What You Need to Know About Microsoft Licensing Changes in 2022 1

What You Need to Know About Microsoft Licensing Changes in 2022

Last year Microsoft customers got a heads up that subscription pricing would increase starting on March 1, 2022. Now that we’re closing in on that date, it’s time to take a look at budgeting and make any last licensing choices before it’s too late. The good news is that there are opportunities to save if you lock in prices before March 1. Here’s a walkthrough of Microsoft licensing changes in 2022 so you can take advantage of this savings and plan your investments going forward.

New Commerce Experience (NCE) for Additional Microsoft Subscriptions

Microsoft introduced a new, simplified subscription purchasing process called New Commerce Experience (NCE) in preview back in 2019. The purpose was to streamline acquisition options and provide flexibility to organizations. Over the past two years, both Azure subscriptions and perpetual licensing have been addressed. In its latest update, the New Commerce Experience has been expanded to include Microsoft 365, Dynamics 365, Power Platform and Windows 365.

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This model will initially incentivize annual subscriptions over monthly ones. Microsoft subscriptions have been loosely based on annual agreements for a while, but they haven’t really been enforced and customers could add or remove licenses at monthly intervals anytime in a pay as you go model. Now, monthly changes will come at a higher cost—a 20% difference over the annual price starting in July 2022. For companies with seasonal or temporary workers, the monthly option may still make sense. However, for regular employees, the annual license is a substantial savings. It is possible to have both license types concurrently if necessary. Annual pricing, called P1Y (for Pay 1 Year), allows for adding licenses at any time but only removing them during the annual renewal window. It’s important to note that you can’t add new subscriptions (SKUs), only license quantities, but there will still be upgrade options on the P1Y plan. In the end, the lower commitment of monthly pricing (P1M or Pay 1 Month) should be weighed against its higher cost.

Lock in Lower Prices before March 1

With the annual pricing, customers who sign up for a 12 or 36 month agreement before March 1 can lock in current prices. The pricing for new subscriptions will go up starting March 1, but you can still renew old ones for a few more months. Beginning July 1, you will no longer be able to renew these legacy subscriptions. So it makes sense long-term to jump into the annual agreement now while the pricing is still lower.

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Breakdown of Microsoft Licensing Changes in 2022

Here’s a comparison of different price options for the main Microsoft licenses. Old price means before the March 1 increase, and the new price applies when purchased thereafter. All prices listed are per user.

Subscription Old price (per month) Annual price if purchased before March 1, 2022 New P1Y price (paid annually) Annual P1M cost when paid monthly
Microsoft 365 Business Basic $5 $60 $72 $86.40 ($7.20/month)
Microsoft 365 Business Premium $20 $240 $264 $316.80 ($26.40/month)
Office 365 E1 $8 $96 $120 $144.00 ($12.00/month)
Office 365 E3 $20 $240 $276 $331.20 ($27.60/month)
Office 365 E5 $35 $420 $456 $547.20 ($45.60/month)
Microsoft 365 E3 $32 $384 $432 $518.40 ($43.20/month)

As you can see, there are good savings if you purchase any of the annual subscriptions before March 1, 2022. If your company size is stable or growing and you know you plan to continue with your chosen license, a 3-year contract can provide the optimal price and save a lot over that time.

Timeline for the Microsoft Licensing Changes in 2022

  • January 1, 2022: New Commerce Experience​ (NCE) generally available
  • February 28, 2022: Last day to lock in old pricing
  • March​ 1st, 2022: Price increases go into effect
  • March 10th, 2022: New licensing purchases must be placed through NCE​
  • June​ 30th, 2022: Last day to renew existing subscriptions through old platforms
  • July​ 1st, 2022: Legacy subscription renewals no longer allowed
  • September 1st, 2022: Nonprofit pricing increases go into effect

A Couple Things to Note

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All of the new pricing is seat-based, meaning per user regardless of how many devices they’re using. Some licenses will not have the monthly P1M pricing option, so check with a Microsoft partner if you’re interested in temporary licenses beyond those listed here. And if you’re using Microsoft 365 E5 or have an education or government account, you’re in luck—those subscription prices are not increasing at this time (although you’ll still need to switch to annual payments to avoid the 20% increase of paying monthly).

More Questions About Microsoft Licensing Changes in 2022?

While no one likes price increases, these ones are paying for dozens of new apps and hundreds of new features that have been added to these subscriptions since they were first offered over a decade ago. To clarify what any of the Microsoft licenses include, contact us.

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