Microsoft to hike prices in October, but partners praise improved pricing simplicity

Office and Windows to see increases, but public sector pricing will align to 'lowest commercial price'

Microsoft will introduce "price adjustments" to a range of on-premise and cloud products in October, the vendor has confirmed in a blog post.

The changes include a 10 per cent increase in Office 2019 commercial prices, while the price of Windows 10 Enterprise will also be raised.

Various other listing and pricing tweaks have also been announced, including the alignment of on-prem and online government services to the "lowest commercial price".

Microsoft said the changes will be implemented in October, with a preview set to be available in September.

In the blog post Microsoft stated: "On 1 October 2018, we will adjust pricing for our licensing programmes and make price adjustments to on-premise and cloud products.

"These changes will highlight the benefits of our pricing for a cloud-first world, help us move from a programme-centric to a customer-centric pricing structure, and create more consistency and transparency across our purchasing channels."

Chris Bunch, head of Europe at Microsoft partner Cloudreach, said the tweaks have been made to simplify Microsoft's licensing offering.

"There are some enterprise agreement pricing simplifications, which is good," he said. "We support anything in that space and historically Microsoft has had some complexity, which has been good for some business models, but it isn't great for the end customer because it's complicated.

"Any move to try to simplify that is positive. There is a 10 per cent increase in Office - prices do go up, but I'm not sure how sensitive that market is to elasticity.

"I'm sure there will be some grumbles, particularly in some large accounts - they've probably already negotiated discounts anyway - but anything that drives simplicity in licensing models is a really good thing.

"The world has moved towards consumption-based economies and having endless layers of complexity is not something to aspire to."

Kelvin Kirby, CEO at Technology Associates, also praised the increased simplicity, but said the partner community would prefer to have had more notice of these changes.

He said that Microsoft's Cloud Solutions Provider (CSP) partners may be the most affected.

"It's not totally unexpected because Microsoft does a round of updates once every two years, but some more notice might have been useful for partners," he said.

"The problem is that partners don't know far enough in advance to plan their pricing strategy. Obviously CSPs will have to absorb some of the cost until they can pass on the increases to their partners, and many of them will have a three-month notice period in place.

"That's partly why Microsoft has announced it now, for October, but I think some CSPs might come unstuck if they have longer agreements in place. What they'll have to do is then increase their costs from 1 January onwards. I think it's a pity that Microsoft didn't give partners a notice of six months, or even a year."

Kirby also noted the timing of the announcement, coming the week after Microsoft's Inspire conference. "Microsoft didn't want to take the flak at a global partner conference," he quipped.

The CEO was however upbeat on the changes to Microsoft public sector offerings.

"That's a good move because in the past a lot of government organisations, particularly councils, have said they won't move to the cloud because they still get more favourable pricing on-prem," he said.

"We have had this ourselves with a few councils, so realigning the pricing to be comparable is a good move. I think that will help encourage departments to take advantage of that. It means a further reduced cost for government, so they can put more money into the services, which will primarily be migration."

Update

Since publication, Microsoft has contacted CRN and provided the following statement:

"CSP is out of scope for both the harmonisation and on-premises product pricing changes. CSP is predominately a cloud-based programme and is solely user based, thus not effected by device license changes.

"In regards to government price changes, CSP was aligned to lowest level commercial in September 2017 and so has already seen these changes. CSP will not be affected by any of the announced price changes."