Microsoft to try to push business customers to longer-term subscriptions via price increases

Microsoft is gearing up to make billing changes around subscriptions for a number of its business software services that could have negative effects on partners and customers.
Written by Mary Jo Foley, Senior Contributing Editor

Earlier this year, Microsoft officials disclosed what they called their first "substantive" price increase in over a decade for commercial Office/Microsoft 365 plans that would be coming in March 2022. But those aren't the only potential price increases facing customers looking to license Office 365, Microsoft 365, Dynamics 365 and more Microsoft business services.

Microsoft launched what it calls the New Commerce Experience (NCE) model for Azure in 2019. The NCE changes the way customers transact with Microsoft through Cloud Solution Providers. According to Microsoft, NCE is meant to align its various licensing programs and will help partners grow their businesses and simplify licensing by changing the way customers can pay for products. 

The Pax8 distributors have a good explainer about NCE on their site. Here's Microsoft's public-facing blog post about it.

Earlier this fall, Microsoft officials said the NCE "per seat" model would be expanding to include Microsoft 365, Dynamics 365, Windows 365, and the Power Platform. NCE will be available to partners in January 2022 and phased in over time through mid-2022.

Under the NCE terms, daily invoicing will become monthly, and a one-month subscription will be 20% more expensive than an annual subscription.

To try to get customers to commit to longer-term contracts, Microsoft will enable customers to lock in pricing for three years if they agree to a 36-month subscription which can be billed monthly, annually, or upfront, according to information published by Microsoft partner Crayon. Once a customer places an order, they can cancel or reduce it within the first 72 hours. After that, the partner will have to keep paying until the renewal date.

As CNBC reported on December 6, many partners are unsurprisingly unhappy about some of these changes and there have been complaints in forums. (Some good threads here.) There's also a Change.org petition asking Microsoft to reconsider the NCE policies that could result in price increases, CNBC noted. Given the impact the COVID-19 pandemic has had on many businesses, longer-term commitments during ongoing financial and organizational uncertainty are resulting in pushback.

I've asked Microsoft for comments beyond its blog post on its NCE plans and potential impact on partners and customers. No word back so far.

Update (December 7). A Microsoft spokesperson provided a boiler-plate response which didn't really answer any of the questions about the reasons for tightening the pricing and licensing screws on partners and customers. The official statement: "To provide our customers with more options, we expanded our Microsoft 365 subscription terms to include a new month-to-month offering in addition to our annual subscription. As is typical with subscription models, the annual term offers a lower rate, whereas the month-to-month subscription provides greater flexibility at a higher monthly cost."

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