Octobits Blog – Microsoft 365 is going through some big changes, and businesses are getting ready for the impact. Learn more about Microsoft 365 price increase and how it can affecting your budgeting.
The tech giant has announced a significant Microsoft 365 price increase, set to take effect in the near future.
This change, along with the launch of the New Commerce Experience (NCE), has left many organisations trying to figure out how it will affect their budgets and operations.
That’s why we need to get a handle on the financial implications and the details of this price adjustment.
How much does Office 365 cost per year?
Before we get into the price increase, let’s first look at the current cost of Office 365.
The price of Office 365 depends on which plan you choose and how many users you have.
As of August 2024, the Office 365 E3 suite without Teams is going for $20.75 per user per month, which adds up to $249 a year.
Meanwhile, the price for Office 365 E5 without Teams is $35.75 per user per month, or $429 a year.
If a company needs Microsoft Teams, they have to buy it separately. The Microsoft Teams Enterprise add-on costs $5.25 per user per month, which adds $63 a year to the total cost.
Introduction of the New Commerce Experience and its impact on pricing
Microsoft’s New Commerce Experience (NCE) is the latest addition to the company’s global pricing and licensing overhaul.
This is a big change in how businesses manage their Microsoft 365 and Office 365 subscriptions.
The idea behind the NCE was to make it easier for businesses to buy Microsoft 365 and Office 365 subscriptions, but it also brought with it a more rigid pricing structure.
Before, companies could pick and choose from different suites with flexible pricing.
However, the NCE means that subscriptions are more standardised, with fewer discounts available for long-term commitments.
Absolutely. The NCE is going to have a big impact on businesses that rely heavily on Microsoft’s ecosystem. The NCE has had a big impact on pricing.
For instance, businesses who get discounts for yearly commitments now have to pay more if they want to pay monthly, even though it’s more flexible.
On top of that, splitting up Microsoft Teams from the regular Office 365 and Microsoft 365 packages has made things more complicated and could lead to higher costs, especially for businesses that need all the collaboration tools they can get.
As you might guess, the annual commitment and the higher price for monthly subscriptions could mean more money out of some customers’ pockets.
Details of the Price Increase
The price rise for Microsoft 365 and Office 365, which is coming into effect in April 2024, is part of Microsoft’s wider plan to realign its global licensing model.
Microsoft is now pricing its productivity suites the same way in all regions outside the EEA and Switzerland.
The new prices are about 10-20% higher, depending on the suite.
For example, Microsoft 365 E3 without Teams now costs $33.75 per user per month, which is a big jump from previous years when the same suite, including Teams, was available at a lower price.
On top of that, the new Microsoft Teams Enterprise licence, which costs $5.25 per user per month, means businesses will have to budget for this extra expense if they want to keep their current level of functionality.
This pricing strategy shows that Microsoft wants to make money from its Teams platform separately, which will help it earn more from its enterprise clients.
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Reasons for the Price Increase
There are a number of reasons behind the price increase. Firstly, Microsoft says its Office and Microsoft 365 suites are now worth a lot more than they used to be.
There are a few examples we can look at here. There have been improvements in AI-driven tools, better security and new services like Copilot for Microsoft 365 have been added.
Microsoft says these new features make the higher costs worth it.
Secondly, this move fits in with what’s going on in the wider market, where software-as-a-service (SaaS) companies are adjusting their prices to reflect higher operational costs, inflation and currency fluctuations.
For instance, Microsoft’s FY24 Q2 earnings report showed a strong rise in revenue, especially from its cloud services.
This shows how the company is planning to make the most of its top spot in the enterprise software market.
Impact Microsoft 365 Price Increase for Customers
For small to medium-sized businesses (SMBs), the price increase could be a real challenge.
The extra costs could mean making some tough choices, like reducing the number of Microsoft 365 licences, looking at other productivity suites, or even cutting back on other IT spending.
The unbundling of Teams, which has become a key part of many businesses’ communication and collaboration workflows, adds another layer of complexity and cost to the equation.
The price increase won’t just affect SMBs.
Even the biggest companies, who might be better able to cope with the extra costs, may still have to make changes to their IT budgets or look for ways to make better use of Microsoft 365 to limit the financial impact.
The changes could also lead to a broader shift in the market, with businesses looking for more cost-effective alternatives to Microsoft’s offerings.
The price increase also raises questions about how it might affect innovation and productivity.
If businesses have to cut back on their Microsoft 365 subscriptions or use less feature-rich alternatives, it could make it harder for them to use the latest productivity and collaboration tools.
This could also have an impact on overall productivity and competitiveness.
This could mean a more diverse market as companies look to find the right balance between quality and affordability in their IT investments.
As Microsoft changes its prices around the world, any unfavourable exchange rate changes could make these subscriptions more expensive for businesses.
The ACCC has been speaking out lately about the need for more competition and fairness in the digital marketplace. So, it’s likely that the Microsoft 365 price hike will attract its attention.
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Strategies for Managing Increased Costs
One of the most effective strategies is to optimise the use of existing licences.
A lot of businesses end up buying more licenses than they need, either because they don’t keep an eye on what they’re buying or because they’re hoping for growth that doesn’t actually happen.
If companies audit and adjust their licence allocations, they can cut down on unnecessary spending while still having access to all the tools they need.
Another key strategy is to make the most of Microsoft’s volume licensing options. These programmes often offer discounts for bulk purchases or long-term commitments.
Even small to medium-sized businesses can look into these options, especially if they think they’ll need more IT resources soon.
If you commit to a longer-term licence, you can lock in lower rates and protect yourself against future price increases.
If you’re looking for more direct cost control, platforms like Octobits can be really helpful.
Octobits offers a complete license management platform that gives businesses the full picture and control over their software ecosystem.
With Octobits, your IT departments and finance departments can manage devices, billing, and reporting from one place, the Octobits dashboard.
And the great news is that Octobits is free for use until December 2024.
Yes, you can bring all their billing and reporting together, so you can keep track of all your IT spending and make sure you’re getting the best deal. And it’s free.
This platform works great with all the big IT vendors, including Microsoft 365, so it’s easier to manage and keep an eye on the costs of these services.
On top of that, training and support for your own IT teams can help to balance out the impact of rising costs.
If employees know how to use all the features of Microsoft 365, businesses can get the most out of their subscriptions.
This training helps to stop people from using only a small fraction of the tools they have at their fingertips.
In Closing
The price increase for Microsoft 365 is a wake-up call for many businesses in the world.
Absolutely. We all need to take a step back and look at our IT strategies again to find the right balance between cost and productivity.
But the price hikes also mean there are chances for businesses to make the most of their software, look at other options, and invest in their IT teams.
If you get ahead of the Microsoft 365 price increase, you can make sure your business stays agile and competitive in today’s fast-changing digital world.
