Microsoft's New Commerce Experience: What It Means for Customers
What Is Microsoft’s New Commerce Experience (NCE)?
Microsoft has announced and will start rolling out in January 2022 its New Commerce Experience. What is NCE? Simply put, it is a new pricing model. Microsoft’s goal is to simplify the buying experience for all of their business customers. Over the years, as Microsoft has developed and acquired business applications, different purchasing options and contracts have emerged. Ultimately there will be one contract – the Microsoft Customer Agreement.
All customers on a CSP (Cloud Subscription Program) plan today will be impacted. Microsoft will be rolling out the NCE in a phased approach, however that will potentially impact all business application customers.
As Microsoft begins to roll out this New Commerce Experience, it’s important to note the three different Microsoft-defined “buying motions”:
Breadth: Purchasing software through your Partner CSP (Cloud Solution Provider) – the primary way most customers will purchase Microsoft software solutions.
Enterprise: Purchasing software via an Enterprise Agreement with Microsoft.
Self-Service: Purchase software direct via Microsoft on the web.
Product Lines Impacted
The business applications that will be impacted by the NCE are:
- Microsoft/Office 365
- Dynamics 365
- Windows 365
- Power BI
- Azure
Check with your partner to determine if your particular product license is impacted in the initial launch of NCE. Currently only SaaS licenses are being impacted with the new terms. But that may change in the future.
Purchase Implications
The purchasing process is changing, with varying degrees of impact on customers:
- New SKUs for license subscriptions are being rolled out for NCE
- Pricing is based on per-user/seat-based subscription licenses
The flexibility offered by the traditional CSP program will be limited under NCE. Whereas customers could easily add or remove users on their subscription plan at any time under the CSP licensing model, this is no longer the case under the NCE licensing program.
Users and seats can be added mid-subscription term; however, removing users or seats can only be done at the end of the subscription term–monthly, annually or every three years–which makes sense since you will be paying for your subscription in advance.
You can still pay for your Microsoft product subscriptions monthly. In this case, you can decrease users monthly. However, there will be a price premium of a 20% increase for those who choose to pay monthly. The benefit of committing to a 1- or 3-year term is that you have locked in your price and won’t be subject to price increases during your term.
The table below outlines the payment terms and conditions:
| Monthly | Annual | Multi-Year | |
|---|---|---|---|
| Term | 1 full month | 12 months | 36 months |
| Quantity Flexibility | Decrease (monthly basis) Increase (daily basis) | Decrease (annual basis) Increase (daily basis) | Decrease (no option) Increase (daily basis) |
| Cancellation Policy | Prorated billing refund within 72 hours of term purchase (After 72 hours, billed for full month) | Prorated billing refund within 72 hours of term purchase (After 72 hours, billed for full 12 month term) | Prorated billing refund within 72 hours of term purchase (After 72 hours, billed for full 36 month term) |
| Price | 20% premium | Legacy plus SKU-based price increases | TBD |
| Payment Option | Monthly | TBD | TBD |
| Price Lock | 1 month | 12 months | 36 months |
Microsoft will allow a hybrid model for those customers who will have a need to decrease the number of users or seats, like those with seasonal staff, for instance. So, you can lock in your price for the number of users or seats you know you will need for the next 12 or 36 months and also have a number of seats which may need more flexibility that you pay for on a monthly basis.
For now, the NCE impacts only those companies currently on a subscription licensing model. So, if you are on a subscription model, the table below will help you determine what to expect and when so you can prepare:
| What customers should know and do | When (2022) |
|---|---|
| Work with a trusted partner to analyze licenses and prep IT for changes | Now |
| NCE is now available for purchase | January 1st |
| NCE and Legacy CSP run cohesively until legacy CSP expires | January 1st – February 28th |
| Legacy CSP is now expired, and no more Legacy model purchases can be made | February 28th |
| Ensure NCE purchases are finalized to avoid SKU-based price increases to come | Month of February |
| SKU-based price increase begins | March 1st |
| NCE is now the only way to transact seat-based licensing | March 1st |
| Have a trusted partner review the licensing environment regularly | March onwards |
We applaud Microsoft’s effort to move away from disparate programs and product-specific offers by streamlining and updating pricing to be in line with how people typically purchase software and apps today. ArcherPoint is here to help you understand your options and take advantage of pricing promotions where available.