Strategies to Help Overcome Microsoft Price Increases

Since the creation of its cloud-based solutions, Microsoft has been focused on pushing customers to migrate to the cloud, preferably the more robust cloud bundle, Microsoft 365, which pulls key solutions together, like Office 365, EM+S, and Windows Online.  Ultimately, by making a commitment to the bundle, Microsoft is getting an immediate commitment from you to many pieces of the puzzle they are trying to sell and it is a commitment that is very hard to walk away from.

Each part of the bundle comes with an abundance of features, functionality, or even products that can be purchased a la carte.  For example, with Office 365, there is a significant portion of companies that are not using Office 365 Advanced Threat Protection or even PowerApps.  EM+S adopters are typically underutilizing Intune or Azure Advanced Threat Analytics.  Finally, those who generally have the most robust Microsoft 365 bundles are underutilizing the various Windows Defender features that are available.

With this, there is often a strain on the customer to effectively roll out all of these features immediately or even over the committed term.  The fact is, Microsoft knows this.  The problem is, too many customers are forced to roll out what they can through prioritization and end up not using many features that they have paid for and had visions of using when signing up.  In fact, many Microsoft customers even lose sight of what features they didn’t end up turning on and using.

As these customers approach their renewal, they should set aside a time and gather resources to ensure they put the proper level of energy into taking a deep look at the overall utilization of these features.  This should help determine the full extent of the value received from the respective Microsoft products they have committed to and have been paying for.  This assessment should also include understanding why particular products and features were not used, whether you expect they will be used moving forward, and whether or not Microsoft made any efforts to help drive utilization of features that would have been of value.

While taking a granular look at use across the Microsoft portfolio may seem like a daunting task, it is a task worth taking, especially when it comes to core products like the Microsoft 365 bundle which often makes up a vast majority of an organization’s Microsoft spend.  In fact, if you want to ensure you prepare for your negotiation with Microsoft effectively, you need to shift the mindset from something you should do to something you must do it.

In working with many Microsoft customers over the years, we have come to find that many are not using a significant amount of the features associated with the particular Microsoft 365 bundle or bundles (E3, E5 or F3) they have bought or even the standalone products (Office 365, EM+S, and Windows), if they have not yet jumped to the bundle.  On average, we have seen that organizations are using roughly 60% of features to which they subscribe*.

Furthermore, there is not one instance of any organization using all of the features available to them.  It is important to mention that even though there are clearly many features not being used by many Microsoft customers, this is not to say that these customers are not getting meaningful value from the features and products they are using, because they often are.  But the fact is, when looking at these utilization readouts, many customers know that they could have gotten more value from actual use of what they have been paying for.

This is not good for Microsoft who needs to report increased usage of their core products, like Microsoft 365, and core features that have extremely competitive landscapes, like Teams, to the investment community.  In addition, Microsoft, like all other cloud vendors, is well aware that use makes their products “sticky” and less likely to be dropped.  Use also makes it easier for Microsoft sales teams to have a conversation with customers about moving to a more robust edition that has even more features that would be of value (i.e., Microsoft 365 E3 to Microsoft 365 E5) or to add even more products (i.e., Power BI, Power Apps, etc.).  It also goes without saying, that lack of use is also not good for the customer, who is inevitably left with the realization that they paid for air.

For those customers that have paid for air, the good news is that it can become valuable if used correctly with Microsoft.  First, it provides an understanding for what may not be needed moving forward and helps with a well understood go-forward set of requirements.  This understanding provides the ability to reshape and optimize the go-forward Microsoft portfolio.  For example, if it is determined  that many users don’t need the full Microsoft 365 E3 bundle because they do not need EMS, they could move out of the bundle completely.  This will be a challenge from a resulting cost perspective because Microsoft does not want customers de-bundling and may flex their muscles to ultimately increase the payment you end up with at renewal.  But these challenges can be overcome with the right approach, strategy, and stagecraft during your negotiation.

Second, having a granular understanding of your use allows for increased leverage when Microsoft tries to increase pricing at renewal.   Microsoft will often increase prices to not only increase annual spend and ARPU (average revenue per user), but they also do this to motivate customers to move to more robust additions, bundles or add other net-new products (have you ever heard, “We can lower that increase or take it away if you are able to do this for us”?).

For those customers that don’t have a renewal-term price protection in place, this is a big problem and given Microsoft is going to uplift the list price of many of the Office 365 and Microsoft 365 products in March of 2022, it is going be an even bigger problem.  By having a readout that shows you have been paying for air and if Microsoft has not offered to help unlock lost value along the way, this can quickly shift the conversation away from what Microsoft wants (more product adoption and dollars) to what Microsoft needs to do to keep you where you are currently.

Lastly, being able to show Microsoft a detailed and supported view of non-use but a continued interest in the possibility of using the functionality moving forward rather than dropping it from your portfolio, puts you in a good position to get investments from Microsoft that can be put towards effort and spend needed to migrate to or implement the product.

Microsoft needs customers to use Microsoft products and often they can get away with not ensuring all expected value is received because customers are getting enough value.  Those customers that are able to call attention to specific non-use and present it as part of a well-thought-out negotiation strategy are often able to avoid Microsoft’s increased prices and also have them assist in your organization’s adoption.

*Average taken across usage of all Microsoft products and bundles (i.e., M365, O365, EM+S, and Windows)

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