Microsoft announced in August, 2021 that they would raise the price of Microsoft 365 and Office 365. Exact price differences will vary depending on the product, but the hike could result in anywhere between 0–25% in licensing cost.
The significant cost increase, which Microsoft has labeled “The New Commerce Experience” for Office has left some resellers and IT leaders with a bad taste in their mouths.
For a few reasons.
Firstly, new deal options pinpoint many customers in between a rock and a hard place. The new deal proffers customers a choice. Either they switch to an annual subscription, or they can face a significant price hike — up to 25%. Some businesses with seasonal fluctuations or experiencing high volatility have no choice but to pay more.
Another sticking point is that the cost increases impact the lower tiered licenses the most. Office 365 licenses at the E1 support level will receive the full 25% hike, whereas Microsoft 365 Business Basic will see a more modest 20% rise, with the most premium tiers even less impacted. This places the most pressure on the least flush customers. Resellers are concerned their customers will take their business to another company, like Google or Zoho.
One reseller, Axiom, was so incensed they started a petition on change.org in protest. As of late last year the petition had found 1,500 signatures. That is not a lot considering the sheer number of Microsoft customers, but it is not insignificant either.
As a reseller ourselves, we have neglected to sign this document. Here’s why we won’t.
5 Reasons Why Microsoft’s Price Hike Is Justified
No one wants their suppliers to raise prices, but there are many reasons why this price increase makes sense, from Microsoft’s perspective and also from a customer’s.
1) Microsoft has not increased prices in over 10 years
A cost increase of 25% in a single year is normally considered price gouging, but when that does not happen more than once in a decade, you have to reconsider. Odds are we will not see another licensing increase in the next 5–10 years. At that rate, even customers looking at the full 25% lift are still paying less than the cost of inflation.
2) Cybersecurity is more complex than ever before
Take a look at the number of security patches over the last ten years, and you will find an almost exponential increase in volume. Platte River Networks did a brief study of Microsoft Security Updates in 2019, finding that on average the number of critical updates released in any given month had tripled between 2016 and 2019. That pace has only accelerated since, all without a single raise.
If you were an employee being asked to do three times the work after ten years of employment, do you think you might ask for some more money? We hope you would.
3) More software and features than ever
This reason piggybacks on the last. When Office 365 went live in 2011, it was comprised of a handful of applications. Some big additions have come to the stack since then, big names like Microsoft Teams, Power Apps, Power BI, Visio, OneDrive, and Whiteboard. Each of these releases new features on an annual, and in many cases monthly, basis.
Again, don’t they deserve a bit more money?
4) Option to go annual and stay at the same price
This one seems pretty obvious but has not been emphasized enough. The cost increase is optional. Most Microsoft customers fluctuate slightly on the number of licenses they might need from month to month, but not so severely as to prevent them from buying an annual contract. Most customers can make small changes to accommodate the same price they have had for the last decade.
5) You create your value with Microsoft Products
Just because Microsoft has increased the number of applications and features covered by its 365 Suites does not mean your users gain the full value of these licenses. Businesses need to invest extra time and effort into rolling out these additional applications. In many cases, they might need to train users or explore different ways of working. A good reseller will help walk you through these hurdles so that you can unlock real business value and grow as a business.
As a Microsoft reseller and advocate, we believe the cost increase is justified. Yes, we would prefer to access these Suites for free, but then again, Facebook is free, isn’t it?
If you have any questions about how to unlock more value with your Microsoft licenses, please email david@platteriver.com for more information.
