Updates to Microsoft 365 licensing and pricing

Microsoft 365 commercial license pricing has been the same since it began as Office 365 over 10 years ago. However, this is about to change as Microsoft recently announced a number of increases that will come into effect soon.

This will include a price increase for commercial Microsoft 365 plans and updates to how M365, Dynamics 365 and the Power Platform are licensed through the CSP.

In this article, we’ll be sharing what the new Microsoft 365 licensing pricing model is for 2022, the CSP changes and how these may impact your business.

When does the new pricing come into effect?

At the end of August, Microsoft announced that they will be increasing the cost of commercial Microsoft 365 licenses, which will come into effect on 1st March 2022. Educational, non-profit and personal plans will not be impacted by this change, but government plans will be impacted with the increase being phased in.

The reason for the increase

As Microsoft has stated in their release, this price increase is the first major price change in over a decade. The reason for this change is the increased value and investment into Microsoft 365. This includes 24 apps to the suites—Microsoft Teams, Power Apps, Power BI, Power Automate, Stream, Planner, Visio, OneDrive, Yammer, and Whiteboard—and the release of over 1,400 new features and capabilities in three key areas.

New pricing

On average, prices will increase by around 15% however they do vary slightly plan to plan. UK pricing is yet to be announced, but we expect prices will be released closer to the launch date and in line with exchange rates. In the meantime, we have included the US pricing to give you a rough idea of the pricing.

Office 365 E1 – Going from $8 to $10 (25% increase)
Office 365 E3 – Going from $20 to $23 (15% increase)
Office 365 E5 – Going from $35 to $38 (9% increase)
Microsoft 365 Business Basic – Going from up to $5 to $6 (20% increase)
Microsoft 365 Business Premium – Going from $20 to $22 (10% increase)
Microsoft 365 E3 – Going from $32 to $36 (12.5% increase)
Microsoft 365 E5 – will not see a price increase and remains at $57
Frontline plans are not affected

CSP licensing changes: New Commerce Experience

You may be familiar with the New Commerce Experience (NCE) which was launched in 2019 to make licensing management easier. This will now be expanded to include Microsoft 365, Dynamics 365 and Power Platform.

This NCE will become available from January 2022 and then become the requirement from 1st March 2022 (note, this date may be changeable) for all new and renewing subscriptions.
As part of the NCE, customers can choose from three different term commitments, which will be enforced by Microsoft.

Monthly – Gives you the flexibility to increase and decrease the number of licenses every month but comes with a 20% premium.
Annual – You will have to commit to several licenses at a better price for the annual term.
3-Year – As above but with a 3-year commitment. This can be paid upfront, annually, or monthly.

It is worth noting that you can ‘mix and match’ subscriptions.

Start preparing now

To prepare for the changes talk to your Microsoft Partner for the best licensing options available and benefit from any early discounts. The right option will depend on how much you rely on the flexibility to change license levels – if you can happily commit to a longer-term with a stable base then the annual or multi-year term will give you better value. However, if you need the flexibility to increase and decrease each month then you need to be aware of the 20% price increase that will come with this. Of course, there is also the option to mix and match too.