Microsoft pricing to go up by 10% in October 2018

WHAT, ME WORRY?

With Microsoft running in nearly all enterprises, headlines of a 10% price increase and removal of volume discounts can cause significant worry. This blog will help sift through the noise and aims to clarify who is affected, what impacts there could be and considers possible ways to mitigate the impact. There are essentially three headlines in this announcement:

1. Office 2019 commercial pricing is going up by 10%
2. Pricing for a few specific Enterprise Agreements is changing
3. Windows 10 Operating System offerings are changing.

OFFICE 2019

WHAT IS CHANGING?

Starting with Office 2019, we see a continued nudge by Microsoft to move customers to the cloud. Microsoft states, “these changes will highlight the benefits of our pricing for a cloud-first world”, which is another way of saying, ‘we’re not raising prices on Office 365, just Office on-premise’. This price increase is across the board, so it affects all components of Office 2019, including Visio and Project, Enterprise CAL, Core CAL and server products such as Exchange Server, Skype for Business Server, SharePoint Server and Project Server.

WHAT TO WATCH OUT FOR?

Microsoft has a vested interest in moving customers to Office 365 as more customers on Office 365 increase their market share and recurring revenue. There are benefits associated with a move to Microsoft’s cloud-based products, but if your organization isn’t set up to take advantage of them, you could find yourself missing out on opportunities to improve infrastructure efficiency as well as optimize and consolidate licensing. While productivity server product prices will increase by 10%, the RDS per Device CAL price will increase 30% to match the per user price.

RECOMMENDATIONS:

• Take a good look at your current licensing and get an understanding of who is using what in your environment. You will need ample amount of time to review, digest and take action on the data.
• Building an accurate view of your estate will help you determine what licensing you need to keep on-premise, who can be moved to the cloud and what services or licenses you can stop purchasing. Leverage your IT/ Software Asset Management practice to get a snapshot of your environment, then plan accordingly for the migration.
• Using a Software Asset Management solution like Snow can help tremendously. If your current plan is to try to sort through a CMDB or spreadsheet, you’ll struggle to generate the data you need to make an informed business decision.

CHANGES TO ENTERPRISE AGREEMENTS

WHAT IS CHANGING?

Microsoft is simplifying its pricing, which is a good thing. With dozens of different levels, bands and programs, simplification is a welcome change. There are a few key changes:

• Establishing a single, consistent starting price across all programs aligned to web direct for online services (OLS).
• Removing the programmatic volume discounts (Level A and Open Level C) in Enterprise Agreement (EA)/ EA Subscription (EAS), MPSA, Select/ Select Plus, and Open programs (Open, Open Value, Open Value Subscription). This will affect only a few programs and affect them differently.
• Aligning government pricing for on-premises and online services to the lowest commercial price in EA/ EAS, MPSA, Select Plus, and Open Programs. This simplifies licensing.
• Delivering a newly designed Customer Price Sheet that better outlines how a customer’s price was derived (direct EA/ EAS only)

WHAT TO WATCH OUT FOR?

According to the Microsoft FAQ: “The biggest impact will be on small and mid-size commercial customers purchasing through Open Programs (including Open License, Open Value and Open Value Subscription), MPSA, Select Plus, Select, Enterprise Agreement and Enterprise Subscription Agreement, and on government customers. The customer-earned pricing display changes are only applicable to customers with a direct Enterprise Agreement, including Enterprise Subscription Agreement.”

• Level A pricing bands will remain the same – but remove volume discounts.
• Open Level C – will remove the pricing band and volume discounts.
• Government customers will see an increase in up to 6% for their Enterprise Agreements and between 3-18% for online services in MPSA and Open programs, and an unspecified increase on perpetual products.

RECOMMENDATIONS:

• The increase in government licensing costs should be noted, especially when considering the greater impact for online services. All government entities should evaluate their current licensing strategy or contact their Microsoft service provider.
• If you don’t have an Enterprise Agreement and purchased through Select, Select Plus, Open, Open Value or MPSA, you don’t have price protection and will be impacted as of October 2018. Review your Microsoft License Statement to get a complete view of your Microsoft inventory.
• Additionally, MPSA online services will be price protected through the subscription term. For most under an EA, these changes could impact you in a few months, or up to three years away – this could be the time to true up and purchase for planned growth to take advantage of the existing price lock provided by your current agreement.

CHANGES TO WINDOWS 10 OPERATING SYSTEM OFFERINGS

WHAT IS CHANGING?

Windows 10 Enterprise E3 offers will be renamed and pricing changed as follows:

• E3 will now refer to the per user offer only – Windows 10 Enterprise E3 per User becomes Windows 10 Enterprise E3
• Windows 10 Enterprise E3 per Device becomes Windows 10 Enterprise
• The price of Windows 10 Enterprise will be raised to match the price of Windows 10 Enterprise E3
• Windows 10 Enterprise E5 per device will be discontinued

WHAT TO WATCH OUT FOR?

Organizations that run a lot of device-based licensing will be affected the most – these are most common in manufacturing, nurse/ doctor terminals, etc. This hints at future simplification of the Microsoft ecosystem, where Office 365 and Enterprise operating systems are aligned for true Virtual Desktop Infrastructure (VDI). The general implications for reducing or removing availability for per device licensing matches cloud-based licensing initiatives while attempting to capture more revenue for usage of Microsoft products.

RECOMMENDATIONS:

If your EA includes Windows 10 Enterprise E5 per device (which is identical to Windows 10 Enterprise E3 except for the inclusion of Windows Defender Advanced Threat Protection), and you need additional licenses then you have little to worry about in the short term. As noted above, as long as your EA is current, you can continue to purchase the products you have today - even expiring products, at the same price.  

CONCLUSION

When you’re writing the checks, it’s easy to say that pricing increases are bad or unfair. Microsoft notes, however, that in the case of Microsoft Office, this is the first increase since 2010 and represents the value added to the product over that time. Take this change as an opportunity to get an accurate view of what is actually in use in your estate and optimize it. For some, this will be the tipping point to finally embrace a true Software Asset Management practice instead of struggling with cluttered CMDB exports and spreadsheets. Office 2019 price increases of 10% will result in increased spend for organizations, especially those who are not measuring their usage and reconciling it against what they are paying for. All organizations will feel the pain of price increases, Snow’s technology will help you only pay for what you actually use and help mitigate unbudgeted spend.