Announced 5th December, these increases are set to take place from the 1st July 2026 and will impact most Enterprise subscribing customers at their next major agreement renewal. Using justification for increases based on additional features, functionality and AI elements, these increases affect customers of all types in all territories and currencies. These list price increases differ from the recently announced changes to automatic entitled volume license discounts and whilst pricing is still negotiable, list price increases will ultimately influence end customer pricing.
| Microsoft 365 Suite | Current List Price | July 1st 2026 List Price | Increase % |
| Microsoft 365 E3 | $36.00 | $39.00 | 8% |
| Microsoft 365 E5 | $57.00 | $60.00 | 5% |
| Microsoft 365 F1 | $2.25 | $3.00 | 33% |
| Microsoft 365 F3 | $8.00 | $10.00 | 25% |
| Office 365 E3 | $23.00 | $26.00 | 13% |
| Business Basic | $6.00 | $7.00 | 17% |
| Business Standard | $12.50 | $14.00 | 12% |
Of specific note are the exceptionally large increases to Frontline Worker SKU’s, typically deployed by customers with shared computer environments, providing more cost-effective options for these users than Full User licenses, with the savings delta now significantly impacted by this price increase. Customers utilizing these products should carefully plan and consider their current position and forward strategy.
Whilst these price increases impact all customers, government customers specifically will see these increases in some cases split across a two-year period. The timing of actual impact may be dependent on agreement renewal timing.
What this means
For most customers subscribing to these products governed by a current Enterprise Agreement (EA) or Enterprise Agreement Subscription (EAS), Microsoft may look to assert increases on renewals after July 1st 2026 . Until renewal customers with these agreement types will typically have agreed pricing which will be unimpacted.
Whilst some of these increases look to be close to inflationary increases (E5), customers should recognize they are typically never paying list price, and renewing customers would almost always see cost increases at renewal through the reduction of discounts and/or the ramping of discounts during the agreement term. This is important as these new list price increases will be levied in addition to discount reductions, therefore customers should expect larger increases than perhaps previously anticipated.
IDC Sourcing Advisory Services had already observed more restrictive discounting for Frontline Worker products and customers with these can expect to see large compound increases at renewal. We note that the F5 addon product is not currently in scope of these increases, however as this is an add-on product, customers will still be impacted overall.
With the removal of entitled discounts, the path is now clear for Microsoft to assert more aggressive unit cost increases, through both these list price increases and discount reductions
Also, customers with Unified Support face a double impact through these price increases, as their Unified Enterprise Base cost is calculated on a percentage of categorized product spend, and any product cost increases will result in Unified Support increases. These cost increases may not necessarily be co-termed to the wider renewal or when the price increases impact the customer, indeed these may come at a later date. Customers should look at the impact across agreements not only to budget but also to provide leverage for future negotiations.
What can Enterprise Customers do
Notwithstanding typical Microsoft renewal actions and strategies, customers should immediately consider the following;
- Act early & Plan now – Customers should begin assessments now, and in some cases may look to shift contractual timelines, so as to mitigate some of these cost increases in the near term
- Pricing is Negotiable – Whilst list prices might increase, Microsoft continues to incentivize customers and pricing is always negotiable.
- Leverage – Customers can seek to leverage many aspects of direct and indirect Microsoft investments and strategic product adoptions in order to drive optimal pricing. Collating current investments and identifying future requirements, even seemingly unrelated ones such as Azure, will help to build an overall investment growth profile and negotiation leverage
- Strategy – As always customers should develop a renewal strategy, aligned to their technology strategies, to drive optimal product selection, rationalization, adoption and negotiations. However, customers should now take a specific view on the potential impact of these increases and how this strategy may be influenced by, or equally influence, future Microsoft commercials
- Frontline Workers – Where customers subscribe, or plan to subscribe, to Frontline Worker SKUs, careful impact assessment and value analysis might be undertaken with a view to identifying risks and opportunities for mitigation.
- Early Renewal – Customers may consider renewing their current agreement early, prior to 1st July 2026, to maximize price protection, however should carefully balance this on the understanding that early renewal pricing may likely increase overall costs in the immediate term.
- Extensions – Those customers with contractual Extension options with fixed pricing might plan to utilize these in order to extend price protection durations.
- Alternatives – Where customers are egregiously impacted by the changes, or where the full functionality of the suites is not being leveraged, customers may choose to realign their requirements and potentially look to competitive solutions. These options may provide direct cost mitigation and/or give competitive leverage when commencing renewal discussions.
- Benchmarking – With global variance in discounts and incentive funding customers should benchmark their Microsoft investments and renewals against their peers and the market to ensure they are cost optimal and provide independent justification for decisions and change.
Summary
In summary these price increases, in tandem with potential reductions in discounts, present some clear commercial cost challenges for many Microsoft customers, in some cases significant ones. For Enterprise customers pricing remains negotiable and those customers that act early and assess the impact of these changes may identify opportunities for successful mitigation and cost optimization.
IDC’s Sourcing Advisory Services (SAS) provides you with the industry’s most-recognized price benchmarks, analyst advice and IT optimization insight. With globally recognized expertise in Microsoft commercials, IDC supports customers around the world helping them to achieve commercial clarity and cost optimization. For more in depth information, advice and support to find out how IDC can support you with the above please contact us.
