Cloudy with a chance of Licensing
Latest news on Microsoft licensing, Cloud, and AI
It’s the Microsoft Product Terms for February 2025:
Added Azure Managed Applications, Azure Resource Manager, and Cloud PC to the EU Data Boundary Services…which now also includes storage of Professional Services Data.
Added Microsoft Defender for Business customers can apply Defender for Business to five devices.
Removed Microsoft 365 Information Protection and DLP – Student Use Benefit Add-on from Availability and Prerequisite Tables.
“Audio Services” renamed “PSTN Audio Services”
So the rumours were true…kind of…to some degree.
Microsoft have announced changes to the Enterprise Agreement but, not unusually, it’s still all a bit unclear.
“Beginning January 1, 2025, a small percentage of cloud Enterprise Agreements (EA) in direct markets will no longer be eligible for renewal under the existing EA framework”
What exactly is a “cloud EA”?
Is it where there is only Azure? Only Azure and M365?
Why not all cloud EAs?
How is that defined?
What will be the alternative?
“For enterprise customers, the Microsoft Customer Agreement for enterprise (MCA-E, the digital evolution of the traditional EA), will provide the optimal, streamlined solution.”
This is direct from Microsoft but is, in many ways, a “bigger” version of CSP rather than a slightly different EA.
So, “evolution” is an interesting choice. That implies a continuation whereas I’d probably us the word “replacement”…
Microsoft will begin notifying impacted customers in Jan 2025 that they cannot renew into the EA.
The post also says:
“Partners will continue to earn incentives when transacting EA renewals”
So they’re not all disappearing…at least not yet!
This marks yet another shift and yet another step towards more licensing business going direct to Microsoft.
To balance this out, they have also announced thst Copilot for M365/Sales/Service will be available on a monthly billing basis from December 1st…but will be 5% more expensive.
As well, all current monthly SKUs will have a 5% price increase from April 2025 and Power BI is increasing. I’ll do a separate post on that shortly.
It is interesting that the final section of the Microsoft post is titled “Microsoft is a partner-led company”…
If you have any questions, feel free to get in touch 😊
You can see the Microsoft post here:
Microsoft have introduced a new SKU: Office 365 E1 Plus. This contains the current E1 features and then adds:
It will be $20 per user per month or $17.75 without Teams. There is a minimum of 100 licenses and a maximum of 2,400.
Currently there is a promotion offering a 30% discount when purchased as an annual subscription.
This CSP only SKU is restricted to certain global regions:
LATAM, ASEAN, India and select markets in Central Asia, the Middle
East, and Africa
We’ve got some new M365 licenses added to EA, EAS, and MCA (CSP) – first up, a bunch more Frontline Worker SKUS:
Also “Python in Excel” is now available as an add-on license for:
M365 Apps for Business/Enterprise
M365 Business Standard/Premium
O365 E3/E5
One would assume it can also be added to M365 E3/E5, as that includes Apps for Enterprise…but then why are Business Std/Prem listed separately?
It’s to be noted that “Python in Excel” has been in public preview since August 2023 with the features freely available for Excel within Microsoft 365 subscriptions. However, the intention has always been to move some of the features behind a paid license:
“While in Preview, Python in Excel will be included with your Microsoft 365 subscription. After the Preview, some functionality will be restricted without a paid license. More details will be available before General Availability.”
https://techcommunity.microsoft.com/t5/microsoft-365-blog/introducing-python-in-excel-the-best-of-both-worlds-for-data/ba-p/3905482
Microsoft have added a section clarifying that Extended Security Updates (ESUs) don’t include support. Sounds like there’s been some confusion!
It’s the Microsoft Product Terms for August 2024 – the first of the new FY so not much going on but let’s take a look.
O365/M365 A1 added as a base license for Copilot for M365
The base licenses for Copilot for Sales & Services have been expanded, although not to the extent of Copilot for M365. You can now add these to:
Microsoft 365 Business Basic/Standard/Premium/F1/F3/E3/A1/A3/E5/A5
Office 365 F3/E1/E3/A1/A3/E5/A5
Intune Frontline Worker SKUs added to MCA
Changes to (seemingly) tighten the wording around using Open AI content for training purposes.
It’s that time of year again – Microsoft have announced their Q4 and full financial year results…so let’s take a look.
Revenue = $245.1 billion, a 16% increase
Net Income = $88.1 billion, a 22% increase
Microsoft Cloud = $135 billion +, a 23% increase.
Q4 Revenue = $64.7 billion, a 15% increase
Q4 Net Income = $22 billion, a 10% increase
Microsoft Cloud
This isn’t a Business Unit but rather a group of related products across the organisation including:
Revenue was $36.8 billion, an increase of 21% Year on Year (YoY).
