Thought Leaders: Microsoft just changed its licensing model – do you know how it will impact your business?

By Scott Warner - Connecting Point — 

In late 2021, Microsoft announced significant changes to its licensing and subscription model as they sunset their Cloud Service Provider (CSP) program and launch their New Commerce Experience (NCE) which is active as of January 1st, 2022. As of March 1st, 2022 Microsoft resellers must use the new model (NCE) to acquire new licensing or renew existing client licenses.    

What does this mean to your business? 

If your business purchases Microsoft licensing through a reseller or IT services provider, you can expect big changes in Q1-2022. 

The Microsoft 365 Suite is a common business tool, and most organizations are familiar with its flexible monthly pricing structure and ability to add/deduct licenses on-demand. As a part of the New Commerce Experience, Microsoft isn’t eliminating the monthly on-demand model, they are just increasing the price by 20% to incentivize their newest subscription model called the Annual Term Subscription (ATS). On top of the price increase for leveraging their month-to-month model, Microsoft is rolling out their first major price increase in 10+ years. Price increases will affect many popular M365 SKUs by 15-20%. Depending on the situation, you could see a 35-40% increase in cost. Please note: pricing for Non-Profits will not change.

As an incentive to move clients into their Annual Term Subscription model, Microsoft will honor existing monthly pricing but will require one-year commitments. Resellers must also move their clients’ licenses manually into the new model before March 10, 2022, to lock in current pricing for one year. As an added value, certain distributors of Office 365 (i.e., Pax8) are providing an additional 5% discount for one year if licensing commitments are made before March 10th…so, even though prices will increase eventually, a business can achieve near-term cost savings if commitments to the new model are made by March 2022.

Licensing not moved into the ATS model as of March 10 will automatically increase in cost. As licenses are moved to ATS, they will establish either a new 1-year or 3-year commitment. Billing can still take place monthly, but commitments must be fulfilled either way. Businesses may still carry licensing with different term commitments, as monthly commitments still make sense for certain businesses (i.e., seasonal businesses or companies with quickly changing resource needs). In those cases, a quick ROI calculation can be done to determine which licensing term makes the most sense. 

With these new pricing changes, purchasing requirements, and licensing terms, it’s important to have a plan, and understand how to take advantage of the discounts/incentives available. Although these changes were rolled out quickly from Microsoft, the process to get licenses moved and set up through the NCE is straightforward.

Do you need help understanding the unique needs of your business and navigating technical change? Learn more and get support from the IT experts at Connecting Point by visiting