Navigating the complexities of Microsoft licensing changes

Navigating the complexities of Microsoft licensing changes

In news that we know many of our clients will welcome, big changes are afoot within Microsoft to restructure and ultimately simplify the way you pay for its products.

Microsoft is also introducing a New Commerce Experience (NCE) to streamline the way customers and partners buy its products and services and optimising its purchasing motions.

 

Out with the old, in with the new

Microsoft first introduced its Cloud Solution Provider (CSP) programme in 2015, which allowed partners to offer monthly cloud service subscriptions to clients.

Within the CSP, customers entered into a contract with their service provider, accepted the Microsoft terms, and where agreed, were provided with support from their CSP provider.

In 2019, Microsoft introduced the Microsoft Partner Agreement, with the aim of making the contracting experience easier and faster. The Microsoft Customer Agreement (MCA) a simplified purchasing agreement without expirations, was also introduced. The MCA replaced the previous Microsoft Cloud Agreement within the CSP.

In the same year, Microsoft announced a New Commerce Experience (NCE) for Azure. This allows partners to easily transition customers to the MCA when purchasing Azure.

Microsoft has now launched its New Commerce Experience for seat-based products across its platforms, expanding on the Azure NCE model. But what does all of this mean for you as a business and a Microsoft customer?

 

Optimising purchasing motions for customers

Microsoft is dedicated to putting customer needs first and creating a sense of clarity around its buying options for businesses, or purchasing motions.

The current standard purchasing structure is fractured, with each licensing platform having an individual contracting experience and terms and conditions.

Under the NCE, Microsoft is creating a unified experience across its platform, no matter which motion customers purchase through. Rather than individual T&Cs, all customers will sign the Microsoft Customer Agreement.

 

Microsoft’s new purchasing motions

Breadth motion: 

  • Primary purchasing motion for small-to-medium-sized businesses (SMBs) of up to 2,400 users
  • For businesses which don’t have unique contractual requirements before negotiating prices
  • Serviced primarily by CSP providers
  • Where most Microsoft customers purchase products

 

Enterprise motion:

  • Primary purchasing option for larger customers (2,400+ users)
  • Generally requires high levels of Microsoft support
  • Serviced by the Enterprise Agreement (EA)

 

Self-service motion:

  • Occurs across businesses of all sizes
  • For businesses with specific technology purchasing needs
  • Can be bought online through a web portal or through a Microsoft Seller

 

Introducing the new commerce experience

What is NCE?

Mirroring the new commerce experience for Azure, the Microsoft NCE is a new purchasing experience for Microsoft 365, Dynamics 365, Power Platform, and Windows 365.

What Microsoft is aiming to do with the NCE is to create a uniform experience for customers, regardless of whether they purchase through the CSP, the Enterprise Agreement, or directly through Microsoft.

The NCE is in its first phase and currently only applies to commercial clients, not to those in the education or not-for-profit sectors.

 

How do NCE plans differ from the previous model?

Microsoft’s previous buying experience allowed customers on a 12-month term to upscale or downscale their subscription throughout the contract.

With the NCE, customers can buy Microsoft licenses against three new plans available, which will replace the current 12-month option.

36 months

  • Pricing will remain fixed for the three-year term
  • There is an enforced no-cancellation policy for the duration of the term
  • Customers will be able to upscale their contract, but not downscale

 

12 months:

  • There is an enforced no-cancellation policy for the duration of the term
  • Customers will be able to upscale their contract, but not downscale

 

30 days:

  • There is an enforced no-cancellation policy for the duration of the term
  • Customers will be able to upscale or downscale their subscription at the beginning of a new month
  • There is a 20% price increase on the annual-term pricing

 

What are the benefits for customers?

The NCE gives customers more choice when it comes to Microsoft products:

  • The premium monthly-term subscription allows more flexibility when it comes to upscaling, downscaling, and cancelling contracts
  • The new Windows 365 Cloud PC service is available on a monthly term with annual-term pricing

 

When will the NCE be introduced?

Partners like ourselves will be able to give our customers the option of NCE contracts from the beginning of January 2022. From March 2022 onwards, the NCE model will become the new standard and all new and renewing subscriptions will be moved to this pricing model.

 

Microsoft Enterprise Agreement

Enterprise Agreements are primarily designed for larger businesses of over 2,400 employees which want to license Microsoft software for a minimum of three years.

They’re best placed for businesses with complex needs and generally require a high level of involvement from Microsoft. With an Enterprise Agreement, businesses can license any Microsoft software, not just cloud-based products.

 

Microsoft CSP vs EA contracts

These are the key differences between the CSP and EA contracts.

  Microsoft Cloud Solution Provider (under NCE)

 

Microsoft Enterprise Agreement
Products available All cloud subscription products (Microsoft 365, Dynamics 365, Windows 365, Azure, Power Platform)

 

All Microsoft products
Length of commitment Flexible choices (three-year, one-year, or one-month terms)

 

Three-year agreements
Number of seats required No minimum requirement

 

500+ (or 250+ in the public sector)
Change user numbers Upscaling available at any time, downscaling only available on 30-day plans Upscaling available at any time, downscaling only available annually (with 30 days’ notice) and must maintain 500 users minimum

 

Support options 24/7 support available through CSP partner with access to premier Microsoft support Basic Microsoft support (premier support available at an extra cost)

 

CSP contracts have clear benefits for smaller businesses which don’t reach the higher limits of 2,400 seats, which is where the commercial benefits of EAs start.

They’re also suited to businesses looking for short or more flexible terms. But the CSP model works for businesses of all sizes and still provides the option for long-term contracts.

 

Upcoming Price changes

Microsoft recently announced several pricing updates* for Office 365 and Microsoft 365 licences. These will come into place in 2022.

SMB products

  • Microsoft 365 Business Basic: $6 from $5
  • Microsoft 365 Business Basic: $22 from $20

 

Enterprise products 

  • Office 365 E1: $10 from $8
  • Office 365 E3: $23 from $20
  • Office 365 E5: $38 from $35
  • Microsoft 365 E3: $36 from $32

 

Audio conferencing 

Unlimited dial-in will be added to the following:

  • Microsoft 365 E3 Office 365 E1/E3
  • Microsoft 365 F1/F3: Office 365 F3
  • Microsoft 365 Business Basic, Business Standard, Business Premium

 

These updates will come into effect from 1st March 2022. Businesses which adopt new CSP contracts under the NCE before March 2022 will be able to take advantage of the current lower pricing structure for the duration of their term.

 

How your technology partner can help to navigate these updates

Understanding your Microsoft 365 licence can be complicated. With the upcoming Microsoft licensing changes, and the breadth of licensing options available, it may seem difficult to choose the best plan for your business.

Your technology partner is best placed to advise you on how these updates can affect your organisation. Your account manager will be able to steer your business on the best route for maximising your Microsoft license investments.

 

*Microsoft releases all of its pricing in US Dollars. Your technology provider is best placed to advise on prices in GBP.

Still want to know more about Microsoft licensing changes?

The way Microsoft licenses its products continues to change as we move through the further phases of the NCE. To learn more about Microsoft product subscriptions, claim your spot at our Digital Transformation 2.0 on Wednesday 19th January - register here.

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