Microsoft note that gross margin decreased YoY to 69%. This is driven by “sales mix shift to Azure” but was partially offset by Microsoft making Azure improvements including scaling their AI Infrastructure.
Now let’s look at some of the individual Business Units and how they performed in Q4 FY24.
Revenue = $20.3 billion, an 11% increase
Office 365 Commercial = 13% increase. Seat growth was again driven by SMB and Frontline Worker growth while Average Revenue Per User (ARPU) growth was driven by E5 and Copilot for M365.
LinkedIn = 10% increase
Dynamics 365 = 19% increase <– This is now almost 90% of all Dynamics revenue.
This gives a good overview of growth over the last 5 quarters:
Revenue = $28.5 billion, a 19% increase
Azure (and other cloud services) growth was 29% for this quarter, a little drop from the percentage point increase of the last 2 quarters but, as it’s Q4, likely increasing from a higher base. Microsoft highlight that 8 points of this growth was from AI services.
Amy Hood (CFO) states that AI demand is higher than Microsoft’s currently available capacity but they expect availability to increase in H2 FY25 aka Jan 2025 onwards.
Server Products grew by 2% this quarter, again driven by hybrid BYOL use with Azure Hybrid Benefit.
Overall growth over the last 5 quarters looks like this:
In terms of how Microsoft are spending money, Amy Hood, CFO, stated that:
“Cloud and AI related spend represents nearly all of total capital expenditures [CAPEX]. Within that, roughly half is for infrastructure needs where we continue to build and lease datacenters that will support monetization over the next 15 years and beyond. The remaining cloud and AI related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals.”
Amy Hood gave her expectations for Q1 FY25 (and beyond) and they are:
Expected revenue growth of between 10% and 11% in constant currency (or $20.3 to $20.6 billion), with O365 driven by E5 and Copilot for M365.
Intelligent Cloud
Expected revenue growth of 18 – 20% (or $28.6 to $28.9 billion) with Azure expected to be 28% – 29% up.
Much like a modern Augustus Gloop or Marjorie Dursley, Copilot for Microsoft 365 keeps expanding!
On June 12th, Microsoft added several more eligible base licenses for the Copilot add-on meaning the full list is now:
I haven’t seen any news that Copilot has new capabilities that relate to these new licenses so I struggle to see the point of these scenarios. If I have Project Online or Clipchamp or Visio but not Apps for Business/Enterprise…why would I buy Copilot for M365?
Perhaps we’re about to see an expansion in Copilot’s capabilities in the new FY?
Let’s take a look at Microsoft’s financial results for Q3 FY24 (Jan – Mar 24) and, in a not surprising move at all – they’re pretty good!
Revenue = $61.9 billion (17% increase)
Net income = $21.9 billion (20% increase)
Within that, “Microsoft Cloud” was $35.1 billion, an increase of 23% year on year.
Revenue = $19.6 billion (up 12%)
Revenue = $26.7 billion (up 21%)
Azure grew 31% – yet again the growth percentage increases for another quarter. Interestingly, server licenses were up 6% due to hybrid and BYOL licensing.
Teams has been “consciously decoupled*” from Microsoft 365 on a global basis, so they’re now only available separately to new users. Existing users can continue to renew but if you need to buy both, it equals more cash more Microsoft.
Teams Enterprise is now listed, which appears to be the standalone version of Teams. From a naming perspective, “that “Enterprise” sounds “bigger” than “Premium” (which is a paid add-on) so I’d expect a rebrand at some point soon🤔
Dynamics 365 Supply Chain Premium has been added…plus another error as “Dynamics 365 Supply Chain Management” is listed as having a minimum purchase quantity of both 10 and 20…clearly one should say “Premium” at the end (the one with 10 I believe).
They’ve still not corrected the D364 error from last month either 🤣
*Shout out to Gwyneth Paltrow
Microsoft have announced expanded Copilot for M365 access to a range of new SKUs including:
M365 F1/F3
Office 365 E1
M365 Business Basic
The Microsoft post says “and more” so we’ll have to wait for the full list to appear soon.
This change means that a huge additional number of Microsoft users will be able to buy it the new AI tool.
I have a couple of initial questions:
1) Why do this now?
I thought it would take a lot longer to get to this point. This feels like Microsoft are not selling Copilot for M365 anywhere near the rate they expected/want/need and so, to help recoup more of the enormous amount of money that must have been spent, they’re widening the pool quickly.
2) What about the price?
Are orgs really going to spend an additional $30 per user on top of these low cost SKUs? Particularly where the users will likely have fewer opportunities to benefit from Copilot’s assistance? I think perhaps we’re about to see a price drop or tiered pricing… I.e. Copilot for M365 Standard and Premium.
Cloudy with a chance of Licensing 