Sina Technology News Beijing time on December 7th morning, it was reported that Microsoft is using its dominant market position in office software to force Office Software customers to pay more: pay more or buy longer software members.
The latest price increase
In 2022, Microsoft will reportedly launch the so-called "Office New Business Experience" product program, which is an optimized upgrade to the program that companies purchase software through Microsoft reseller partners. Microsoft has yet to announce future price changes for software products, but some Microsoft partners have been notified that Office Enterprise users will face a 20 percent increase if they pay a monthly fee, unless they switch to annual paid members.
For Microsoft, being able to lock companies into longer-term membership contracts means greater predictability of future revenue without worrying about user churn, which is a key factor in the software membership business model. In general, software developers offer higher price discounts for annual members than monthly paying users, and many large companies prefer annual membership.
However, in the face of today's new crown epidemic challenges, some small and medium-sized enterprises are willing to pay monthly, keep as much cash as possible. Microsoft's changes will disappoint them.
It should be noted that in August, Microsoft just raised the price of a price called "Microsoft 365", or Office 365 as it is known.
Corporate revenue is the main
At present, Microsoft's development situation is good. Microsoft's shares are up 46 percent from the start of the year, with a capital market capitalization of more than $2.4 trillion. In the past two quarters, Microsoft's revenue growth has been more than 20%.
The data show that the vast majority of Microsoft's revenue comes from corporate users, not consumers. Ninety-five percent of corporate users' revenue comes from sales from third-party partners.
According to reports, the current "Microsoft Cloud Solutions Provider" program to buy software members of the enterprise users affected by Microsoft's new round of price increases, but how much of the enterprise customers through the program to buy, Microsoft has not disclosed data.
Rob Schenk, co-founder of Intivix, Microsoft's partner in the San Francisco Bay Area, told the press that he had informed corporate customers of the company's 20 percent monthly membership price increase, and that the response from corporate customers had varied, with some saying they did not like Microsoft's new policy at all.
Dealers bounce back
For third-party distribution partners like Intivix, raising prices is hard to come by because they act as "messengers" between Microsoft and corporate users.
Shenke said that in terms of monthly membership price increases, Microsoft lack of clear information, which leads to difficult communication with enterprise users.
According to an internal Microsoft document obtained by the media, Microsoft will still leave the full software membership fee if the company switches to annual membership and wants to opt out midway through.
Microsoft's reseller partners have rebounded on many online forums, such as Reddit, a well-known forum, where 1,400 people have signed up against Microsoft's monthly membership price hikes.
According to a source familiar with Microsoft's inner workings, the backlash has led to frequent recent communication talks between the company and its distribution partners.
A Microsoft spokesman said by email that the company offers flexible software purchase options to meet the different needs of corporate customers, though it would not publicly discuss pricing policies that affect reseller partners.
Microsoft's new plan includes one-month paid members, and distribution partners still have the flexibility to offer price concessions to businesses, the email read.
Microsoft officially doesn't officially sell monthly members of Office 365, but in practice, businesses can still pay monthly and increase or decrease the number of employee users as needed, according to resellers. During the new crown outbreak, market demand decreased and some companies made layoffs, so it was important to adjust the pay-per-person policy flexibly.
George Hammerschmidt, executive vice president of Norteec Communications, Microsoft's washington dealer partner, said it was worse for companies to be unable to reduce the size of their software membership (the number of employees) than to increase prices. ”
Microsoft was reportedly due to launch a "new business experience plan" in October, but postponed it until early next year. Microsoft announced in an official blog post that from March next year, new software membership orders must pass through the New Business Experience Program, and membership renewals will switch to the program starting in July.
In addition, from January to June next year, Microsoft will continue to maintain the current price for monthly and annual members, after which prices will be raised.
Previous price increases
In August, Microsoft publicly announced a price increase. Starting next March, Microsoft 365 software package members will increase their prices by 8.5% to 20% (based on the price per employee user) depending on the tier. At the time, Microsoft said it was the first substantial price adjustment since Office 365 was introduced a decade ago. Microsoft also stressed that the new software package includes more employee collaboration, security and automation tools.
UpperEdge, a US consultancy, usually helps corporate customers negotiate more discounts from companies such as Microsoft, Salesforce and ServiceNow.
Adam Mansfield, the company's executive, told the media that Microsoft's price hike in August was unwelcome bad news for some companies.
In Microsoft's view, even if the price increases, corporate users will continue to buy members. One reason is that there are few competitors, and only Google's Workspace package, formerly known as the G-package, poses a real threat.
"Companies that use Google packages today are either very price-sensitive or very small, " says Mr Hammerschmidt, a dealer. ”
Mr Mansfield said Microsoft, which is rising in price, would face the potential worry that some dissatisfied corporate customers would look for other cloud service providers if there were big projects in the future. In the cloud computing market, Microsoft lags significantly behind Amazon, and Google is investing heavily in new customers.