15% Price Increase for Microsoft Cloud Starting April 1, 2023

Microsoft Cloud Price Increase April 2023

Microsoft has announced a 9-15% price increase for all Cloud services in United Kingdom and Europe starting April 1, 2023.  See how multinational, UK, and EU enterprises can avoid or offset the new Microsoft licensing cost hikes.

Audience: CIO and IT Executives | Sourcing, Procurement and Vendor Management | IT Software Asset Management (ITAM/SAM)

15% Price Increase for Microsoft Cloud Starting April 1, 2023

Multinational, UK and EU Enterprises Impacted

April 1st 2023 is the beginning of the new Microsoft Cloud price increase. The price increase will affect all Microsoft cloud services, including popular offerings such as Azure, Dynamics 365, and Microsoft 365.

Below are the price adjustment rates for the European region including United Kingdom:

CURRENCY MICROSOFT PRICE INCREASE
Swedish Krona 15%
Norwegian Krone 11%
Danish Krone 11%
Euro 11%
British Pound 9%

Some more details:

  • Perpetual licenses will not be affected (e.g., Windows Servers, Exchange Server, Office Professional Plus, Windows Enterprise 11 on-prem)
  • Customers with a running agreement with price protection (such as the Enterprise Agreement, Open Value Subscription – Company Wide) benefit from price protection for previously ordered products and those products will not receive the new, higher price under that Agreement
  • Customers with a Microsoft Customer Agreement (seat based offers, such as Office 365, Microsoft 365, Dynamics 365) do have price protection during the term of their subscription. Only at renewal of their subscription after April 1st or when they start a new subscription after April 1st, will they receive the cost increase
  • Azure Plan through the Microsoft Customer Agreement is already priced in US Dollar with a monthly higher price and will not be affected
  • Price adjustments apply to commercial, governmental and educational customers

Because there is a (maximum) semi-annual price adjustment, this means that during 2023 there can be another update. This could be another price increase, but a decrease is also possible if the US Dollar valuation drops – local currency exchange rates change in the benefit of the local currency.

While this news may be unwelcome to many enterprises and organizations, Microsoft has stated that the change is necessary in order to maintain consistent global pricing for their cloud services. In a statement, the company explained that “periodic adjustments to local currency pricing are necessary to ensure that customers in different regions are paying consistent prices for similar cloud services.”

Price Protection for Microsoft April 1 Increases

Prices for all cloud services are going up April 1. For some products, you can have price protection depending on your contract. For an EA, SCE or EAS, that’s 3 years from the start date. For most CSP products, it’s 1 month (if you chose monthly subscriptions) or one year (if you chose annual subscriptions).

That price protection applies only to “plans,” such as M365 F1 or E3 or EMS E3. For services that charge based on usage, the protection does not apply. Nor is there a price noted for those in your contract. Think of storage, network and compute costs. There are a lot of services in Azure that are charged based on usage.

A commitment is often issued for that usage. This involves the customer agreeing with Microsoft to spend a certain amount on these types of usage costs. Usually over a period of 3 years. In return, the customer gets a discount on the usage fee. But that discount is always calculated on the current price for a service. The price itself is not fixed.

Normally not such a problem, because price changes in Azure services are usually quite limited. Now suddenly the prices for those services all become 9-15% higher!

Say a particular service costs €1 per unit. And you got a 10% discount. So then you pay €0.90. With the price increase, that service suddenly costs € 1.11 per unit. Then you get a 10% discount on that and you pay € 1 per unit. So with that, your negotiated discount has suddenly disappeared because of a price increase by Microsoft.

So customers are going to pay more for these types of services because of the price increase, even if they have agreed to a commitment. You can’t actually avoid the price increase for these services. You will need to find a way to offset these new Microsoft cost increases.

More Price Increases on the Heels of NCE in March 2021

Microsoft are increasing their pricing by 9% on April 1st, 2023. This will affect ALL Microsoft products/services, so not to be confused with the NCE and Microsoft 365 price increases in 2021.

