Microsoft New Commerce Experience: what it means for Microsoft licensing customers

November 9, 2021

As many customers and partners are aware, today’s Microsoft licensing experience includes a dizzying array of programmatic choices.  Customers have Volume License Agreement options such as Enterprise Agreement (EA), MPSA (formerly known as Select), Open Business, and Open Value.  Alternatively, customers can purchase through Microsoft Direct at retail pricing with no partner support, or through a Cloud Solution Provider (CSP) partner to receive value-added support and pricing breaks.  Each one of these purchasing vehicles comes loaded with its own set of terms, conditions, licensing rules, stipulations, caveats, and complexities.

In 2019, Azure Plan became the first subscription category to move from Legacy CSP into the New Commerce Experience (NCE).  Then, in 2020 and 2021, Microsoft began including perpetual software into NCE.  The latest announcement from Microsoft rounds out the NCE portfolio by adding in the per-user/seat-based subscription licenses into the buying program, such as:

• Microsoft 365
• Dynamics 365
• Windows 365
• Power Platform

Microsoft’s ‘nirvana’ is to simplify the buying experience for their customers. Moving forward, under the New Commerce Experience (NCE), all buying options will be governed by one contract: the Microsoft Customer Agreement. Microsoft is moving away from the disparate program-specific offers to three new buying motions. The size, scale, and support requirements of your organization will determine which option is the best fit for you as the customer.

Many Legacy Cloud Solution Provider (CSP) customers thoroughly enjoyed the flexibility the program offered in the past.  Customers were able to cancel subscriptions at any time, add and reduce licensing as required, and pay per day of use.  Under NCE, customers still have the option to have similar flexibility, but it will come at a premium price compared to the alternative annual/multi-year options.  There will now be two license term choices for customers with differing caveats to each:

NCE Short-Term Commitment ($$$)

• Term: Monthly for term flexibility
• Available at a premium in recognition of the flexibility included (20% price premium when compared to annual/multi-year pricing option)
• No price protection, month-to-month exchange rate
• 72-hour cancellation window for new purchases
• Quantity increases possible; no decreases during term (instead schedule decrease for end of term/end of month)
• Upgrades are permitted mid-term for some products; downgrades are not permitted on any license during term (instead schedule replacement for end of term/end of month)

NCE Long-Term Commitment ($)

• Term: Annual or Multi-year for price predictability
• Available at a discounted price in recognition of your commitment to Microsoft (20% discount compared to monthly pricing)
• Expected to have pricing parity with Legacy CSP pricing (Note: Statement does not include recent Microsoft SKU-based price increases which impacts both NCE and Legacy pricing)
• Price protection for committed term (annual or multi-year)
• 72-hour cancellation window or at term renewal (annually)
• Upgrades are permitted mid-term for some products; downgrades are not permitted on any license during term (instead schedule for end of term)
• Quantity increases possible; no decreases during term (instead schedule decrease for end of term)

Microsoft’s aim to simplify the buying experience brings together many of the programmatic features of Web Direct, Enterprise Agreement, and CSP into one buying motion.  As with any major Microsoft licensing change, it will take some time to learn the ins and outs of the new program.  Generally speaking, we think most of the changes associated with the New Commerce Experience are beneficial for our customers, with a few major exceptions.

Pros

• Price protection for up to 36 months now offered
• Billing is now aligned to calendar month
• Simple/scheduled conversion of trial licenses to paid offers
• All new offers will be aligned to NCE
• 1 Microsoft contract governing terms and conditions – Microsoft Customer Agreement contract
• Hybrid Use Benefit now included (no longer just a Software Assurance/EA benefit)
• New communication credit offers (no longer just an EA benefit)
• Multi-Geo capabilities included (no longer just an EA benefit)
• Scheduling of subscription changes/upgrades to new SKU’s (which removes the need for admins to make changes on anniversary dates)
• Auto-renew toggle (similar to Microsoft Direct)

Cons

• Monthly terms now come with a 20% premium as a trade-off for flexibility
• Cancellation policy is now enforced for 12 month and 36 month commitments, meaning you can only reduce licensing at the end of your term (but can still add licensing at any time)
• Customers can no longer switch licensing partners mid-term

• We recommend customers work with a partner to identify and use a blend of long-term and short-term commitments of NCE to suit their specific licensing needs for employees.
• Annual and multi-year term commitments come with a pricing discount, but do not allow customers to reduce their committed seat counts during the term. To avoid paying for unused seat counts, we recommend working with a partner to determine your expected stable number base of employees and only committing that number of seats to an annual or multi-year commitment.
• Short-term commitments (monthly) come with a pricing premium but allow flexibility in reducing counts as needed. To avoid paying for unused seat counts, we recommend working with a partner to determine your expected variable number of employees (such as seasonal or contract workers) and committing that number of seats to a short-term commitment.

If you’re a client of ours, we know how overwhelming licensing changes like this can be, which is why we’re working hard to ensure that the new structure and change of Microsoft 365 license pricing works for your business. You can expect to be contacted in the coming weeks to discuss the upcoming Microsoft 365 licensing changes and get moving on ensuring you’re getting the most from your investment. For now, you can begin thinking about the above and which Term you may wish to choose.

The Plow Networks team will continue to update you as we prepare for this new component of the CSP program. If you have any questions about Microsoft program changes, don’t hesitate to reach out to our team!