On April 1st, 2024, Microsoft announced a radical change to the licensing terms for Microsoft Teams, including a change in the pricing structure of Microsoft 365 and Microsoft Teams. This impacts most Canadian businesses that use Teams.
What Is Microsoft Changing?
Until now, Teams came bundled as part of Microsoft 365, but Microsoft has been forced to unbundle the Teams product. Teams must be purchased separately for any new business customer. This is a direct result of the October 2023 EU decision that required Microsoft to unbundle the products over antitrust issues. In their statement, they explained:
Globally consistent licensing helps ensure clarity for customers and streamline decision making and negotiations. To that end, we are now updating the way Microsoft 365, Office 365, and Teams are licensed outside of Europe in keeping with the recent changes in the EEA. Starting today, we are introducing 1) a new lineup of commercial Microsoft 365 and Office 365 suites that do not include Teams in regions outside the EEA and Switzerland, and 2) a new standalone Teams offering for Enterprise customers in those regions.
What If My Business Already Has a Microsoft 365 Subscription Bundled with Microsoft Teams?
If you are already an existing Microsoft Teams customer, you will be allowed to continue using your bundled product until your renewal date. At the time of your renewal, you will have the option to separately renew both Microsoft 365 and Teams, but you will also have the opportunity to change your contract to a subscription that does not include Teams. According to Microsoft, “Office 365 E1, Office 365 E3, Office 365 E5, Microsoft 365 E3, and Microsoft 365 E5 suites [bundled] with Teams will no longer be available to net new subscribers, worldwide.”
Is Microsoft Reducing the Price for Subscriptions without Teams?
Unfortunately, the new pricing for most customers will represent an increase in cost for businesses who opt to continue using both 365 and Teams. However, the cost of both may still be less expensive than replacing Teams with another solution, such as Slack.
As Forrester explains:
All new customers of Office 365 or Microsoft 365 plans that wish to provide Teams to their workforce will now have to purchase two separate SKUs from Microsoft – one for the core Office 365/Microsoft 365 product and a second for Microsoft Teams. For most customers opting to purchase both SKUs for their employees, this represents an unanticipated price hike of $3/user/month across plans, i.e., between 5.3% and 30% against the older, bundled pricing.
SMEs That Don’t Use Teams May See Cost Savings
If you are a small- to medium-sized enterprise (SME), then Microsoft Basic, Standard, and Premium subscriptions can still be purchased with Teams bundled. However, SMEs also have the option to choose plans without Teams, which may be beneficial for those businesses that weren’t using it anyway but were paying for it as part of the required bundle. Microsoft’s Basic, Standard, and Premium pricing are explained by Microsoft:
Microsoft 365 Business suites will coexist with the new lineup. Customers will be able to choose between the existing Microsoft 365 Business Basic, Microsoft 365 Business Standard, and Microsoft 365 Business Premium suites with Teams or the new versions of those suites without Teams. See details of the new lineup on the table below [prices shown are CAD]:
New suites without Teams (starting Apr. 1) Pricing
Microsoft 365 Business Basic $8.10
Microsoft 365 Business Basic (no Teams) $6.40
Microsoft 365 Business Standard $17.00
Microsoft 365 Business Standard (no Teams) $13.90
Microsoft 365 Business Premium $29.80
Microsoft 365 Business Premium (no Teams) $26.80
New Customers Have New Licensing Options with Microsoft 365 and Teams
New customers are now required to purchase Teams separately from their Microsoft 365 or Office 365 suite. In addition, business customers will also be able to purchase Teams as a standalone product, without having to invest in 365, should they choose to do so.
Why Is Microsoft Being Forced to Unbundle Teams and 365?
One of the primary reasons for the unbundling of Teams from Office is that Slack filed an antitrust complaint against Microsoft in the EU, “accusing Microsoft of illegally abusing its market power by tying its competing product, Teams, to its dominant enterprise suite, Microsoft 365.” In the statement obtained by TechCrunch, Slack said, “Microsoft has illegally tied its Teams product into its market-dominant Office productivity suite, force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers.”
Unbundling Is Likely to Have Little Impact in the Long Term
Because most companies started relying on the combined efficiencies that Microsoft 365 and Teams provided, and because swapping out communications tools can be incredibly complicated, Tech Crunch predicts that it might be a pyrrhic victory for Slack and that most organizations will absorb the cost, adjust accordingly, and continue to use Teams. And if you have been taking advantage of CoPilot, Teams may have already become an integral part of your strategy to be more productive and more efficient.
Casey Lindsay, Strategic Software Consultant with Connection’s XLO Practice, explains in more detail:
For those customers using another solution for UC [unified communications] like Webex, Zoom, or Slack, this does bring some sunshine in the way of savings. You’ll end up saving between $1.75–$2.25 per user, per month without Teams. But I would also argue a point where that savings could bring diminishing returns. For instance, let’s say a company is using a competitor to Teams but has Teams deployment on their roadmap, even if it’s remote. It would be vital to dig in and compare the financials to unbundle now and forecast long-term costs to stack the two SKUs down the road. Projecting that breakeven point is necessary to determine if your long-term costs could outweigh your immediate savings.
No matter how you choose to move forward with your Microsoft Teams and 365 subscriptions, The ITeam is here to help you navigate the licensing and help you determine the best strategy.
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