As many of you recall, in March 2021, Microsoft change their licensing model to the New Commerce Experience (NCE). As regular upgrades take place to enhance the NCE, a further increase will take place on April 1st.

As a reminder, the NCE cost increases affected the following license types:

  • Microsoft 365 Business Basic (20% Increase)
  • Microsoft 365 Business Premium (10% Increase)
  • Office 365 E1 (25% Increase)
  • Office 365 E3 (15% Increase)
  • Office 365 E5 (8.5% Increase)
  • Microsoft 365 E3 (12.5% Increase)

In January 2019, Microsoft launched its new commerce experience (NCE) for Microsoft Azure. In October 2021, it added end-user subscriptions to the NCE. The old way of doing things is referred to as Legacy CSP.

Legacy CSP
Under legacy CSP, there was one commitment term: annual. Customers were allowed to pay monthly or annually, but the subscription was renewed yearly. Its price remained unchanged for the duration of the term (i.e., the whole year).

NCE
NCE introduced three different commitment terms: monthly, annual, and triennial. The same rule of maintaining a subscription’s price applies, but now it can change as frequently as every month if you have committed to a monthly subscription.

Impact to Microsoft Azure Pricing

For UK and EU customers transacting directly with Microsoft for Azure consumption through Azure.com, prices will increase on 1 April 2023.

On the other hand, Azure customers buying through a Microsoft Cloud Solution Provider (CSP) under the new commerce experience (NCE)* are not impacted.

This is because Microsoft CSP partners are charged in US Dollars for their customers’ Azure consumption. The cost is converted to the local currency using a monthly variable exchange rate.

If you have an Enterprise Agreement (EA), you’ll receive price protection up to the baseline price stated in your agreement. But only for the duration of your contract.

Prices may go up for some EA customers but not above the baseline price stated in their agreement.

Azure Commitment Discount (ACD) customers in the UK and EU will see prices increase, but not above their baseline price protection.

Impact to Microsoft End-user Pricing

Customers who purchase annually-committed end-user subscriptions through a Microsoft CSP under the NCE are price-protected for the duration of their subscription. So that’s annually-committed subscriptions of Microsoft 365, Dynamics 365, billed monthly, annually or tri-annually

However, if you are on a monthly-committed subscription, you will pay the higher prices starting 1 April 2023. Furthermore, any new product subscriptions added or renewed after this date will be charged at the higher prices. This applies to both monthly-committed or annually-committed subscriptions.

“Effective software asset management is important,” says Michelle Cowan, a SAM pro. “Knowing what you have, who has it, why they have it, and how long they need it are key questions to answer regarding your Microsoft licensing portfolio.”

Trailing Microsoft Unified Support Cost Increase

Microsoft customers in Europe impacted by price “harmonization” increases on cloud products will see their Azure spend grow, leading to an increase in Unified Support costs in the following year.

That increase in support costs won’t be because their requirements for support increased, but because rates on Azure did.

How to Mitigate or Offset Microsoft Price Increases

Organizations that already have seat-based subscriptions within the New Commerce Experience Cloud Solution Provider (NCE CSP) program will have price protection until the renewal date.

Furthermore, if these organizations add any new subscriptions before April 1st, 2023, the licenses on those subscriptions will be price protected, along with any additional licenses added during the subscription term.

Organizations on month-to-month Microsoft 365 subscriptions can avoid the price increase for up to a year by committing to a 12-month term.

Those with an annual commitment up for renewal before the April 2023 can also avoid the price increase for up to a year by renewing their subscription.

For Azure subscriptions; legacy subscriptions will be impacted by the price increases, but any Azure plans purchased through the NCE program will NOT be impacted.

Furthermore, existing reserved instances (RI) won’t be impacted by the price rise until the end of the term.

For those unable to avoid the Microsoft licensing increases on April 1, analysts agree that Microsoft cloud heavy organizations should take a serious look at Microsoft third-party support. 30-50% savings on Microsoft Premier/Unified Support is common in year 1 with additional cost avoidance opportunities over the course of the EA lifecycle.

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