Today, Cloud Solution Providers offer Microsoft Online Services per user, like Microsoft 365 Business Premium, or Office 365 E3/E5. These are ‘flexible’, 12 months subscriptions and can be cancelled or postponed at any time. This is going to change. Microsoft will invoice the CSP partner for the full 12 months, even if end customers cancel their subscription. This will impact these customers as well. The good thing is, new month-by-month subscriptions will be introduced October 12, 2021 and 36 month subscriptions in the near future.
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Microsoft New Commerce
To understand the upcoming changes, let’s talk a bit about the Microsoft New Commerce platform (also known as the Microsoft Modern Commerce Platform). This affects Microsoft partners rather than end-customers. The New Commerce platform is the modernized cloud environment where Microsoft lands cloud subscriptions and has the (new) billing mechanism for partners.
The fact that perpetual software licenses are now available in the CSP program is due to Modern Commerce. Azure Plan and Azure Reserved Instances are another one. Starting October 14th, Microsoft will move most of their seat based offers (license per user per month) to the new platform as well. Onlines Services impacted:
- Windows 10 E3/E5
- Office 365 (all plans)
- Enterprise Mobility + Security E3/E5
- Microsoft 365 (all plans)
- Windows 365
- Power Platform
- Dynamics 365
For Microsoft Partners the billing will also change. From the ‘per anniversary’ date (the date the partner started with CSP in the past), to a cadence per calendar month with an invoice on the 8th of the month. Possibly CSP partners will change the billing cadence for their customers, ask your CSP provider (Quexcel customers won’t be impacted, for your convenience we will maintain our current invoicing mechanism).
12 month subscriptions
What you (end customer) didn’t realize is that all current seat based subscriptions are 12-month subscriptions with monthly or upfront payment. Today, you can cancel your subscription – as an example – after you are 3 months into the 12-month subscription, without consequences. Microsoft did not have a mechanism to enforce the 12-month subscription term. With the new Modern Commerce platform, they do.
The current 12-month subscription will be the regular 12-month subscription after October 14th 2021. However, if a customer postpones of cancels a subscription with their CSP partner, the partner will still be invoice for the full 12 months!
The positive side is that prices are locked for 12 months and monthly payment is still possible.
For customers who have the need for a flexible layer, Microsoft introduces 1-month subscriptions. They will be 20% more expensive than the 12-month subscription, but the numbers can be increased and decreased on a month-by-month basis.
36-months with price protection
New is the option for 36-months subscriptions. Customers will lock the price for the 36 months (even if they add licenses to the same subscription in the future). If the 36-month subscription will be cheaper than the 12-month subscription isn’t mentioned. With the 36-month subscription customers have the choice for monthly, yearly or upfront payment. Microsoft announced the 36-month subscription available for Microsoft 365 (selected offers) starting March 2022. Dynamics 365 36-month subscriptions are available at the start: October 14. All others are not decided about yet.
Mix and match
CSP customers will be able to mix and match subscriptions. Example: Contoso has 100 employees and 25 more during peak season around Christmas time. They can subscribe to 100 Microsoft 365 E3 User Subscription Licenses (USL) and 25 short term (monthly) Microsoft 365 E3 USL’s for their flexible workforce. For those 25 subscriptions Contoso will only pay for three months.
Monthly subscriptions can be turned into a 12-month subscription. And 12-month subscriptions can be turned into 36-month subscriptions after the initial 12 months. We do expect a midterm step-up license in the (near) future, but Microsoft has not confirmed yet.
Because the Cloud Solution Provider Program is a Microsoft Partner program, most information is created for CSP partners. Find more here (MPN ID is necessary to be able to read relevant information). Public blog post over here. Because changes in the CSP program are likely to affect end-customers as well (by the same CSP partners), we found it necessary to provide broad information in the knowledge base article. Might you require additional information, please do reach out to your CSP supplier or one of our consultants.