Get Ready: Microsoft Cloud Licensing Is Changing

You might have heard that Microsoft is changing the terms and prices of its cloud software offerings for businesses. The updated licensing model, called New Commerce Experience (NCE), is in the process of being fully implemented by July 1, 2022. NCE will have a direct impact on your financial and workforce planning. You should know what its implications are, so you can make the best possible decisions. Sikich is here to help you make the best of NCE and the Microsoft cloud licensing solutions.

Understanding NCE basics and milestones

Starting in 2019, Microsoft began rolling out NCE with adjustments to its seat-based licensing for business customers using cloud software and services. NCE at first applied just to Microsoft Azure. In the fall of 2021, Microsoft expanded the program as a “technical preview” to Microsoft 365, Dynamics 365, Windows 365, and the Power Platform. On January 10, 2022, NCE became “Generally Available.”

Microsoft has channeled communications regarding NCE mostly through the Cloud Solutions Provider (CSP) partners who resell its cloud offerings to customers. From what we hear, many businesses are not yet aware of what NCE is and how it works. You can count on us as your resource to get up to speed on NCE quickly and help you manage the transition smoothly.

Under NCE, you will have three different term options for licensing cloud software from Microsoft:

  • Annual licensing term, with payments upfront or monthly
  • Three-year licensing term, with payments upfront, annually, or monthly
  • Monthly licensing, at a 20 percent premium

Invoice calculations will change from daily to month-based invoicing, and prices will be protected only for 12-month or three-year subscriptions.

Two important NCE milestones are coming up quickly:

  • March 10, 2022: any new subscriptions you order will be under the NCE model.
  • July 1, 2022: all existing subscriptions will have to transition to NCE before this date. If you have heard about March 10 for this change as well, that is no longer accurate, because Microsoft extended the transition period.

Coinciding with the NCE changes, Microsoft is implementing price increases for some products. These will be effective starting March 1, 2022.

Planning and preparedness will make a big difference

For customer organizations, NCE is mediated through CSP partners like Sikich. We will work with you to determine the most advantageous licensing combinations and help you model and control your costs. Microsoft may still finetune details of the program, but we already know the most important conditions that will require you to adjust how you approach cloud software licensing.

For one thing, licensing will still be scalable, but not in the same way as before. Businesses used to be able to add or remove licenses anytime without penalties or restrictions. However, after seven calendar days following your signing of a one-year or three-year NCE contract, you won’t be able to cancel the agreement or remove licenses. You will be able to add seats to your licenses at a prorated amount through the end of the agreement, and you can also reassign licenses during a one- or three-year term.

Software licensing should support your workforce planning and growth as well as employee turnover and expected fluctuations in your business. Both for optimizing your costs and enabling a productive workforce, the number of licenses will be as important as their types. As subscription costs for some products are about to increase, you need to understand your licensing options, plan and forecast as accurately as possible, and allocate the appropriate budget. You will probably want to use one- or three-year licenses for your permanent employees and contractors. For any seasonal employees, it may be best to purchase month-to-month licenses.

When it comes to renewals, once NCE is fully in place we will no longer assume automatic term extensions. Instead, we will connect with customers approximately 90 days before their renewal dates to discuss the best available licensing options and help them plan.

Here to help

The NCE deadline for full implementation will be here soon. We recommend learning about the changes you can expect under the program and fine-tuning your budget and licensing forecasts now. As your technology partner, we are committed to turning NCE to your advantage as much as possible.

To get ready for NCE in a timely fashion and have your questions answered:

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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