The cost of commercial and business Microsoft 365 subscriptions will rise sharply starting on March 1, 2022. Microsoft announced the price increases, which include key Office 365 SKUs, on Thursday.

Some of the subscriptions will increase by as much as 10%. At least one, Microsoft 365 Business Basic, will surge 20%, from $5 per user, per month to $6. Microsoft is not increasing the prices of Office 365 for consumers or education customers

The move is the first “substantive” price increase since the launch of Office 365 a decade ago, according to Microsoft. Among the other SKUs that will cost more:

Microsoft’s Jared Spataro

Microsoft 365 corporate vice president Jared Spataro, who announced the increases, noted Microsoft has added many new features throughout the years. “This updated pricing reflects the increased value we have delivered to our customers over the past 10 years,” Spataro said.

Spataro underscored the new communications and collaboration capabilities now available with Microsoft Teams, which is included with all versions. “In 2020 alone we released over 300 new capabilities including Together mode, background effects, large gallery view, raise hand, live reactions, breakout rooms, live captions with speaker attribution and Fluid components,” he noted.

Also, Spataro emphasized the new collaborative applications in Teams that provide integrations with Microsoft’s Power Platform, Whiteboard, Lists, Planners, Shifts, Forms and SharePoint. And he noted the third-party integrations with Adobe, Atlassian, Salesforce, SAP, ServiceNow and Workday.

Since the launch of Microsoft 365, Spataro noted the addition of ransomware protection, data loss prevention (DLP) for email and documents, message encryption and compliance capabilities. Spataro also pointed to the AI and automation capabilities added.

Potential Impact

Partners find themselves having to explain the price increases to their customers. “It will certainly be a tough conversation for some of our clients,” said Peter Fidler, president and founding partner of WCA Technologies, a New York-based managed services provider.

Techaisle’s Anurag Agrawal

Industry analyst Anurag Agrawal of Techaisle said price increases were inevitable, but it will raise eyebrows, especially among smaller businesses. “These smaller businesses do not use most of the features and functionalities Microsoft has added over the years,” Agrawal said. “Enterprise segments will still be able to manage volume discounts.”

Will the move result in customers evaluating a switch to Google Workspace. For its part, Google increased the price of its suite in January 2019. At the time, it was known as G Suite. “SMBs which have not adopted Office 365/Microsoft 365 will surely weigh their options,” Agrawal said. “Data also shows that Google Workspace is generating interest as well as adoption within the SMB segment.”

Based on a survey fielded by Techaisle from April-May of 2021, 41 percent of SMBs are actively considering Google Workspace.

‘Static Pricing Is Not a Guarantee’

“However, static pricing for Google Workspace is not a guarantee,” Agrawal said. “An important consideration is also that SMBs are mixing and matching their productivity applications adoption. For example, even if SMBs are using Office 365, they use Zoom or Webex for collaboration because they consider them better products over Teams’ convenience.”

Channel partners will have to become familiar with all of the pricing changes, but the upside is it will give them opportunities to help their customers weigh their options. The price increases, along with the pending launch of Windows 11, will create “purchase decision inertia” for customers, Agrawal added. “It also opens up opportunities for partners to become true consultants for the business customers.”