Microsoft Partners On New Billing Premium: ‘The Price Increase Definitely Hurts’
Microsoft’s plan to add a 5 percent premium for the option of monthly billing on some of its annual subscriptions will negatively impact small business customers, solution providers said.
Microsoft partners are speaking out against the 5 percent premium the vendor has planned for various annual subscriptions if customers want to pay the bill monthly instead of once a year.
Michael Goldstein, CEO of LAN Infotech, a Fort Lauderdale, Fla.-based honoree on CRN’s 2024 MSP 500, told CRN that he expected an increase to this subscription billing option but did not expect the premium to be so high. Most of his customers opt for the one-year commitment with monthly invoicing.
“The price increase definitely hurts,” Goldstein said.
[RELATED: Microsoft Licensing, Billing Changes Hit Copilot, Enterprise Agreements]
Microsoft plans to introduce a 5 percent premium on various annual subscriptions where the customer wants to pay monthly instead of once a year, starting with some of the vendor’s Copilot artificial intelligence tool plans.
The Redmond, Wash.-based tech giant will launch the premium on Dec. 1 for Microsoft 365 Copilot, Copilot for Sales and Copilot for Service annual subscriptions bought through the vendor’s Buy Online, Cloud Solution Provider and Microsoft Customer Agreement for enterprise motions, Microsoft revealed Tuesday.
Starting April 1, Microsoft will raise by 5 percent the annual commitment monthly billing option for all new and renewing subscriptions, including popular offerings such as Microsoft 365 and Office 365, across Buy Online, CSP and MCA-E. Customers will have the ability to switch from monthly billing to annual billing at renewal date, according to the vendor.
Microsoft had not responded to a request for comment as of press time.
A document for partners released by Microsoft highlighted the importance of “cash flow flexibility.”
“This change aims to continue providing customers with cash flow flexibility while maintaining the value and benefits of our services,” according to the document. “By aligning our pricing strategy across channels and segments, we ensure consistency and transparency across all platforms.”
Randy Jorgensen, managing member of South Jordan, Utah-based Microsoft partner RJNetworks, told CRN that the new premium left him “baffled” and would hurt small businesses.
His customers have usually opted for the least expensive subscription billing option from Microsoft, he said. While customers switching to an annual subscription and annual billing plan gets Jorgensen the money up front and potentially lowers his risk should the customer go out of business before the subscription ends, the hit to small businesses’ cash flow could outweigh the benefit.
“Most small businesses are completely trapped into using their [Outlook] mailboxes, and at least they could pay monthly to help swallow the cost,” Jorgensen said. “Now they have to pay more or come up with a bunch of money once a year.”
Multiple solution providers told CRN that it will be important to tell customers that the price increase they would encounter for picking a monthly billing plan for annual commitments is because of Microsoft and not them.
Wayne Roye, CEO of New York-based Microsoft partner Troinet, said that the “ridiculous” premium could be a hindrance when talking to prospects about switching to Microsoft offerings.
The vendor’s licensing and what products and services are included in each license can be difficult for customers to understand, and price changes can throw off customer budgets for the rest of the year, Roye said. Customers like to opt in to monthly billing, monthly commitments when economically feasible.
Although he sees a potential benefit to his business with some changes to Microsoft’s Enterprise Agreement (EA) moving some customers to the Cloud Solution Provider (CSP) partner program, he expects the new premium “will have a greater negative impact.”
Customers “don’t want these continuous changes that don’t really benefit them,” Roye said.
Some partners said the innovation Microsoft has been pouring into its products could make the billing premium more palatable for customers.
Dawn Sizer, CEO of Mechanicsburg, Pa.-based Microsoft partner 3rd Element Consulting, said that when she talks to her customers about pricing, she will focus on value from the license and the products that come with that license.
“The conversation with the end client needs to be around value. Are they getting the value from the license and the products served in that license? Is it moving their business forward in a productive way? If the answer is yes, add some additional value where you can. That always makes it more palatable for the customer,” she said. “I’d feel worse if Microsoft wasn’t innovating and the products stagnated and there was a price increase.”