Overview
Big changes are coming to Microsoft Licensing in 2022 . In August of last year, Microsoft announced price increases across most of their Microsoft 365 license types that go into effect on March 1st, but that is not the only change coming to Microsoft 365 subscribers. Microsoft is simplifying the license procurement process, aligning all offerings (direct purchase, CSP, Open Value) to the Enterprise Agreement (EA) model. Here are three important things to know:
- New pricing increase of around 15% goes into effect on March 1st
- Annual agreements will be enforced, with monthly terms getting a 20% increase over annual agreements
- The cancelation window for licenses will be reduced to 72 hours, where previously you could suspend licenses to avoid being charged.
Why is Microsoft Increasing Prices?
In Microsoft’s August 2021 announcement they explained that Office 365 has not had a substantive price increase since its launch in June 2011. During that time, they have added 24 applications to the suite, including Teams, PowerApps, Power BI, Planner, Visio and OneDrive and released over 1400 new features across the suite, including security, AI, and collaboration improvements. Additionally, along side the pricing increase Microsoft will now be including unlimited dial-in capabilities (Audio Conferencing) for Team Meetings to meet the needs of remote and mobile workers.
Timeline for Microsoft Licensing Changes in 2022
- January 1st, 2022 - General Availability for New Commerce Experience
- March 1st, 2022 - Office 365 and Microsoft 365 price increases go into effect
- March 10th, 2022 - All new-to-the-customer licensing must be placed through NCE (New Commerce Experience)
- March 31st, 2022 - Discount pricing for annual agreements ends
- June 30th, 2022 - End of ability to renew subscriptions on existing platform
- June 30th, 2022 - Discount for monthly terms ends
- July 1st, 2022 - Can no longer renew legacy subscriptions
Annual Terms For Microsoft 365
Microsoft has long stated that their monthly pricing was based on an annual agreement, but left it unenforced, giving businesses the ability to add and remove licenses at will. Microsoft will begin enforcing annual agreements for all direct purchase, CSP, and Open Value customers with the shift to the New Commerce Experience. The ability to purchase licenses on a monthly basis will still be available (for some licenses) with a 20% premium price. License purchases made under the annual agreement will qualify for the standard price model, and customers may reduce license counts during their annual renewal window. Licenses may be added at any time. Microsoft is referring to annual term pricing as P1Y (Pay 1 Year) and monthly term pricing as P1M (Pay 1 Month).
The monthly P1M term, while more expensive than annual, is going to remain useful for organizations that have seasonal workforces, contractors, or during provisional employee onboarding periods.
Monthly Microsoft 365 Pricing
| License Type | Monthly (P1M) Cost | P1M Cost over 12 months | Increase from Annual Term |
|---|---|---|---|
| Microsoft 365 Business Basic | $7.20 | $86.40 | $26.40 |
| Microsoft 365 Business Premium | $26.40 | $316.80 | $76.80 |
| Microsoft 365 E3 | $43.20 | $518.40 | $134.40 |
| Office 365 E1 | $12.00 | $144.00 | $48.00 |
| Office 365 E3 | $27.60 | $331.20 | $91.20 |
| Office 365 E5 | $45.60 | $547.20 | $127.20 |
Worth Noting
- Microsoft 365 E5 pricing is not increasing
- Windows 365 is not eligible for discount pricing
- Some licensing will have not have the P1M (monthly) option
- All offers will be seat based (as opposed to seller based)
- Customers can have both annual AND month-to-month agreements
What Are The Price Increases Coming to Microsoft 365?
| License type | Old Price | New Price | Increase |
|---|---|---|---|
| Microsoft 365 Business Basic | $5 | $6 | $1 |
| Microsoft 365 Business Premium | $20 | $22 | $2 |
| Microsoft 365 E3 | $35 | $38 | $3 |
| Office 365 E1 | $8 | $10 | $2 |
| Office 365 E3 | $20 | $23 | $3 |
| Office 365 E5 | $32 | $36 | $4 |
Microsoft 365 Annual Term Discount
Organizations that move to P1Y terms prior to March 31st, 2022 get a 5% discount for the first year. Substantial savings are possible for early movers that lock in pricing ahead of the March 1st, 2022 price increases as this discount will also apply to the old pricing.
| License Type | Monthly Cost (P1Y) | Annual Cost | Price With Discount | Savings |
|---|---|---|---|---|
| Microsoft 365 Business Basic | $6 | $72 | $68.40 | $3.60 |
| Microsoft 365 Business Premium | $22 | $264 | $250.80 | $13.20 |
| Microsoft 365 E3 | $36 | $432 | $410.40 | $21.60 |
| Microsoft 365 E5 | $38 | $456 | $433.20 | $22.80 |
| Office 365 E1 | $10 | $120 | $114.00 | $6.00 |
| Office 365 E3 | $23 | $276 | $262.20 | $13.80 |
Author: Kristy Guy, Agile IT Program Manager and Resident Licensing Expert
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