We are seeing an increasing number of organizations who are preparing to renew their Office 365™ Enterprise Agreements (EA), and experiencing significantly higher pricing from Microsoft® than they had previously. There are a number of reasons for this, but it’s important to note that if you received deep discounts on your existing agreement, that doesn’t necessarily mean you’ll get them again.
Microsoft has been public about their desire to move customers to the cloud, and Office 365 is often the first step in doing so. They use multiple ways to convince users to abandon their perpetual licenses, including tactics such as refusing to negotiate, or at least minimally negotiate, discounts for perpetual agreements. They also offer aggressive pricing to motivate users to move to O365. This strategy has been effective, but once the user has moved to the cloud, Microsoft has accomplished their goal and they are no longer motivated to offer similar discounts upon renewal.
Another factor contributing to higher prices is that Microsoft has retired O365 Level E4 pricing, and replaced it with a more robust (and more expensive) Level E5. The most notable additions in E5 are security related, but since E4 is no longer available, organizations are often compelled to replace it with E5 upon renewal. Another possible option is to purchase E3 and add Advanced Threat Protection (ATP). This will address the functional and security concerns of many, without committing to the more expensive E5, but the combined standard price of E3 + ATP may be higher than the E4 they’re replacing. Combine the higher standard price with Microsoft’s reluctance to offer similar discounts, and many organizations are facing renewal costs which are much higher than they expected.
If you’re preparing for an O365 EA renewal and aren’t already using other cloud services such as Azure™, or bundles such as M365, these may become opportunities for negotiation, but once Microsoft moves you to the cloud, don’t automatically expect a continuation of that which may have been promotional pricing.