Microsoft 365 Monthly Pricing Backlash: Solution Providers Petition Against ‘Punitive’ Fee
More than 900 people have signed the petition opposing a 20 percent fee on month-to-month Microsoft 365 subscriptions, which is expected to take effect in March 2022.
An online petition launched by a solution provider CEO urges Microsoft to reconsider a 20 percent fee on monthly Microsoft 365 subscriptions that’s expected to take effect in March 2022, with the petition garnering more than 900 signatures so far.
Month-to-month subscriptions “have been an invaluable tool to help with cost reduction during COVID and other economic events. Adding an addition[al] 20 percent on these types of SKUs seems almost punitive in nature and, given the already 15 percent increase, is extreme,” the Change.org petition states.
It goes on to say, “If this policy goes into effect, it will cause ripple effects with our vendors like Ingram, Synnex and Pax8 and many others, as they struggle to implement this change in their automatic procurement portals and try to handle the additional price change management. Help us make sure this increase doesn’t go into effect in 2022 by signing.”
The petition was started a month ago by Bobby Guerra, CEO of Jacksonville, Fla.-based solution provider Axiom, and it has received 927 signatures as of Wednesday.
“We’re hoping to get the word out and really try to at least start the discussion,” Guerra said in an interview with CRN. “I’m a big advocate and supporter [of Microsoft]. It’s just that this is a big head scratcher.”
Emily Lugo, owner of a Computer Troubleshooters franchise in Greensboro, N.C., said she signed the petition because she has customers still struggling due to the pandemic and who would struggle even more with an additional price increase to keep the flexibility of month to month.
Lugo has been working to help her customers--which include medical and professional services companies, some of which she’s worked with for nearly 15 years--by offering more flexible payment plans until their own revenue numbers return to pre-pandemic levels.
“It’s kind of like adding insult to injury,” Lugo said, speaking of the expected fee on monthly subscriptions. “Either I have to take a hit or I have to pass a hit to my clients. Either way, it’s just one more thing to have to deal with and to have conversations about. This is not what we needed right now.”
Other solution providers told CRN the fee increase would incentivize customers to move to annual commitments rather than monthly subscriptions for the Microsoft 365 suite. That would represent a step backward from the flexible, month-to-month cloud approach that Microsoft and its partners have enabled for customers, solution provider executives said.
The 20 percent fee is in addition to the price increases on the Microsoft 365 productivity suite of up to 25 percent that were announced in August and that also begin March 1, according to the distributor blogs. One analyst projected that the price increase announced in August could bring Microsoft an additional $5 billion in annual revenue.
The two distributors mentioned the monthly subscription fee in posts about the new “commerce experience” for Microsoft Cloud Solution Provider partners that is rolling out early next year. As of March 1 of next year, monthly Microsoft 365 subscriptions that offer the ability to change seat counts will be priced 20 percent higher than annual subscriptions, the blogs from Ingram Micro and Pax8 said.
While Microsoft said in a blog post that monthly term subscriptions will have “premium pricing” under the new commerce experience, the company did not mention the 20 percent monthly fee cited by Ingram Micro and Pax8.
Solution providers told CRN that this apparent move by Microsoft seems to contradict the cloud ethos of providing customers with the flexibility to change their seat counts on a month-to-month basis without incurring substantial cost.
“The idea that our clients are going to be locked into a year term—that’s not even the spirit of the cloud,” said Zac Paulson, CEO of TrueIT, a managed services provider based in Fargo, N.D.
Up until this point, the price difference between monthly and annual Microsoft 365 subscriptions has been negligible, solution providers told CRN. “And it’s been that way for years,” Axiom’s Guerra told CRN.
Customers have particularly appreciated the ability to easily ramp up or down on seat licenses during the uncertain times of the pandemic, he said. “It’s been a huge help for them over the last few years,” Guerra said.
And even for customers who have technically been on annual subscriptions, Microsoft has accepted monthly payments and has not enforced penalties for customers who needed to lower their seat counts month to month, according to solution providers.
With customers forced to pay more for that flexibility, Microsoft seems to be pushing for a return to the days of customers paying for seat licenses they might not end up needing, solution providers said.
“I just don’t see the business case for reaching backwards and pushing annual contracts onto our customers,” said Robby Hill, founder and CEO of Florence, S.C.-based HillSouth iT Solutions. “That’s just antithetical to everything we’ve done over the last five years as a partner ecosystem in the [Microsoft] 365 space.”
A Microsoft Partner Network blog that was originally posted Aug. 19 and updated Oct. 5, indicates that charging an extra fee for monthly Microsoft 365 subscriptions is at least partly intended to encourage longer commitments by customers.
“Partners will be able to forecast revenue more accurately and mitigate the impacts of shorter subscription terms,” the Microsoft Partner Network blog said.
Microsoft has declined to comment on the fee or the solution provider petition. However, in a statement provided to CRN, Microsoft said that overall “efforts to enhance the commerce experience” in the Cloud Solution Provider program “are designed to provide partners with standardization of offers, better choice in how and where to buy, and increased opportunities to serve a larger set of new and existing customers.”
Microsoft did not make Channel Chief Rodney Clark available for an interview.
Customers will have three days to cancel their subscriptions without penalty under the new Microsoft commerce experience, according to the blogs from Ingram Micro and Pax8.
Pax8 declined to comment. In an email statement to CRN, John Dusett, executive director for cloud services in the U.S. at Ingram Micro, acknowledged that the “Microsoft [new commerce experience] structure and pricing may create challenges for some MSPs and Indirect Providers.”
“However, Ingram Micro has worked intently with Microsoft at engineering and sales levels to ensure clear paths to success for our partners,” Dusett said in the statement.
The “monthly, annual and multi-year terms allow partners to better forecast reoccurring revenue and gain term flexibility,” he said.
IT distributor TD Synnex also published a blog about the new Microsoft commerce experience, which mentions a “premium price” for monthly subscriptions but does not offer specifics. TD Synnex declined to comment.
Phil Walker, CEO of Manhattan Beach, Calif.-based Network Solutions Provider, said the conversations with customers around the new pricing approach will be difficult and likely to create “anxiety” for them. It puts the solution provider in the position of having to present two bad choices to customers: pay 20 percent more or run the risk of buying licenses that might not be needed, he said.
Guerra said that if Microsoft provided a way to recoup money on dropped seats or extended the cancellation period, he might be happier with Microsoft’s decision. He added that he doesn’t have any quarrel with the previously announced price increase for Microsoft 365—which will be the first major price hike for the productivity suite in a decade.
“We just want them to back off that margin on the monthly,” Guerra said.
Without question, Microsoft has added a significant amount of value to the Microsoft 365 suite in recent years, Hill said. The suite includes Office 365 productivity apps such as Outlook, Word, Excel and PowerPoint. It also includes the Teams collaboration app, which has surged in usage during the pandemic.
“The product we have today is infinitely more marketable and better suited towards the needs of our business clients than it was five to 10 years ago,” Hill said.
But pushing customers to yearlong commitments for cloud products is the wrong approach, he said.
“Companies are constantly changing their head counts. And part of the allure of having a cloud-first service offering is that you’re not supposed to buy more licenses than you consume every month,” Hill said. “I just firmly believe that a cloud-first program requires companies to not buy more than they need.”
Hill said that all of his customers are on monthly contracts for Microsoft 365 and they pay based on what licenses they actually consumed the previous month.
Attempting to push an annual licensing program on customers will only lead to customers feeling “alienated,” he said. “They don’t want to be left holding the bag with more licenses than they’ll use.”