Managed IT Services

Navigating Microsoft Licensing Complexities for Our Customers

Post by
John Snyder

We typically avoid writing about software license management. It’s not a leading headline and it’s a topic few would eagerly read. It’s even more tedious to research and address, yet there are two recent developments that impact how businesses will obtain Microsoft 365 (M365) and Azure. They necessitate that we wade into these unexciting waters. This article is intended to be informative for our customers and to inspire our MSP peers to consider adapting their services by our lead.

Navigating Cost Adjustments

The first change is relatively straightforward: prices are increasing across nearly the entire catalog for M365 licenses (education licenses remain unchanged). As announced by Microsoft:

On March 1, 2022, [Microsoft] will update our list pricing for the following commercial products: Microsoft 365 Business Basic (from $5 to $6 per user), Microsoft 365 Business Premium (from $20 to $22), Office 365 E1 (from $8 to $10), Office 365 E3 (from $20 to $23), Office 365 E5 (from $35 to $38), and Microsoft 365 E3 (from $32 to $36).

Overall, these cost adjustments are entirely fair since Microsoft hasn’t increased their prices in years, while at the same time readily building new features into all packages. Notable add-ons include the Teams and OneDrive applications, and apparently 22 other applications since Office 365 first debuted in 2011.

Additionally, the improved security options and data protections that have come online in the last decade all deliver enormous value to businesses. At Net Friends, we personally benefit as a distributed workforce within Word, Excel, PowerPoint, and other applications thanks to the robust real-time collaboration capabilities.  

Our Response Plan

Net Friends already bundles M365 Business Premium licenses with all our NetVisor contracts for Managed IT Services.

With the upcoming pricing changes, Net Friends plans to absorb these cost increases on behalf of our customers.

It’s worth repeating this: we will not increase our prices due to the 10% cost increase for M365 Business Premium. We believe that our small business customers see increasing value in M365 tools, and we know that there’s enough positive benefits and value-add from these bundled tools that we see no pressure to pass along the price increases to our loyal customers.

Navigating Annual Requirements

However, there is a second change to licenses that Microsoft is implementing by March 2022 that will create some significant challenges. This change is titled the “New Commerce Experience”, or NCE. The bulk of NCE involves incentivizing annual contracts for licenses.

Anyone who wants to pay for M365 licenses on a month-to-month basis will pay a 20% premium for the privilege of this non-contractual flexibility – this is on top of the price increases described above.  

By March 2022, Microsoft will require a 1-year minimum commitment to secure the new prices listed above. You wouldn’t think that this would matter too much, since we offer NetVisor contracts for annual terms and we could just align the M365 licenses with our annual contracts. However, there are some scenarios where this adds needless complexity. Here are two examples:

1. Limits to License Transfers:

If, for some reason, either the customer or Net Friends terminates the NetVisor contract, the M365 licenses are still the responsibility of Net Friends to financially cover through to full term – there’s no mechanism yet that would allow Net Friends to transfer the billing or ownership of the licenses to anyone else.

So, if a new IT provider takes over support for the customer, Net Friends will need to continue paying for the licenses and the new provider will likely need to commit to another 1-year term for the same licenses. This is not ideal for anyone other than Microsoft.

2. Limits to Scaling Flexibility:

The former consumption model was truly optimal for a Managed Service Provider (MSP) and customer relationship, as we could readily adjust licenses to scale both up and down based on our customer’s staffing changes and needs. The new 1-year minimum license commitment disrupts this, as any new licenses that are added as part of the 1-year commitment cannot be removed or reduced.

In other words, you can go from 20 licenses to 25, but you cannot go back down to 24 subscriptions. This makes ongoing license management more complex since you are now predicting if the business has permanently grown or if the need for more licenses is potentially temporary.

Our Response Plan

As a Microsoft Gold Partner, Net Friends is working with our Microsoft representatives to advocate for clarity on how license transfers can occur. At this time, there is no transfer pathways available, but we are closely monitoring this and will escalate our concerns as the March 2022 date approaches.

Additionally, our plans involving adjustments for M365 licenses after the initial 1-year term commitment are to simply purchase additional licenses on a month-to-month basis and pay the premium cost. We opted to go for a simpler approach that could be universally applied for all of our contract customers. To state it once again: we plan to absorb these cost increases on behalf of our loyal customers.  

Microsoft Licensing with Net Friends

The NCE terms will likely influence adjustments to our NetVisor contract language, ensuring we establish contract clarity over what happens to non-transferrable licenses purchased by Net Friends in the event of a contract termination.

Our ultimate goal is to put the interests of our customers first and try to protect the organizations we serve from any unnecessary price hikes or additional complexities from NCE annual contract terms.

We are also putting this information out there so our peers in the MSP community can better understand the logic of our intentions, and consider whether to follow our lead. I invite the insights and ideas of our friends in the managed services sector. Feel free to direct message me on LinkedIn to share how you are navigating these upcoming changes!

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