Changes coming to Microsoft 365 subscriptions and pricing

Changes coming to Microsoft 365 subscriptions and pricing
January 25, 2022 RES Business IT

What does it mean for you?

2022 is shaping up to bring a swag of changes to how customers worldwide plan and buy Microsoft 365.

Microsoft have been working towards transitioning customers to updated subscription and commercial structures over the last year, and finally confirmed the timeframes as 2021 was coming to a close.

The changes to pricing both at a basic level, but very notably, how prices will vary between annual and monthly subscriptions are likely to be confronting for Microsoft 365 customers.

Being aware of what’s coming in advance will help your business avoid some of the short-term impact and devise a subscription structure that will balance price and flexibility moving forward.

So, what is changing?

The items below are the key changes for customers to be aware of to help with your planning. Microsoft are providing some incentives in the first year of these changes to help customers minimise the impact which may be of interest, which we will touch on below in the timeline of events.

Price premiums for monthly subscriptions.

Previously there was no price difference between monthly and annual subscription types. As a result, most customers rely on monthly subscriptions, as there was no real incentive to buy yearly. With these changes, Monthly pricing will be 20% higher than Annual subscriptions. This is a fairly common approach with cloud software subscriptions from other providers, and Microsoft are now heading in this direction.

Price increases across the Microsoft 365 suite.

Microsoft have not increased prices substantially for some time and have chosen 2022 as the year to move. In their words, these increases account for the significant product feature upgrades and improvements that have been provided over the last 10 years. You can read more on the Microsoft position regarding the price rises on their blog post. Not all license types will be affected equally but expect a price rise of up to 15% (note that this is in addition to the premium for monthly subscription types).

Enforcing annual commitments.

For subscriptions that are created on an annual term (either with annual or monthly billing) to benefit from reduced pricing, the initial seat count for this subscription will be locked in and cannot reduce during the lifetime of that subscription. Extra seats can be added through the term on this subscription, which are charged on a pro-rated basis with an aligned end-date.

Some products will only be available on Annual subscription.

A range of licenses will only be available as annual subscriptions, but you can still pay monthly. For these products, you will need to be mindful you do not over commit on annual licenses up front. The most recent updates suggest that most license types will still be available monthly, so this should have limited or no impact for most customers.

It is worth mentioning that Microsoft will also be offering multiyear subscriptions, currently focused on the Dynamics 365 suite but this may extend to Microsoft 365 over time. We don’t expect this type of commitment will be attractive to most of our customers even taking into consideration the lower pricing on offer. However, these options can be made available on request.

When are the Microsoft changes happening?

There key changes are rolling out over Q1 and Q2 of the 2022 calendar year., with some important dates coming up as early as March.

Until March 31, 2022.

Customers can transition to new subscription types and avoid the price rises. There is also a 5% discount incentive for new annual subscriptions based on current pricing which will provide a level of cost relief until your future subscription renewal date (at which time, new/current pricing will apply).

March 1, 2022.

Microsoft 365 price rises come into effect. Resolution Technology will be able to confirm new AUD pricing in February 2022 (expect ~15%).

Until June 30, 2022.

Customers can convert to new subscriptions and secure monthly subscriptions at annual pricing (but, if done after March 1, the Microsoft 365 price rises will have come into effect).

July 1 2022.

Any new monthly subscriptions will come at a 20% premium compared to an annual subscription, and all new subscriptions will be based on the new model.


How can I avoid paying more than I have to?

It’s fair to say Microsoft are changing the game for Microsoft 365 customers with these updates, however there are strategies you can adopt to reduce the impact to your business.

Make smart use of Annual subscriptions.

Most of our customers are not highly seasonal, which means your user counts are not likely to change that much throughout the year or at the very least, you should be able to determine a ‘core’ number of licenses that are not likely to disappear. Consider how many users and what license types you can commit to on a yearly basis to avoid the 20% premium for monthly licenses. Beyond this number, use monthly subscriptions to provide flexibility.

Review what licenses you should be using, before committing to Annual.

It goes without saying, but once you buy the annual license, you are stuck with it! It’s a good time to at least quickly review your core licenses and consider if another option might provide better value over the coming year. Resolution Technology is more than happy to help you make the best decision, and in some cases, you might get access to a range of new features without paying significantly more.

Increase your annual subscription, when it makes sense.

It’s easy to get caught up in the year and growth inherently keeps you busy. But if you find yourself adding more licenses during the year, consider it would be cheaper to add them to the annual subscription if you are confident the licenses will still be required for the remainder of the subscription period (for example there might only be 6 months left on that subscription!). You can also move licenses that are currently on monthly subscriptions to annual subscriptions if they will be required until the end of your annual term.

Talk with us.

Beyond any of the pointers above, if you aren’t sure what the best approach is or what to plan for, we are here to help.

In Summary…

There is no doubt that Microsoft 365 provides tremendous value to businesses of all sizes. Price rises and major changes to terms have been thankfully few and far between in recent years. Using some of the strategies we have outlined above will certainly help you avoid unnecessary costs but managing a mixture of Annual and Monthly subscriptions will require some extra effort to maintain.

For Resolution Technology Microsoft 365 customers, we will implement additional processes and communications in relation to your subscriptions to help make sure the new model works for you, as opposed to the other way around! In addition, our team of Microsoft 365 experts are here to help you navigate the best options and design a proactive balance of cost and flexibility into your licensing plan.

For our community of customers that procure Microsoft 365 licenses from Telstra, Telstra will also be communicating with you directly on these changes, but we are still here to help. Our team will provide advice and assistance as necessary to devise the best action plan within the options and process provided by Telstra.