M365 customers should explore alternatives, plan to dicker as prices hikes loom — analysts

Microsoft 365 customers will pay more for subscriptions next year, with price hikes across most subscription plans set to begin July 1. The changes will affect customers with Business, E3/E3, Frontline, and Government subscriptions. 

Microsoft said in a blog post Thursday that the increases reflect new features being added to several plans. This includes expanded Copilot Chat functionality, Microsoft Defender for Office (Plan 1) in E3, Security Copilot in E5, and additional Intune tools such as Remote Help and Advanced Analytics for E3 and E5.

The new prices are: 

Microsoft 365 Business Basic, up $1 to $7 per user each month.

Microsoft 365 Business Standard, up $1.50 to $14 per user each month.

Office 365 E3, up $3 to $26 per user each month.

Microsoft 365 E3, up $3 to $39 per user each month.

Microsoft 365 E5, up $3 to $60 per user each month.

Microsoft 365 F1, up 75 cents to $3 per user each month.

Microsoft 365 F3, up $2 to $10 per user each month.

Two plans will remain the same: Microsoft 365 Business Premium and Office 365 E1 ($22 and $10 per user each month, respectively). Microsoft 365 Government customers will see increases of between 5% and 10%, depending on their plan. (There’s more information in a related blog post). All prices include Microsoft Teams; lower rates apply without the collaboration app included.

“These recent price actions will further intensify customer concerns and pricing fatigue,” said Gartner analysts Zach Nagle and Stephen White in a “first take” report in response to the changes.

Microsoft last hiked M365 prices in 2022, increasing subscriptions by between 9% and 25%. It recently made changes to its Enterprise Agreement terms for products including Microsoft 365, phasing out volume-based discounts that previously lowered per-seat pricing for large customers.

The Gartner analysts said Microsoft 365 customers should “prepare to mitigate the financial impact” of the increases by “leveraging negotiation strategies, exploring alternatives and optimizing license allocations.” 

They also suggest that, where possible, customers consider renewing contracts early ahead of the July 1 price changes, as that would defer the increase until the next renewal. 

A recent Gartner survey of 215 IT leaders showed that 17% of M365 customers are considering alternatives, and only 5% felt they get sufficient value from their subscription. 

There are now more than 430 million commercial M365 users globally, Microsoft said during an earnings call earlier this year. 

Jack Gold, analyst at J. Gold Associates, said it’s not uncommon for Microsoft to raise prices periodically and “given the amount of additional processing it needs to do with its AI features, it makes sense to try and recover the costs of running a larger cloud footprint to enable those products.

“I don’t think the price increase will have a detrimental effect on customer numbers, as most are already locked in and will just go along with this,” he said. “While there is more price competition these days from Google, I’m not seeing a large shift away from Microsoft to Google office in enterprises, but Google is doing well in SMB/mid-tier.”