Microsoft has announced a series of price increases for various subscriptions and services, set to begin on December 1, 2023, and continuing into April 1, 2025. These changes are part of Microsoft’s strategy to balance product value with customer flexibility for subscription payments. The adjustments will affect a wide range of Microsoft’s offerings, including Microsoft 365 (M365) Copilot, Office 365, Enterprise Mobility + Security (EMS), Windows 365, Microsoft Dynamics 365 Services, Microsoft Power Platform, and price increases for Teams Phone and Power BI services.
Beginning December 1, 2023, Microsoft will introduce a 5 percent premium for annual subscriptions billed monthly. This premium will impact several services, including Microsoft 365 Copilot, Copilot for Sales, and Copilot for Service. The premium will apply to purchases made through Microsoft’s Buy Online platform, Cloud Solution Provider (CSP), and Microsoft Customer Agreement for enterprises. Moreover, starting April 1, 2024, this premium will also be applied to all renewing and new subscriptions under the same purchase frameworks. Customers have the option to switch to annual billing at the time of renewal to avoid this premium. This move is part of Microsoft’s effort to harmonize its pricing strategy across different channels and segments. By providing the option of monthly billing with a premium, Microsoft aims to offer cash flow flexibility while maintaining the value and benefits of its services.
Introduction of 5 Percent Premium for Monthly Billing
From April 1, 2025, customers who prefer the convenience of monthly payments for annual subscriptions will face a 5 percent premium. This adjustment impacts various services under multiple purchase frameworks, emphasizing Microsoft’s goal to standardize its billing approach. Customers can circumvent this additional cost by opting for annual billing at the time of renewal. This change is designed to give customers flexibility in managing their cash flows while ensuring that the perceived value of Microsoft’s services remains intact. The introduction of this premium marks a significant shift in how Microsoft balances affordability and value across its broad spectrum of offerings.
Randy Jorgensen, a representative of Microsoft partner RJNetworks, raised concerns about the new pricing structure, particularly its impact on small businesses. These businesses might find it challenging to handle the higher upfront annual costs or the added monthly premium. In the past, Microsoft had implemented a 20 percent premium for month-to-month commitments under its New Commerce Experience (NCE) platform, which had faced similar criticisms. It is worth noting that certain products, such as Azure Reserved Instances, the Azure savings plan, GitHub, on-premises software, and offerings for educational or government customers, are excluded from this new premium. However, educational and government customers will still encounter a 5 percent premium for monthly billing on annual terms, with nonprofits being excluded from this particular payment structure.
Specific Price Increases for Teams Phone and Power BI Services
Effective April 1, 2025, several price adjustments will take place, notably impacting Teams Phone and Power BI services. The cost of Teams Phone will increase by 25 percent, jumping from $8 to $10 per user, per month under annual commitment and annual billing plans. Similarly, the price of Power BI Pro will rise by 40 percent from $10 to $14, while Power BI Premium Per User will see a 20 percent hike from $20 to $24 per user, per month, adhering to the same billing schedule. Despite these changes, customers utilizing Teams Phone or Power BI through Microsoft 365 E5 or Office 365 E5 annual subscriptions with annual billing will not experience the price increases. They will still, however, be subject to the 5 percent premium for annual commitments with monthly billing.
Another critical shift coming in April 2025 is that Microsoft will no longer allow changes to billing frequency midterm for three-year offers, restricting any adjustments to renewal periods only. This new policy aims to streamline billing practices and set clear expectations for enterprises engaging in long-term commitments. Notably, the article does not clarify whether these price level changes will apply to Enterprise Agreements (EA) for Copilot or if month-to-month plans will be available for M365 Copilot, leaving some questions unanswered for specific customer segments.
Discounts and Incentives for Solution Providers
In an effort to mitigate the impact of these price hikes, Microsoft is offering several discounts for solution providers selling Copilot. There will be a 15 percent discount on Microsoft 365 Copilot for the monthly billing, annual commitment plan, available until December 31, 2023. To qualify for this discount, customers must purchase at least ten licenses, and those committing to a 12-month subscription can secure the discounted rate for the entire duration, with the flexibility to add up to 300 licenses during this period. Additionally, a 15 percent discount on Microsoft 365 E5 for CSP partners will be available from January 1 to June 30, 2024. These incentives reflect Microsoft’s willingness to provide some relief amid the broader price adjustments.
For current customers renewing plans before April 1, maintaining existing prices until the next renewal date is a critical advantage. For instance, a renewal on March 30, 2024, will lock in the current pricing structure until March 30, 2025. This strategy allows businesses to plan and budget more effectively, providing a degree of stability amidst significant price changes. While these incentives and discounts offer temporary relief, they underscore the broader trend of rising costs and the need for businesses to adapt to the evolving pricing landscape.
Justification for Price Adjustments and Market Competitiveness
Microsoft has announced upcoming price hikes for several of its subscription services, which will roll out from December 1, 2023, through April 1, 2025. This move aims to align product value with customer payment flexibility. The price adjustments will affect a variety of Microsoft services, including Microsoft 365 (M365) Copilot, Office 365, Enterprise Mobility + Security (EMS), Windows 365, Microsoft Dynamics 365 Services, Microsoft Power Platform, as well as Teams Phone and Power BI.
Starting December 1, 2023, a 5% premium will be added to annual subscriptions billed monthly. Impacted services include Microsoft 365 Copilot, Copilot for Sales, and Copilot for Service. This change will take effect for purchases through Microsoft’s Buy Online platform, Cloud Solution Provider (CSP), and Microsoft Customer Agreement for enterprises. From April 1, 2024, this additional charge will apply to all renewing and new subscriptions under these frameworks. Customers can opt for annual billing at renewal to avoid this premium. Microsoft aims to harmonize its pricing while allowing for cash flow flexibility for its customers, maintaining the services’ value and benefits.
