In Episode 1 of our Microsoft Briefing Series, we discuss Microsoft’s upcoming price increases, planned to hit specific products on 1st March 2022. We discuss the impact these planned price increases will have on existing Microsoft customers, as well as the best way organizations can prepare. These price increases are inevitable, but a proactive approach to fully understanding your current consumption, extending to improvements such as control and optimization, will help mitigate as much risk as feasibly possible, whilst empowering your contract negotiations.
What we know about the planned Microsoft price increases so far
Microsoft is planning to increase prices on certain products rather than across the board. So far, we know this will affect most of the end-user-computing (EUC) platforms, and likely some of the Microsoft 365 Enterprise solutions as well. The one area in which we know there will be no price increase is Microsoft 365 E5 – the company’s more premium offering which includes PowerBI Pro. Notably Microsoft Office 365 E5 will incur price increases but not the overarching M365 E5 bundle. Tune in to Episode 2 of our series to find out more about PowerBI and Power Apps.
Microsoft’s announcement of these increases is not unexpected. For a start, it has simply been a long time since there have been any price increases at Microsoft. And the increases are certainly justified considering the additional technology that has been added to their products in the past ten years since Office 365 was launched. Moreover, since there are no planned price increases for E5 components, Microsoft’s decision to increase the price of targeted products is clearly considered.
What the Microsoft price increases mean for organizations
Organizations will need to take into account an estimated 20% price increase for certain Microsoft product sets. All Microsoft customers will be impacted by the rise in prices, though those customers using purely the M365 E5 service to a much lesser extent. Microsoft 365 E3 customers that are not yet ready for full E5 will be the most highly impacted, and the most likely to see the full 20% increase if they stay with what they have.
The decision not to raise prices for M365 E5 indicates that Microsoft is looking to position this solution as a more standardized platform for their customers. This is reflective of the fact that Microsoft has already been trying to increase customer adoption of their E5 products. And certainly, with other product prices increasing whilst M365 E5’s remains the same, many organizations will be doing the math to discover if switching to E5 is better value.
Our key takeaways
Organizations need not feel pressured to switch to Microsoft’s E5 service purely because of the planned price increases. Instead, the best way for organizations to save money in the long-term is by ensuring they fully understand their IT consumption now, and therefore what they will realistically require in the future. Here are our top tips to ensure Microsoft continues to work for you:
- Plan ahead. Contracts themselves have already changed a lot compared to just a few years ago. The planned price increases therefore add another layer of complexity to contract renewals. It is in organizations’ best interest to plan ahead and prepare well in advance of March 2022.
- Target an early renewal. By planning to negotiate early you can effectively “beat the increase”. If possible, plan to get your next contract in place ahead of schedule.
- Understand your Bill of Materials (BoM). It’s really important that organizations make sure they fully understand their entire IT Estate and know exactly what and how much they are consuming. This will help create a solid, considered BoM to present during negotiations, and is key to walking away with a successful deal. It’s also worth considering if anything can be optimized to mitigate any further costs. By having a clear BoM to bring to contract negotiations, organizations can show Microsoft that they know exactly which products they do and don’t need, and therefore maintain leverage to keep costs as low as possible. This is exactly how Essex Police recently found success, as their CIO, Jules Donald, explains: “Essex Police was able to successfully reduce the number of services, products and licenses it required through more efficient technology consumption, securing a better deal and a leaner estate for the future.” Case study link here https://www.livingstone-group.com/client-success/essex-police-service
- Prepare your finance team. If you really cannot plan ahead, then this is your last resort. Since we know exactly when the price increases are coming, it’s best to be as prepared as possible to mitigate any potential risk.
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About the Authors
Simon Leuty, Livingstone Founder
Simon is a founder of Livingstone Technologies. He currently sits on the Executive Leadership Team as Head of Pre-Sales. Simon is responsible for the development roadmap of our client portal LUCE.
He has over 15 years’ experience of the Software Asset Management and Cloud markets, working closely with our growing customer base to help them take control of their software and cloud cost. Simon helps to eliminate unacceptable spend and enforce tight governance standards that keep them compliant, agile and secure.
Gareth Redshaw, Director of Microsoft & Cloud
Gareth joined our team through the acquisition of Cloud Optics, who are now a company in the Livingstone Group. With over 15 years’ experience in software licencing Gareth has helped clients optimise spend, develop their future strategy and taken control of high-profile vendor negotiations; this includes one of the largest UK Government contracts.
Having successfully managed UK wide government EWA contracts from 2009-2011, more recently Gareth developed a proven methodology for cost optimisation. He has implemented this across EMEA wide clients and delivered substantial savings. Gareth developed and grew the largest LSP’s practice for Microsoft government SME consulting and Cloud Commercial Optimisation. In addition to this he was responsible for this same LSP’s Licence Consulting UK, Ireland & Nordics.