Microsoft aligns subscriptions with USD Exchange Rates. What’s the cost?

Microsoft continues to offer the unique point of difference over other comparable vendors in that it costs subscriptions in local currencies rather than only in US Dollars. 

Microsoft offers transparent pricing

Microsoft customers have enjoyed a transparent pricing model that has not fluctuated monthly in line with global exchange rates but has been fixed and increased occasionally.  The product price increase in March 2022 on selected licence types was the first in over a decade.  The last currency alignment increase was in August 2015.  As we know- much has happened to the value of GBP since then.

Microsoft announce a change in FOREX alignment

Microsoft announced earlier this month that they will continue to sell in local currencies against published prices but that due to the global economic climate and the performance of certain currencies, local prices will have to be aligned more realistically with the USD.  The announced alignment will result in an increase in April 2023 across Microsoft’s prices with the commitment from Microsoft to review local currency licence costs twice a year to inform future price increases or indeed reductions in line with the global exchange rate.

This newsfeed confirms the official Microsoft messaging.

Will my Microsoft licence costs change?

Q: Which Microsoft products are affected?

A: All Commercial Cloud Services

ALL Microsoft products that are accessed via subscription will increase by 9% in the UK.

Think: Microsoft Office 365, Teams Business Voice, Azure Cloud, Microsoft Dynamics 365 (all variants such as Business Central).

The Business Ready Enhancement Plan for on premise customers (NAV for example) will not be affected.

Very few businesses using Microsoft products will NOT be affected by this price increase in some way.

When will this affect your business?

All renewals and new contracts from 1st April 2023 will carry the 9% increase for annual in advance commitment and annual in advance payment.  If an annual renewal allows monthly payment and flexible licence changes throughout the duration of the contract a 20% surcharge will apply in addition to the 9% increase described above.  This 20% surcharge was introduced in March 2022 as part of a Microsoft global licence change.  Please see our previous article.

Can I avoid the increase for 2023?

Microsoft Office 365

If your renewal date is in April, you will save money by renewing at the end of March instead.  Pricing structures are the same whether you subscribe directly through Microsoft or via your CSP.  In short, Microsoft prices have changed/increased in line with local currency exchange rates and there is no way of avoiding these changes.

Dynamics 365 (Business Central for example)

If your renewal date is in April, you will save money by renewing at the end of March instead.  You can also lock into the pre-increase licence cost on Dynamics 365 products if you commit to a 3-year contract and pay in advance.

(There is no 3 year deal available for Microsoft (Office) 365 or Azure etc)

However – as with fixed mortgage rates, Microsoft alludes to the fact that licence costs may go down in any local currency if that local currency performs strongly against the USD.  This is totally within Microsoft’s gift and the cost end users pay will not go up or down within any given contracted period.  If you sign for 3 years but in year 2 there is a Microsoft licence published cost reduction due to exchange rate changes, your price will not reduce within that term.  If your user number requirements become less during the 3-year term, you cannot reduce your licence numbers.   If you are on an annual contract and your renewal is in a given month but Microsoft publish a licence cost reduction in the next, your cost will not reduce within that annual term.

You CAN however add users during a given contract period at the price you locked in when the contract started.

Tip for new Microsoft users

Start your contract with the minimum number you need rather than second guessing what you think you will use.  Add licences to your contract when you are confident, they are essential.

Microsoft’s Strategy for Fair Pricing

Microsoft will keep a close eye on FOREX rates moving forward to better inform its product users of required price adjustments, well in advance of the event which the corporation believes will be preferable overall.  Microsoft have committed to establishing a centralised global process to enable them to fairly react to changing exchange rates.  The reviews will be every 6 months as stated by Microsoft at the time of publishing.

Microsoft’s Commitment to its customers

It is also true to say that Microsoft remains committed to its extensive programme of R&D in Microsoft Cloud services which in turn will assist businesses to run more efficiently and reduce operating costs.  Microsoft licensing remains very competitively priced in the marketplace and this latest announcement merely confirms its pricing model, will now be more closely aligned with the wider industry and its competitors.

Thought for the Day

Now, more than ever it is crucial to evaluate the type and number of Microsoft licences your business subscribes to. Ensure the subscription level is as cost effective as possible. Make sure your business is working with a CSP who will advise you of price changes and renewals in good time and guide you through licencing options to achieve your optimal approach.