Written by Tim on 01 December 2021

Microsoft announces changes to Cloud Solution Provider (CSP) licensing program

Microsoft has announced some important changes to its Cloud Solution Provider (CSP) licensing program for 2022. As all of our clients use CSP to transact and provision their licenses for Microsoft 365, Office 365 and Dynamics 365 products via Axon, we have outlined the main changes and important dates in this article.

The information we have so far is based on the latest Microsoft announcements and this could change up to the official release date. We just wanted to give you a heads up as ongoing announcements are made.

What’s changing?

Microsoft presently has a plethora of multiple license models across its products which have program-specific offers. But this is now changing to a New Commerce Experience (NCE) that provides flexibility to meet varying usage needs. Microsoft’s aim is to create a consistent set of policies, agreements and procedures across all Microsoft’s cloud products and purchase channels.

Initially the change will only apply to agreements for commercial customers. If you are in the not-for-profit or education sectors, this transition currently won’t apply to you, but it is expected that these sectors will also onboard to NCE at some point in the future.

Under a global Microsoft Customer Agreement, NCE covers transactions for self-service (web direct), enterprise and CSP. As a result, all IT providers globally are required to transition their CSP billing of client licenses to the New Commerce Experience.

The CSP transactional model will change within the New Commerce Experience. Currently, CSP includes:

  • A standard cancellation policy that is aligned with existing non-CSP Microsoft licensing programs and subscription models, including Azure.
  • The new subscription term allows seat numbers to be decreased month-to-month. Licenses can also be cancelled at any time without incurring further costs.
  • Flexibility to pre-schedule subscription changes prior to the renewal date. This includes scheduling changes to renew at a higher or lower SKU count

If you are concerned about the changes or would like to discuss this further, our licensing specialists and consultants can walk you through the changes and explain what the NCE means for your subscription to your Microsoft licenses. We can also help with what options are available to make sure your business is on the most cost-effective licensing model.

For any questions around how the changes will affect your licensing and what your options are in transitioning to the New Commerce Experience if you are currently transacting licenses with another Microsoft partner please contact us.

When will these changes take effect?

Microsoft had planned to launch the New Commerce Experience in October 2021, but this has been postponed until January 2022 following feedback from partners.

The NCE will run alongside the existing CSP model until 28th February 2022, so customers can continue to transact licenses and renew their agreements on the current CSP terms.

Customers will have the choice between cancelling existing subscriptions, renewing using the new NCE terms or renewing subscriptions using the current CSP model between January 2022 and 28th February 2022.

From 1st March 2022, all new subscriptions and CSP renewals will be on NCE terms.

A New Commerce Experience early adopter promotion will be available for orders placed between January and June 2022 that will offer a save on monthly and annual term orders.

When will these changes affect our licenses?

The existing CSP model can be renewed until 28 February 2022. The month of February 2022 will be the last month that existing customers can reorder their subscriptions using the legacy CSP model and retain their current billing terms for Dynamics 365, Office 365, Microsoft 365 and the Power Platform.

From 1 March 2023, all customer agreements will transact on NCE terms.

How is Microsoft’s CSP cancellation policy changing?

The annual agreement options require a 72-hour cancellation window (based on UTC zone) after which all cancellations will be charged for the full term remaining. If you cancel after this timeframe, you will not receive a pro-rata refund for the unused period.

Licenses can be added during either of these terms, but seat reductions can only be made at the end of each term. Mid-term license volume reductions are not permitted under the updated policy.

When an organisation transacts licenses through NCE, billing cannot be transferred to another partner until the contract expires.

How can we decrease seat numbers month-on-month?

With the New Commerce Experience, Microsoft offers a one-month subscription term that allows customers to reduce or increase the number of licenses in any month.

Prices will only be locked in for one month with the one-month term. License prices will also be 20% higher for these transactions.

Can seats be held on a combination of 1-month and annual terms?

Microsoft allows customers to mix and match licenses across these terms within the NCE. It allows organisations to reserve a portion of their licenses that can be reduced or cancelled at any time. It also supports both permanent and seasonal workers.

For example, 85% of Microsoft 365 licenses can, be held on a 12-month basis by an organisation. It is possible to hold the remaining 15% of seats for a one-month period in order to reduce the total number of seats within this threshold.

NCE subscription terms in summary 

  • Blend and combine subscription terms for Dynamics 365, Power Platform, Microsoft 365 and Office 365 licenses.
  • Monthly Subscription
  • Flexibility to decrease licenses in any month at a price premium
  • Change license seats up and down month-to-month
  • Cancel in any month with no additional financial cost
  • Prices locked in for 1 month
  • Cancellation after 72 hours will be billed for the full month term
  • 20% higher price compared to the annual subscription
  • Annual Subscription
  • Fix license prices for 12 months and reduce user count at the end of term, if required
  • Increase user count at any time
  • Reduce licenses at the end of the annual term
  • Prices locked in for 12 months cancellation after 72 hours will be billed for the full 12-month term

The price increase on the Microsoft platform is really down to the enhanced offering they have included as part of their service, and we think the price hike actually reflects the offering Microsoft now has.

It’s not as if they’ve increased the price without offering more, they now have more, and the price is really in recognition of that. So, we think it’s down to the enhanced capabilities for where clients perceive value. Let’s not forget that this is the first update across the Microsoft price platform for over 10 years.

If you look at the Microsoft stack, and then obviously the price rise, you could argue, okay, that’s going to impact businesses. But more customers are looking at what else they’ve got in their Microsoft kit bag and are then looking at the other vendors that they’ve got, and where they can tactically consolidate into that Microsoft stack. Of course, not every customer’s the same, but we see opportunities to say “well, I’m not actually going to pay that fee for that vendor, I’m actually going to consolidate that into the Microsoft stack”.

If you have any questions at all, please get in touch.

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