Navigating Microsoft’s NCE’s Impact to Your Business

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This year, Microsoft is making significant changes to the pricing and licensing structure of widely-used business software and cloud services, including its Office 365 and Microsoft 365 lines of products. They’ve dubbed it the “New Commerce Experience,” or NCE for short.

As with all things Microsoft licensing, the new model isn’t exactly simple. As a result, business leaders will need to think carefully in order to maximize the efficiency of their spend with Microsoft. (Importantly, nonprofits and government organizations are currently exempt from these changes.)

Below are the most important considerations to think through.

Microsoft NCE Incentivizes Annual Commitments

Under the new program, Microsoft customers have to make annual commitments to license quantities in order to secure Microsoft’s best pricing for the Office 365 and Microsoft 365 lines of products. This has been a feature of other Microsoft products, such as Azure cloud services, for a few years. Now, Microsoft is rolling this out to their flagship lines of productivity, communication, and security products.

The Nuts and Bolts: How Microsoft Annual Commitments Work

 Until this year, businesses could make changes to their licensing quantities from month to month; if they experienced a decrease in their workforce, for instance, they could terminate a corresponding number of licenses to prevent any excess spend.

 Starting this year, businesses must agree to pay monthly for a set quantity of licenses for a 12-month term in order to secure Microsoft’s best pricing. You can add licenses to that quantity ( additional licenses will be co-termed with the initial quantity), but you can’t subtract from it. So, if you start the 12-month term with 50 licenses, and you reduce your workforce by 10 in the terms second month, you are stuck paying for 10 additional licenses for the remaining 10 months of the term.

Month-To-Month Licenses Are Still an Option – But There’s a Price

 Microsoft will still allow the purchase of licenses on a month-to-month basis, but will charge a 20% premium to do so. So, say you are paying $20 per month for a particular flavor of license. Under the new rules, remaining on a month-to-month commitment will mean that you will now pay $24 per month. If you have a workforce of 10, your spend will increase by $40. If you have a workforce of 100, it will increase by $400.

Microsoft Is also Increasing Some of Its Prices

On top of the new NCE structure, it’s important to know that Microsoft is increasing the base-level pricing (i.e., the price with an annual commitment) for these widely-used Office 365 and Microsoft 365 products:

  • Microsoft 365 Business Basic

  • Microsoft 365 Business Premium

  • Microsoft 365 E3

  • Office 365 E1

  • Office 365 E3

  • Office 365 E5

The exact increase varies by product, but it ranges between 10 and 25%. This factors in to the new NCE incentives because your business could potentially lock in current pricing before the increase takes effect – if you sign on to the annual commitment.

When Do These Changes Take Effect?

 All of these changes will begin to take effect on March 1st, 2022. They will not impact your business, though, until your current license agreement’s renewal date with Microsoft. Depending on your business’s renewal date, you may have more or less time to decide how to proceed.

What’s the Best Microsoft Licensing Strategy for Your Business?

This year, Affinity’s vCIOs will be working with clients to help them maximize the efficiency of their spend with Microsoft. One of the most important drivers of this decision will be the variability of any given company’s workforce – which, of course, is an open question for many given the current high level of turnover in many industries. Still, for businesses who anticipate either steady or growing staffing levels, opting into the NCE’s new annual commitments will likely be the best choice.

Affinity is devoted to helping our clients navigate these kinds of changes, making sure they are maximizing their investment in technology. If you’d like to learn more about how Affinity works to make technology a force for good and for growth for companies throughout Greater Nashville and Middle Tennessee, contact us today.