The upcoming release of Microsoft Office 2019 has triggered “price adjustments” across many of Microsoft’s on-premise and cloud products. The impact of these increases varies between commercial and public sector customers, depending on which software is being used from Microsoft’s broad portfolio, and whether it is deployed on-premise or via the cloud.
Customers under an enterprise agreement (EA) will no longer enjoy automatic price discounts for the volume Level A pricing tier. The same goes for those under the Microsoft Products and Services Agreement (MPSA), and the Select programme. According to Microsoft, this means that organisations with up to 2,399 employees can expect to see price increases of about 4% on their volume licensing fees.
For government users, pricing will be “aligned” with the lowest commercial price under EA/EAS, MPSA, Select Plus and Open Programs. Public sector pricing has historically been been lower than the lowest corporate price, but this change effectively means that government users will see a 6% increase. A new public sector discount model has been introduced, but this only applies to online services, such as the cloud-based Office 365 suite.
In the past, councils have been reluctant to move away from their on-premise software due to the less favourable pricing associated with cloud subscriptions. But now that licensing Microsoft Office on-premise represents a 6% increase, they may well consider moving to an Office 365 subscription instead.
There is also a price rise for the on-premise commercial version of Office. This means the cost of Office 2019 will increase by 10% over current on-premise pricing. The rise affects Office Client, Enterprise Client Access Licence (CAL), Core CAL, and server products such as Exchange, Skype for Business, and SharePoint.
Microsoft says: “Pricing for cloud and on-premise don’t align well, nor do programmatic volume discounts align with cloud pricing models, and we aim to correct that.”
Along with the price rise, Office 2019 is becoming a click-to-run product, where components are installed on-demand. The pricing structure for Office 2019 has also been changed from device-based to user-based. Microsoft customers now have almost no choice but to move over to an Office 365 subscription.
Managing the price adjustment’s impact
By limiting access to key cloud features for perpetual licence products, users are encouraged to make regular payments for Microsoft Office 365. This is more profitable for Microsoft than those one-off perpetual licence purchases. This is a great way for Microsoft to build loyalty. Once a customer is involved with a cloud service subscription, it is difficult to move to a rival provider.
From an IT decision-maker’s perspective, Microsoft’s focus on subscriptions and the price increase for Office 2019 should be seen as an opportunity to optimise software licensing.
Organisations that have built a mature software asset management (SAM) process should already be aware of how they are currently licensed, which is essential in weighing up whether moving from device-based to user-based licensing is the best option for reducing cost.
This will not be the case, for example, if Office is running on shared devices because this would be likely to increase the user count to the point of it no longer being cost-effective. Real-time software asset management should be used to measure usage. A dedicated SAM manager’s job will involve ensuring that the organisation’s licences and technology align with the current state of the business.
At the other end of the scale, organisations with a less sophisticated, or no, SAM process in place often do not have an accurate view of how employees are using software, or what is deployed. Microsoft admits that smaller organisations, using on-premise Office, will be the group of customers most affected.
While moving to Office 365 is certainly an option, it requires extensive planning and preparation, dedicated resource, and scheduled downtime. Before deciding to switch, these smaller organisations, which often do not have the budget to employ a SAM manager, should consider using a specialist Microsoft licensing consultant to establish an accurate licence position and carefully consider the next steps.
In the public sector, customers that have bought a Microsoft Open Program agreement will see their costs go up in phases, which should help manage the price increases for Microsoft Office 365. As with enterprise customers and SMEs, all government entities will need to evaluate their software licensing strategy in terms of both contract and usage. This will require the support of a SAM specialist or external SAM consultant.
Historically, on-premise licensing gave every device the full feature set of Microsoft Office, but in reality, most users within organisations did not utilise all of its constituent parts. Office 365 offers differing levels of subscription, ranging from power users who require the full Office local installation with telephony integration, user-centric identity management and data security tools, to light users who can get by with web-based Office applications and services, such as call centre staff.
By only granting the functionality actually required to users rather the traditional one-size-fits-all on-premise options, it may be possible to mitigate the price rise by buying the right level of subscription based on usage needs.
By building a true picture of the organisation’s IT estate, the IT department will understand which software licensing can remain on-premise, which can be migrated to the cloud, and which software licences are no longer needed. So with the right subscriptions in place, Microsoft’s price adjustments could be unexpectedly positive, propelling an organisation toward more a modern, efficient way of working.