Microsoft is ending its long-standing practice of giving discounts to large companies for its popular Microsoft 365 software subscriptions. The move means many businesses will soon see their prices go up, with some analysts predicting hikes of anywhere from 6% to 12%.
The change, which takes effect on November 1st for new and renewing contracts, applies to Microsoft’s biggest customers. For years, these companies have been able to negotiate lower prices, but that’s all coming to an end. Microsoft says the change is about creating “more consistent and transparent pricing” across all its customers.
For investors, the news isn’t a huge surprise. Analysts at UBS said the impact of the price change was likely already baked into the strong revenue forecast Microsoft gave in its last earnings report. The company is seeking new methods to maximize profits from its most profitable business.
The Microsoft 365 and Office division is a cash cow for the company, and its growth has been slowing down recently. Microsoft is hoping to make up for that by selling more expensive plans and add-ons, like its new AI-powered Copilot. Eliminating discounts is another straightforward way to boost revenue.
While some customers might swallow the higher costs, others could look for ways to save, like buying through resellers instead of directly from Microsoft. Still, the move is a clear sign that the days of cheap enterprise software from Microsoft are over.
