Microsoft price increases move negotiations from challenging to nightmare
On March 14, 2022, Microsoft increased its list pricing by 15%-25% on many key commercial products including Microsoft 365 Business Basic and Microsoft 365 E3. So negotiations that were already challenging? Now they’ve reached nightmare-level.
Anytime there’s a Microsoft price increase, negotiations get tougher – and everything becomes more expensive. On top of the usual increases companies get pushed into at renewal time (we’ll talk about the inescapable upsell cycle in a moment), there’s now also a blanket increase in prices across the board. And since Microsoft 365 offerings tend to make up the majority of overall Microsoft spend – a lot of companies are really feeling the sting right now.
Microsoft is more concerned about getting more money than they are with offering you what your company actually needs. For them, every renewal is a chance to upsell. But that’s probably not news to you. Experienced IT folks know to expect a price increase anytime a renewal comes around – and that they need to be prepared to hold their ground.
The Microsoft Bait & Switch
There’s a well-known bait and switch game that happens with renewal pricing. Here are the choices they’ll give you:
1. Option A: Stick with the status quo and pay more (way more).
At renewal time, if you want to stay “as-is”, Microsoft will pull back the discounts they previously gave you when you first signed the deal. And given the recent blanket price increase, you could now end up paying 50% more for exactly the same functionality.
2. Option B: Upgrade to the next level for a price that’s close to your as-is renewal cost.
Paying more for less is a tough nut to swallow, so you may be likely to pick this option, even if you don’t need the additional functionality.
Microsoft does this very purposefully – they make it financially unappealing to go with anything but the higher package. And they know most organizations will go with the bigger package because they don’t think they can negotiate anything better, and there’s perceived (if not actual) value there. If you can get more for just a little bit more than what you’d pay otherwise, why wouldn’t you?
Here’s why not: because at the next renewal, you’ll be offered yet another upsell to move you up the Microsoft value chain, paying “the same” (i.e. a more manageable Microsoft price increase) for increased functionality and features. And then you’re stuck with a larger, more expensive package than you need – one that will keep getting more and more expensive with each renewal.
5 ways to fight Microsoft price increases
So what if you don’t need more features or your user numbers aren’t increasing? What if all you really want is to just add a bundle to your existing licensing without moving up to the next level? Here’s how you can avoid this double whammy.
1. Understand how the upsell cycle works Knowledge is power, so just by knowing that this kind of thing happens is an important first step. Be on the lookout for additional products and features Microsoft brings forward: things like security, identity management, PowerBI and telephony, not to mention Azure consumption commitments.
2. Have a good grip on your requirements and how you’re currently using 365 Microsoft will try to sell you more functionality as a benefit to your business. But knowing what products you’re using now – and what you expect to use in the future – will give you more leverage in negotiations. Knowing if the additional features, products and increased licensing fees they’re suggesting are worth it or not is a powerful bargaining tool.
3. Match your requirements to the most efficient licensing mix (end user, server) Once you know your requirements, make sure what you’re negotiating for what actually meets those needs without exceeding them.
4. Push your reseller to quote on that efficient solution Compel your reseller to base their quote on your optimized licensing position, not what they want to sell you – or what Microsoft is pressuring them to get you to buy.
5. Negotiate hard on your as-is renewal Do whatever you can to get the best possible discounts for your current scenario. Let’s say E5 doesn’t make sense for you but E3 doesn’t quite meet your needs. If you definitely don’t need the full bundle, don’t be tempted. Consider buying one of the add-ons to round things out. Remember: once you’ve moved to E5, what’s next? You guessed it – more upselling, more Microsoft price increases. So if you can keep your as-is renewal for longer at a manageable price, you’ve got more leverage for future negotiations.
You don’t have to do it alone
Navigating the complexities of a Microsoft renewal, especially with the added Microsoft price increase across the board, doesn’t have to be a nightmare. Now that you know what the Microsoft price increases are, let us work with you on how to combat them.
Check out a recent example where we came in at the eleventh hour to save a major manufacturer $450K on their Microsoft contract.
When you work with a third-party IT negotiation partner like Dark Horse, you’ll benefit from a ton of intel and experience – and stop being a prisoner to Microsoft’s upsell cycle.
