LAST UPDATED: 3rd May 2022
This article was originally published on 25th October 2021 but has been constantly updated in line with any changes announced by Microsoft
Microsoft have announced the launch of a new model for subscription licensing, branded as the ‘New Commerce Experience’.
Originally planned for a launch in October 2021, the new model start date was postponed until 10th January 2022 to allow partners and customers more time to prepare. The new model applies to all seat-based subscriptions including Dynamics 365, Microsoft 365, Office 365, and the Power Platform.
Most organisations using seat-based subscriptions (including Dynamics 365, Microsoft 365, Office 365, and the Power Platform) purchase them directly from Microsoft Partners via a programme called the Cloud Solution Provider programme (CSP). This programme was first launched in 2015 and has become the preferred way of purchasing licences for businesses globally.
Microsoft announced the first major change to this programme for six years. The New Commerce Experience brings some major changes to its model compared to the old CSP model which is now labelled ‘Legacy CSP’. The New Commerce Experience was first launched in 2019 for Microsoft Azure subscriptions and is now being expanded to seat-based subscriptions including Dynamics 365, Microsoft 365, Office 365, and the Power Platform.
What is the New Commerce Experience?
Microsoft are aiming to simplify and streamline their subscription models while presenting customers the flexibility to tailor purchases to their business needs. The New Commerce Experience also aligns the CSP programme with the rest of the Microsoft ecosystem and many of the models used by their competitors.
Below, we take a look at the previous programmes available from Microsoft compared to the new simplified programmes coming as part of these changes.
Previous Models for Partners and Customers
The below graphic illustrates Microsoft’s previous licensing programmes. These include – CSP (the programme used currently by most partners and customers), Open, MPSA, Select Plus, EA (Enterprise Agreement), and Web Direct. These programmes can cause confusion amongst partners and customers; therefore, Microsoft are aiming to streamline this.
Future Models for Partners and Customers
In the graphic below, you can see the future evolution of the new models for partners and customers. This is much clearer and more straightforward and split into three purchasing options.
1. Breadth Motion – The breadth motion is the primary purchasing motion for mid-sized and small organisations, and this is where most Microsoft customers purchase from. They are serviced primarily by Microsoft partners in the Cloud Solution Provider programme (CSP), such as Strategy 365. Partners in the CSP programme will manage the end-to-end customer relationship from licence advice and onboarding to implementation and support services.
2. Self-Service Motion – This option is for individuals who prefer to make purchases online via a web portal or through an assisted self-service purchase motion via a Microsoft Seller. These customers know exactly what they want and intend to self-serve the ongoing management of their subscriptions.
3. Enterprise Motion – The enterprise motion is the primary purchasing option for the largest organisations. This is because it entails a greater level of involvement from Microsoft to support the needs of the business during the digital transformation process.
These new streamlined approaches clearly split the purchasing options into three distinct categories, with greater clarity during the purchasing process for partners and customers.
What are the major changes with the New Commerce Experience?
The New Commerce Experience introduces various purchasing options for end customers for per-seat licensing. The new purchasing options are:
Monthly subscription:
- This option provides a monthly term, allowing the number of seats to be increased, decreased, or cancelled, each month, with only month-to-month commitment from the customer.
- Bringing this model in line with purchasing directly from Microsoft (via the Web Direct programme), this option will incur a 20% premium on the subscription costs.
- Price increases are not protected and will increase in line with price changes made by Microsoft.
- There is a 20% price premium on monthly subscriptions because it offers the flexibility to be cancelled with only 30 days’ notice. Furthermore, a monthly subscription allows customers to purchase additional seats or decrease the number of seats, to meet the fluctuating requirements of a business.
12-month subscription:
- With this option, the customer commits to a 12-month term with price protection from cost increases for the full 12 months.
- The subscription can only be cancelled within the first 7 days (with pro-rated billing). After 7 days, the customer cannot cancel and is then committed to the full 12 months.
- The number of seats cannot be decreased within this period but can be increased with pro-rated billing.
- The customer can only terminate their subscriptions after each 12-month term.
