In our November 2021 Insight, we Demystified the Microsoft New Commerce Experience (NCE) in preparation for Microsoft’s new licensing model and Microsoft 365 (M365) price increases that rolled out on March 1, 2022. We discussed the main components of NCE and what companies should do to prepare for the changes.
Since then, our team has worked diligently with our partner, AppRiver, to ensure our customers enjoyed a seamless and stress-free transition to NCE and fully understood all the ramifications of this new licensing model. We helped customers make the best decisions for their business by analyzing their current license requirements and costs, then figuring out which approach was the best fit for their business needs – a service we provide 12 months a year not just related to NCE!
This month, we’re sharing what we’ve learned and highlighting some important dates that you should be aware of.
First, let’s recap the changes that went into effect on March 1, 2022.
Microsoft 365 Price Changes
Price increases went into effect for the following core Microsoft SKUs on March 1, 2022:
- Microsoft 365 Business Basic: now $6/user (previously $5/user)
- Microsoft 365 Business Premium: now $22/user (previously $20/user)
- Office 365 E1: now $10/user (previously $8/user)
- Office 365 E3: now $23/user (previously $20/user)
- Office 365 E5: now $38/user (previously $35/user)
- Microsoft 365 E3: now $36/user (previously $32/user)
Microsoft’s New Commerce Experience
The new licensing model, called New Commerce Experience (NCE), also went into effect on March 1, 2022. Under NCE, companies have three options to license their Microsoft solutions:
- Month-to-Month: You pay a 20% premium per month for the flexibility
- Annual Commit: Allows you to avoid price increases for 1 year.
- Multi-Year Commit: Allows you to avoid price increases for 3 years.
Check out our NCE Made Easy page for more detailed pros and cons of the three options.
So, what have we learned over the past several months?
Month-to-Month if Flexibility is King
Many of our customers have chosen the month-to-month option under the NCE licensing model, which is closest to most organizations’ previous model. This option allows you to retain the flexibility of increasing or decreasing licenses each month based on your company’s changing needs. Even with the 20% monthly increase on each license, many customers have decided that the ongoing flexibility makes it worth the additional cost.
One important note if you have not yet transitioned to NCE:
The 20% premium will go into effect July 1, 2022, for any licenses not covered under an Annual or Multi-year agreement, as discussed below.
Annual or Multi-Year Commitment for Long-Term Cost Savings
For our customers, where cost savings are the priority over month-to-month flexibility, the annual or multi-year commitment options are a better fit. With these options, you lock in your license rates for the duration of the commitment term (one or three years), meaning if there is an increase in license prices during your commitment term, you won’t be affected.
Changing License Counts During the Term
With the annual or multi-year commitment, you can add licenses at any time during the term for SKUs you already have, but you can’t decrease license counts until the agreement comes up for renewal (at the end of the term). So, you’re effectively committing to a set number of licenses for a 12-month or 36-month term, and by doing so, you avoid the 20% premium.
Adding New SKUs During the Term
If you need to add a new SKU, say Visio, that was not part of the original agreement, you can certainly do this. However, this will require a new, separate annual (or multi-year) agreement which would expire 12 months (or 36 months) after you added the new SKU. So, we recommend keeping this to a minimum to avoid having multiple renewal dates for different M365 products. Alternatively, you can add the new SKUs on a month-to-month agreement until your annual agreement renews.
Two Payment Options
With both of these options, you can choose to pay each month or pay the lump sum for the term upfront, depending on your budgeting needs.
Important note about the multi-year commitment option:
Microsoft has not yet made the multi-year option available; it is currently scheduled to be released in the second half of 2022.
A Hybrid Approach for the Best of Both Worlds
There’s a third option to consider when transitioning to NCE—a hybrid model. Let’s say you have 100 full-time employees, and you know you will need to hire another 20 for the summer months. You can combine the annual and month-to-month options to accommodate both. You would have an annual agreement for the 100 full-time employees, then add licenses as needed under the month-to-month option, which you can cancel when no longer needed. You will pay the 20% premium on the month-to-month licenses but will not be stuck paying for a whole year of licenses for these seasonal employees.
Microsoft is mandating that all customers migrate to NCE. After June 30, 2022, all subscriptions must be renewed in the New Commerce Experience model. Organizations that do not transition to an NCE agreement before June 30, 2022, will be automatically enrolled in the month-to-month NCE option with the added 20% premium on their license costs.
If you have not already transitioned to NCE, we stand ready to assist your company in making this critical change. We have the experience of having worked through it many times with our customers and would love to schedule a call with you to begin the process of discussing what will work best for your company.