Introduction

Last year, Microsoft announced major changes to their CSP (Cloud Service Provider) licence provisioning and pricing model for Office365/Dynamics 365. CSP’s are effectively distributors or wholesalers for Microsoft products. Many of you reading this may be impacted here since your own Microsoft partner, of which there are thousands, will in all likelihood be provisioning your licences through a CSP.

This post is intended for those involved with the CSP model. i.e. If your MS partner invoices you themselves, then this is probably the model they are using.

This new licencing provisioning model is being called the New Customer Experience or NCE and all clients currently with a CSP provider, either directly or indirectly will have to move to this new licence provisioning and pricing model by February’23.

Before going further, at the time of writing, these changes only apply to commercial pricing and not to academic or charity/non-profit organisations who for the time being will continue to be on the old model.

These changes announced with the NCE have potentially a big impact on the ways of working for many commercial SME clients and to be fair to Microsoft are, I believe, their first pricing increases in nearly 5 years during which many new features have been added, not least of course the ubiquitous MS Teams.

Background

The CSP Model

Microsoft licencing options can mean a PhD is required to understand the various pricing models in place. However, for many corporate and many SME organisations (both private and public), this was a great concept.

The CSP (Cloud Service Provider) model was based on providing licences on a monthly or annual paid basis, as a monthly pay-as-you-go, with the ability to flex your licence count up and down which helped client planning and cashflow.

This was of great benefit during the recent pandemic. We had one great example of a client in the travel industry who had sales staff go into furlough, so their options were either to temporarily remove licences or convert full Dynamics 365 Enterprise Sales licences into Dynamics 365 Team licences for example, so training could continue, saving them at a critical time, hundreds of pounds in their monthly licence costs and importantly helping them weather the pandemic storm.

NCE

The NCE (New Customer Experience) is Microsoft’s new licence provisioning and management platform for CSP partners and their Microsoft partner clients to order and change (add/remove) licences.

Until early next year, there will be in effect two parallel platforms through which your MS partner can order products for commercial clients.

Timeline of changes

This may help explain to some extent why you may have had mixed messages from your Microsoft partner over the last few months, since this has been a somewhat confusing time.

2021

New Commerce Experience announced for Dynamics 365/Office 365

The original rollout date of this platform was in October, but this was then postponed to January’22

2022

10th January

NCE roles out in the UK for clients looking to move to the new experience and for new clients.

31st January

Announcement that monthly rolling prices will carry on, with a 20% price premium over annual pricing. This was a volte face caused in part by partners reaction to the removal of this option in the first announcements and client upset.

1st March

UK Price increase for following Office365 products (Microsoft365 on monthly CSP pricing) (ex VAT)

Microsoft 365 plans

Business Basic from £3.80 to £4.50

Business Premium from £15.10 to £16.60

E3 from £28.10 to £31.70

Office 365 plans

E1 from £6.00 to £7.50

E3 from £17.60 to £20.20

E5 from £30.80 to £33.40

You can avoid and maintain your prices by moving quickly to NCE and moving to minimum 1 year annual commitment plan for this year. Speak to your Partner first.

End of March

Any new Client are auto-enrolled in NCE.

End of June

Look at switching to NCE before this date.

Existing clients are unable to add new licences from this period.

1st July

New Monthly Premium starts to take effect from end of your annual provisioning period

2023

End of February

All commercial clients must have now transitioned to the NCE platform.

Dynamics 365 Clients Impact

So, lets look at impact now on Dynamics 365 client of these changes, which is the main focus of this article.

These are two-fold and are a big change from the current model, and we expect more changes to take place.

1. You must be on NCE model by Feb’23. Really you need to look to move by the end of June to safeguard current pricing levels until your next provisioning period.

2. Migrating to NCE model you now have a choice of options for your licence term and price level to consider:

a. Dynamics 365 on monthly commitment only price. This will have a c. 20% premium, from 1st July or the end of your provisioning period. With this option importantly you can still flex up and down your licence count.

b. Dynamics 365 on annual commitment. You must pay for this whole period, even if it is on monthly for the whole locked in term period. You cannot flex down your licence count through the year, only within 72 hours of the annual renewal period. You can, of course, add licences at any time!

c. Dynamics 365 on three-year commitment. This is same as above apart from the term.

You can have a mix of licences since each is a different SKU or product item.

