What's it all about?
Microsoft's New Commerce Experience comes into effect in early 2022. And besides new billing options, it is designed to simplify Microsoft’s legacy (and complex) licensing model. There are two price changes to be aware of.
First, there's a general 15% increase to Microsoft 365 subscriptions. This price rise reflects Microsoft's considerable investment in improving the product range and is hard to argue with.
The second is that customers who sign on to a 12-month subscription term will no longer be able to scale down the number of licenses during the term. New licenses can be added at any time and will co-terminate with the main subscription dates. This means that there is less flexibility available during the subscription term.
However, customers who wish to significantly change license numbers throughout the year to reflect seasonal impacts can continue to leverage the flexibility of the month-to-month subscription, but with an additional 20% premium. This applies to Microsoft 365, Office 365, and other seat-based offers, including all modules of Dynamics 365 (e.g., Customer Engagement, Finance and Operations, and Business Central).
So, what are the options?
Under the New Commerce Experience, most customers will need to evaluate how they leverage the Microsoft solution stack, and choose between:
- A month-by-month commitment, with a 20% price premium over a 12-month term and retaining the right to scale seat numbers up or down at will and without penalty.
- Sign up for an annual commitment with a committed number of seats, without the premium or the ability to reduce or cancel any licenses until the end of the 12-month subscription period.
An embraceable impact
So, where do we stand on this? As explained during an interview with CRN and documented in their recent news article, we view these changes as 'embraceable' (meaning they're neither good nor bad).
We believe the 'good' fallout of these changes is that they provide customers and partners alike with more certainty and security around both the value of their relationship and the issue of pricing/income.
What's good about the new annual commitment subscription?
In a nutshell — it’s certainty!
These applications are running core operations and are hugely relied upon to keep the business going. Ensuring subscriptions, pricing and availability are locked in provides great peace of mind.
Despite customers having the flexibility to reduce seat counts on a whim in the old model, outside of some specific customers that had seasonal demand changes, in our experience — very few do. It’s a case of set and forget.
And for those customers with user numbers that rarely change, and have no need for on-demand flexibility, it's business as usual, with predictable pricing.
We find that customers looking at solutions are more concerned with budgetary certainty and locking in the pricing and usage of solutions, than they are with reducing licenses on the fly. The desire for predictability is supported in most of the conversations we have with our customers’ CFOs or purse-string holders.