First Microsoft Price Increases In A Decade Will Affect Customers, Says UpperEdge
Some Office 365 and Microsoft 365 pricing changes are set for March 2022
UpperEdge, an independent third-party advisory company that empowers enterprises to get the most value from their IT supplier relationships analyzes how Microsoft’s newly announced pricing increases will impact customers.
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According to Microsoft, there hasn’t been a price increase to these product suites in over a decade. Over that 10-year period, there has been considerable value added to the Office 365 and Microsoft 365 product suites.
Understanding these price increases and why Microsoft is adding them will be critical to negotiation strategies moving forward.
“One way to increase revenue is to increase the average revenue per user (ARPU), something all cloud vendors focus on. If the underlying list price goes up across key products like Office 365 and the all-in cloud bundle Microsoft 365, that’s a fast way to increase the ARPU tied to their entire base of customers using these products,” said Adam Mansfield, Microsoft Practice Leader at UpperEdge.
“Microsoft is also ultimately trying to move their customers to the Microsoft 365 E5 or even E3 bundles. If you increase the Office 365 components of these all-in cloud bundles, which also have Windows Online and EMS, it certainly helps “motivate” customers to consider moving to the more robust bundle,” Mansfield added.
Key Insights When Navigating Deals
- Check for Renewal Term Price Protections. If you have renewal term price protections in place that adequately address the level of increase Microsoft can apply at your upcoming renewal and your renewal is after March 2022, you may be in a good position.
- Evaluate Existing Pricing. Determine whether or not the pricing you negotiated last time is appropriate before looking to the future. Protecting a price that is not worth protecting in the first place is certainly problematic and would need to be addressed.
- Assess Current Utilization. Carefully assess current utilization of products as well as the actual value received to date. As part of this, look closely at the expected go-forward value as well. If something has not been used to date, are there plans to use it in the near future? No Microsoft customer is using every feature in a given product suite but ensure enough key aspects and features of the product are adding value.
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