Microsoft to add new monthly billing option, but at a 5% premium

Mary Jo Foley is the Editor in Chief at Directions on Microsoft. Before joining Directions, Mary Jo has worked as... more

Just days ahead of its Ignite 2024 conference for IT pros and partners, Microsoft announced some major changes to its price list and its Enterprise Agreement volume licensing framework that will take effect starting in late 2024 and into 2025.

On December 1, 2024, Microsoft will add a new monthly billing option for Microsoft 365 Copilot, Copilot for Sales and Copilot for Service. Touted by Microsoft as helping customers with “cash flow flexibility,” the new billing option will allow customers to commit to an annual subscription and pay monthly rather than entirely up-front. But if customers opt for this monthly plan, they will pay 5% more for these products than if they paid once for the full year.

It’s important to note that Microsoft is not offering customers the option of paying monthly but licensing these Copilots for less than a full year — which is actually what many customers would prefer. Microsoft will continue to require customers to license its business Copilots for a full year minimum, whether they pay monthly or annually.

It’s not just Copilots which will be getting this new, pricier financing option. Starting April 1, 2025, Microsoft will be increasing prices for other products licensed via per-user monthly billing plans for annual term subscriptions across CSP, MCA-E and “Buy Online.” All new and renewing monthly billing plans for these annual subscriptions will be priced 5% higher than if paid for annually under annual subscription plans.

Product categories which will be covered by the 5% higher monthly billing option include Microsoft 365, Office 365, Enterprise Mobility + Security, Windows 365, Dynamics 365, Power Platform and other online services. (Products not affected by the price increase for monthly billing include on-premises software, plus Azure Reserved Instance/Savings Plan, Marketplace, GitHub and AirGap, according to Microsoft’s Frequently Asked Questions document on the changes.)

Customers with renewals before April 1, 2025, will be able to lock their price without paying a 5% uplift until their anniversary date. Any customers who want to change to an annual billing plan, which is priced 5% lower than the updated monthly billing option, for their annual subscription can do so at their next renewal date after April 1, 2025, the FAQ says.

Price increases coming for Teams Phone, Power BI

Starting April 1, 2025, Microsoft also is increasing prices for a handful of products purchased as annual term subscriptions paid once annually. Teams Phone Standard, Power BI Pro and Power BI Premium Per User all are getting price hikes of 15% to 40% for both new and existing customers upon renewal.

Microsoft officials said they believed the price increases were warranted due to the extra value Microsoft has added to these products since their introduction a few years ago.

The new prices for those paying annually for a one-year subscription — plus a few existing prices for comparison:

• Teams Phone Standard: USD$10 per user, per month (was $8)

• Teams Phone Standard for Frontline Workers: USD$5 per user, per month (was $4)

• Teams Phone with pay-as-you-go calling (for users in UK/CAN): USD$12 per user, per month

• Teams Phone with pay-as-you-go calling (for users in US & all other service markets): USD$13 per user, per month

• Teams Phone with Calling Plan (for customers in US/UK/CAN): USD$17 per user, per month (was $15)

• Teams Phone with Calling Plan (for customers outside US/UK/CAN): USD$22 per user, per month

• Teams Phone with domestic and international calling: USD$34 per user, per month

• Power BI Pro licenses: USD$14 per user, per month (was $10)

• Power BI Premium Per User licenses: USD$24 per user, per month (was $20)

Customers will be billed another 5% more for these products if purchased on a monthly billing plan per annual subscription.

Microsoft notes in its FAQ that “currently” there are no pricing changes for customers who purchase Power BI Pro or Teams Phone through Microsoft 365 E5 or Office 365 E5 annual term subscriptions with annual billing.

Speaking of E5, starting Jan. 1, it is offering partners a promotion of 15% off the net price of Microsoft 365 E5 for an annual commitment for new customers buying 1-2,400 licenses through June 30, 2025.

The push to move smaller/mid-size orgs off EAs begins

In addition to these price changes, Microsoft also is going to start moving some organizations off Enterprise Agreements and over to Microsoft Customer Agreements for Enterprise (MCA-E) or Cloud Solution Provider (CSP) agreements. Microsoft officials said this will affect “a small percentage of cloud Enterprise Agreements in direct markets,” which will no longer be eligible for renewal under their existing EAs, and that it would begin notifying affected customers of the coming change during January 2025.

Directions on Microsoft shared an early warning about this coming change in June in a blog post entitled “Mid-size orgs: Your Enterprise Agreement days are numbered.” As we noted at that time, Microsoft has been working to move smaller organizations off EAs for years. But Directions heard that Microsoft was planning to try to eliminate the EA option for companies with fewer than 2,400 users/devices (known as Level A) by moving them to MCA-based licensing.

(It’s not clear from Microsoft’s November blog post about the licensing changes exactly which categories of customers will be forced to move off of EAs in 2025, but the wording indicates it’s likely smaller/mid-size customers.)

While Microsoft unsurprisingly characterizes the EA-to-MCA-E/CSP change as positive, customers will lose some of the benefits they have under EAs when they move to the new agreements. In some cases, customers will need to string together multiple license types to try to approximate the pricing and benefits they get with EAs.

“Customers now forced to move from EA to MCA are going to have a bunch of unwelcome surprises,” said Directions on Microsoft analyst Rob Horwitz.

Additionally, customers who are required to go from an EA to an MCA-based license may be considered a “net-new” customer by Microsoft. That means, under MCA, they could be required to buy Microsoft 365 E3/E5 without Teams and buy Teams separately, which will add a few dollars per user per month. CSPs may be able to help some orgs renew existing subscriptions with Teams but won’t be able to help customers moving from EA to CSP to buy brand-new subscriptions with Teams.

Update (Nov. 15): We asked Microsoft for more clarity on the changes around Teams. A spokesperson gave us the following updated information.

Microsoft is providing CSP customers whose renewal dates are after April 2025 two options for keeping their Microsoft 365 suites with Teams.

Renew their annual subscription with monthly billing and pay the 5% uplift.
Renew their annual subscription with annual billing without any price increase.

Customers will lose Teams in their bundles if they change their annual billing from an annual subscription to monthly billing or monthly billing from an annual subscription to monthly billing for a monthly subscription.