36-month subscription:
- With this option, the customer commits to a 36-month term with price protection from cost increases for the full 36 months.
- The subscription can only be cancelled within the first 7 days (with pro-rated billing). After 7 days, the customer cannot cancel and is then committed to the full 36 months.
- The number of seats cannot be decreased within this period but can be increased with pro-rated billing.
- The customer can only terminate their subscriptions after each 36-month term.
Does the New Commerce Experience change any of my existing Dynamics 365, Microsoft 365, Office 365, and Power Platform subscriptions?
Although the new model launched in January 2022, it will not be enforced until 11th July 2022 for existing subscriptions. This means that customers can still switch to the New Commerce Experience at any time prior to 11th July 2022. However, any new subscriptions added on or after 10th March 2022 will only be allowed via the New Commerce Experience. Furthermore, all renewals after the 10th July 2022 will only be allowed via the New Commerce Experience. If you have an existing licence with a renewal date after 10th July 2022, it will continue as normal until renewal, at which point it will transition to the New Commerce Experience.
Why has Microsoft introduced a 20% premium on monthly subscription costs?
As mentioned previously, Microsoft are aligning with many of their competitors’ models. This subscription premium is common within other industries; for example, with Booking.com, the same hotel room can be paid for upfront, but it is non-refundable. An alternative option is no pre-payment and free cancellation, but the cost of the same hotel room is 23% higher. The extra premium is for the added flexibility. Another example might be a local gym. The annual upfront membership might cost £300 (equivalent to £25 per month) which cannot be cancelled during the 12 months. If paid monthly with no commitment, this might cost £30 per month. Again, the extra premium is for the added flexibility.
Are we able to have some seats on the monthly term and some on the 12-month/36-month term?
Yes, subscriptions can be mixed. You can have both monthly term and 12-month/36-month term subscriptions with an appropriate number of seats in each term. This is particularly suitable for a business that has seasonal employees.
With the new model, can we cancel the subscription mid-term?
The New Commerce Experience has a 7-day cancellation window for all subscriptions. This means that after the 7-day cancellation window has elapsed, a subscription cannot be cancelled until the full term has elapsed. When the number of seats on an existing subscription is increased, this increase can also be cancelled only within the 7-day cancellation window (with pro-rated billing). For customers who are not entirely certain of committing to a 12-month or 36-month term, the option of a monthly subscription is recommended, and this will allow cancellation at the end of each month.
Does the New Commerce Experience apply to all customers?
The New Commerce Experience initially only applies to commercial pricing. No announcements have been made about any changes to nonprofit, academic, or government models, however, we believe this will change in the future.
Has Microsoft launched any new promotions as part of the New Commerce Experience?
To help customers transition to the new commerce experience, two introductory promotions have been announced as follows.
- For the 12-month subscription – a 5% discount off the list price will be offered. This promotion will only be available between 1st January 2022 and 31st March 2022 but may be extended through to 30th June 2022 (to be confirmed). Please note that the promotional price would apply to the full 12-month term.
- For the monthly subscription – a 20% discount off the list price will be offered. This promotion will only be available between 1st January 2022 and 30th June 2022. As monthly subscriptions effectively renew every 30 days, the promotional price will only apply until 30th June 2022.
What’s next for Strategy 365 and our customers?
At Strategy 365, we aim to be completely transparent with our customers. We are therefore keeping you up to date throughout the launch period of the New Commerce Experience. We will also be contacting all customers directly, prior to your next licence anniversary date, to discuss this with you further, and to help each of you decide which option (or combination of options) is best for your business.
Please note that this new model is a fast-moving subject and we’ve already seen several changes announced. Further changes may be announced, and we will update this post accordingly as and when we find out about any other changes (LAST UPDATED 3rd May 2022).
If you are an existing Strategy 365 client and want to discuss the New Commerce Experience with one of our team, feel free to get in touch.
CHANGELOG (these changes have been reflected in the latest version of this article)
17th December 2021: New promotions launched by Microsoft
18th March 2022: Cancellation and seat-reduction window increased from 72 hours to 7 days
3rd May 2022: Last date of legacy CSP renewals updated to 10th July 2022
