 years.
About Rich Gibbons
A Northerner renowned for his shirts, Rich is a big Hip-Hop head, and loves travel, football in general (specifically MUFC), baseball, Marvel, and reading as many books as possible. Finding ways to combine all of these with ITAM & software licensing is always fun!
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