Who owes the money?

This has been a bone of contention, but your partner will now effectively be taking on your liability to Microsoft, so it you went under, they have to pick up the whole bill for the remainder of your contract. This also means you cannot change partner mid-term. This has been, shall we say, somewhat controversial! I expect then there may be some impact in terms of changes to your payment terms, for example you may move more now from in arrears to more advance and upfront payments, particularly for new clients in their first year, but this will be depend on your partners approach.

Dynamics 365 Price increases

Dynamics 365 apps will continue to be available on a monthly pricing, but the monthly premium protection stops on 1st July or your provisioning anniversary. At that time, those continuing will be on a new 20% pricing premium when their annual provisioning date expires.

An example is below for those wishing to stay only on monthly payment option, from 1st July

Dynamics 365 Enterprise Sales moves from £71.60 per User to £85.92 per user per month

Dynamics 365 Sales Professional moves from £49.00 per user to £58.80 per user per month

Dynamics 365 Team user moves from £6.00 per user to £7.20 per user per month

You can mitigate this by moving to NCE before the end of June and so will maintain your current monthly pricing or until the anniversary of your NCE provisioning. You have choice then as well of moving to either an Annual or Three year contract, still available with either upfront or as a monthly plans. Remember, you are committed to that whole licence count and payment term.

If you are not on an annual NCE plan by the end of June and remain on the original platform, then this means from July (or your provisioning anniversary), your Dynamics 365 monthly payments are going to go up as the premium is applied across all monthly items.

From next February, every licence will only be able to be provisioned on the NCE by your CSP in any case and from June this year, you can’t make licence count amendments anyhow.

A key point to repeatedly stress is you can only revise your licence counts within a 72-hour window of either provisioning a new licence or at the annual renewal. You can, of course, add licences any time.

What should I do now?

This is the critical question:

For Office 365 clients

Really, by now you needed to have moved to NCE to give you some price protection, but you should already have been speaking to your MS partner.

Dynamics 365 Clients

This is now a bit more complex, but you do have a few months to do some planning. So, I am assuming here that most of you interested in reading this post will be on monthly pricing, so your next steps in my view are as follows:

Step 1: Contact your Dynamics 365 licence provider (whoever invoices you) for guidance and check your provisioning dates to find out when your locked in price expires

Step 2: If you want to protect your current pricing for the rest of this year, then plan to move to NCE with the CSP before end of June so you can keep monthly price as they are until next year.

Step 3: Review your current and planned licence mix

This is the most critical action, as you need to review your licence requirements expected for the year from say June’22 to June’23.

So, key questions from this are:

1. Review how many Licences you will need on annual commitment and remember you can have a mix of monthly, annual and even 3-year licences.

2. Consider if, even with the monthly premium (it is 20% as you can see from example above) if it is worthwhile keeping a number of your licences on this monthly premium option to give you flexibility to go up/down at certain periods.

3. Start your licence mix budgeting process for June’22 to June’23

As I said at the start of this post, this has been a somewhat confusing process to understand, particularly with changes being made by Microsoft even as recently as a few weeks ago, as welcome as they were. For many it has been hard to comprehend the changes and impact, hence this post attempt to clarify this.

Conclusion

Whilst regrettable in many ways as a price increase always is, as I’ve said, for those of you using this CSP model its inherent flexibility has been and continues to be an attractive model for many businesses, especially proven useful during the pandemic when users were being furloughed. It is then that this flexibility really came into it own.

On a personal view, it is a shame these changes have been made so soon after the worst of the pandemic, since businesses will now need to look more closely at their licencing model and their commitments and undertake much more careful planning, narrowing one of what I think was Microsoft key licencing model advantages.

But the key now is to start planning and reviewing what licence mix is going to be ideal for you and to start to work closely with your Microsoft partner.

ENDS

This post is I believe correct at time pf publishing, but as pointed out in this post, there still seems to be changes being made, so you need to work closely with your own partner to get the latest information. All opinions are my own, but are based on my 25 years in the software industry.

Sources:

https://www.microsoft.com/en-us/us-partner-blog/2021/11/18/lets-simplify-the-changes-in-the-new-commerce-experience/

https://westcoastcloud.co.uk/microsoftnce/

https://www.westcoastcloud.co.uk/all-you-need-to-know-about-nce/