The Microsoft "new commerce experience" – why it's not all bad. At all.

What's it all about?

Microsoft's New Commerce Experience comes into effect in early 2022. And besides new billing options, it is designed to simplify Microsoft’s legacy (and complex) licensing model. There are two price changes to be aware of.

First, there's a general 15% increase to Microsoft 365 subscriptions. This price rise reflects Microsoft's considerable investment in improving the product range and is hard to argue with.

The second is that customers who sign on to a 12-month subscription term will no longer be able to scale down the number of licenses during the term. New licenses can be added at any time and will co-terminate with the main subscription dates. This means that there is less flexibility available during the subscription term.

However, customers who wish to significantly change license numbers throughout the year to reflect seasonal impacts can continue to leverage the flexibility of the month-to-month subscription, but with an additional 20% premium. This applies to Microsoft 365, Office 365, and other seat-based offers, including all modules of Dynamics 365 (e.g., Customer Engagement, Finance and Operations, and Business Central).

So, what are the options?

Under the New Commerce Experience, most customers will need to evaluate how they leverage the Microsoft solution stack, and choose between:

1. A month-by-month commitment, with a 20% price premium over a 12-month term and retaining the right to scale seat numbers up or down at will and without penalty.
2. Sign up for an annual commitment with a committed number of seats, without the premium or the ability to reduce or cancel any licenses until the end of the 12-month subscription period.

An embraceable impact

So, where do we stand on this? As explained during an interview with CRN and documented in their recent news article, we view these changes as 'embraceable' (meaning they're neither good nor bad).

We believe the 'good' fallout of these changes is that they provide customers and partners alike with more certainty and security around both the value of their relationship and the issue of pricing/income.

What's good about the new annual commitment subscription?

In a nutshell — it’s certainty!

These applications are running core operations and are hugely relied upon to keep the business going. Ensuring subscriptions, pricing and availability are locked in provides great peace of mind.

Despite customers having the flexibility to reduce seat counts on a whim in the old model, outside of some specific customers that had seasonal demand changes, in our experience — very few do. It’s a case of set and forget.

And for those customers with user numbers that rarely change, and have no need for on-demand flexibility, it's business as usual, with predictable pricing.

We find that customers looking at solutions are more concerned with budgetary certainty and locking in the pricing and usage of solutions, than they are with reducing licenses on the fly. The desire for predictability is supported in most of the conversations we have with our customers’ CFOs or purse-string holders.

The strategic advantages of a committed relationship

Annual or multi-year subscription commitments put considerably more emphasis on partners and customers taking a strategic approach to licensing and maximising the value their solutions will deliver over the term. We love these conversations, as it’s about the business outcome after all.

Unlike some partners who may only focus on licensing, Fusion5 offers both specialist strategic licensing and implementation services. So, we concentrate on making sure our customers’ licensing is precisely aligned with their business and technical needs to help them achieve their desired business outcomes and an ROI.

It also means that customers need to move away from tyre kicking — shopping around partners every month or two chasing the small license saving, a change that most partners will welcome. Tyre kicking is a costly exercise for a partner who typically will invest heavily upfront to ensure the customer signs up and is onboarded well. For customers, the emphasis will move from shopping around based on licensing discounts, to:

1. Looking for a proven partner who can deliver far-reaching, strategic business value.
2. Investing in that partnership to drive the desired business outcomes from the solutions.

For the partner community, it places the importance of the overall quality, capability and capacity of their services and people — not just a flashy first viewing. This is a good thing, as we can stand (or fall) on our own merits, not on our willingness to discount.

Seize the opportunity to optimise

We admit that a more lateral and creative approach to licensing is required for customers with a strong seasonal ebb and flow of users, which is why we have Microsoft licensing gurus on our team.

For example, our strategic licensing specialists suggest that a hybrid model that combines an annual commitment with a mix of premium month-by-month licenses may offer a flexible and cost-effective option.

However, we don’t believe in ad hoc solutions. Each customer’s specific business needs and workloads need to be scrutinised by not only a partner’s licensing team but their solution architects and consultants as well.

Are they worth it?

Apologies to L’Oreal and Eva Longoria, but yes Microsoft, you're worth it.

Microsoft invests heavily in its technology stack. And the Dynamics 365 application suite in particular, offers users significant flexibility.

We believe it's time that we stopped looking at licensing costs as the defining take away from Microsoft's New Commerce Experience.

Instead, we need to focus on driving more value from application investment. If this requires partners to step up our collective game, then so be it. And our customers need to look beyond their license cost, and instead at how, together, Microsoft’s business applications and a trusted partner can transform and support their future transformation, growth, and success.