Microsoft announces switch to annual local currency pricing – what does it mean for SMEs?

This month Microsoft announced it will transition to annual local currency pricing updates every January for its Commercial Cloud services.

This is a move away from the previously introduced semi-annual updates, which started in April 2023, to account for local currency exchange rate fluctuations following events like the Covid pandemic and the war in Ukraine.

For customers using Microsoft Cloud products on an annual commitment, pricing updates will take effect at their next renewal date after January 1, 2027.

Customers on a monthly commitment are most affected

For customers on a monthly commitment, the pricing updates would take effect on the first monthly renewal after January 1, 2027.

Under the old semi-annual model, Microsoft could review exchange rates twice a year, meaning a customer on a monthly commitment could potentially be exposed to two currency-related adjustments per year. Under the new system, there is generally only one scheduled adjustment. This means customers on a monthly commitment lose that additional opportunity for exchange-rate movements to work in their favour, but they also might be better off for the same reason, depending on the rate of exchange.

Since exchange rates can vary in both directions, this means pricing can go up or down, and as such, no action is required for customers.

Either way, the move provides customers with greater pricing predictability while continuing to account for sustained fluctuations in foreign exchange rates.

Notifications with guidance on the upcoming year’s pricing updates will be issued in advance every November.

Any product-specific price adjustments and/or any consumer price adjustments will continue to be communicated separately.