For those that haven’t seen, Microsoft have announced increases to the list pricing of Office/Microsoft 365 that will take effect from March 2022. The new per user per month pricing will be:
- Microsoft 365 Business Basic (from $5 to $6)
- Microsoft 365 Business Premium (from $20 to $22)
- Office 365 E1 (from $8 to $10)
- Office 365 E3 (from $20 to $23)
- Office 365 E5 (from $35 to $38)
- Microsoft 365 E3 (from $32 to $36)
Note, there are no prices increases for Microsoft 365 E5 or the “F” SKU products. Microsoft have stated that they “want to make it more economically transparent that E5 represents the best value” and that this increase reduces the gap between M365 E3 and E5.
While price increases are never anyone’s favourite thing, and a 25% increase for E1 is certainly pretty sizeable – my main feeling is that, actually, this isn’t the end of the world or VENDOR LOCK-IN writ large. These are the first such price increases in about a decade and I don’t think that they are unreasonable or an example of Microsoft abusing their position or their customers.
In a nutshell, Microsoft have added a LOT of stuff to O/M365 over the years and it is better than it used to be. Microsoft say they have added 24 new apps and over 1,400 new features since Microsoft 365 was introduced. These include:
Microsoft also include the Power Platform apps but, as they’re relatively new and pretty limited without extra licensing, I’m not sure how much value they’re adding right now tbh.
Taking Teams as an example, it is miles ahead today of Teams on Day 1 as so many new features and capabilities have been added. I’d say that most customers have probably found an extra $2-$4 (pupm) value from the additions over the years…if you’ve started using OneDrive or Teams for example.
Often, people will say something like “no-one is using every feature in their subscription” as a “gotcha” in these cases – that’s absolutely true and will always be the case. No person or organisation will ever use every feature in everything – and they don’t have to. An organisation simply needs to use enough of a product that it adds value to their business by helping them do something new/faster/better etc.
I haven’t watched everything on Netflix and I never will, but as long as I keep watching enough each month, and they keep adding new content, that I’m getting value – that’s fine. It’s well known that product adoption can be more difficult that expected for organisations, and it often becomes more difficult the larger the user base. That said, if an organisation truly hasn’t seen an increase in value that far outstrips this price increase, a review of what they’re buying and how they introduce new software to their users is urgently required.
Setting a precedent?
All this said – if these price increases become a regular thing from Microsoft – every 1 – 3 years for example – then my tune will surely change! However, if they continue to add new apps and features and keep price increases few and far between (and at a reasonable level) – it seems fair enough to me if I’m honest.
However, doing it a month after announcing almost $70 billion annual operating income isn’t the greatest timing! While I think the principle is sound, if you can make that much money…do you really need to increase the price? Just because you can doesn’t mean you should…
For end user organisations, this is absolutely a great opportunity to review your Microsoft spend and strategy though.
- Take a look at what you’re buying and compare that to what you’re using. If the gap is too big, work out what changes can be made and when, depending on your contract.
- Start to define your negotiation strategy – can you work with MS to get a deeper discount to (partially) offset these price increases? Be wary however, of what you might have to commit to in order to get them…it’s likely they’ll be pushing M365 E5 pretty hard.
- Get external help from partners and consultants to help you make the best decisions as quickly as possible.