Microsoft 365 Licensing Updates: What You Need to Know

In 2023, Microsoft made changes in the European Economic Area (EEA) and Switzerland, which have been implemented worldwide, affecting how Microsoft 365 and Teams are sold and licensed. Removing bundled Teams licenses from essential Microsoft 365 Enterprise SKUs and introducing new standalone options means that businesses must reevaluate their subscriptions to optimize costs and ensure compliance.

Microsoft 365 & Teams Licensing

1. End of Sale for Microsoft 365 and Office 365 Enterprise Suites with Teams: Starting October 1, 2024, Microsoft will no longer sell any Microsoft 365 and Office 365 Enterprise SKUs that include Teams (E1, E3, E5) to new customers globally, except in the EEA and Switzerland, where this policy was implemented in 2023.

   Current customers can renew their subscriptions and adjust their seat counts as long as they are active. However, once a subscription expires, it cannot be renewed with Teams included. Businesses that allow their licenses to expire will need to buy new subscriptions without Teams and then add Microsoft Teams Enterprise as a separate product.

2. Introduction of Microsoft 365 & Office 365 "No Teams" Plans: In response to this change, Microsoft has rolled out new versions of Microsoft 365 and Office 365 that do not include Teams, offering a more affordable option for customers who do not require the collaboration tool as part of their suite.

3. Microsoft Teams Enterprise as a Standalone Subscription: For organizations that still need Teams, Microsoft has launched a new standalone SKU: Microsoft Teams Enterprise. This separate license must be acquired in addition to a Microsoft 365 or Office 365 Enterprise plan if Teams is necessary.

Microsoft 365 Copilot: New Monthly Billing and Discounts

1. Microsoft has rolled out new pricing options for Microsoft 365 Copilot, including a monthly billing plan for those who choose annual-term subscriptions. Customers can pay for Copilot monthly rather than making a full upfront payment for the entire year.

   This new billing option aims to offer more flexibility, particularly for businesses that prefer not to commit to annual upfront costs. However, it's worth noting that monthly subscriptions will come at a 5% premium compared to the annual billing option.

What Businesses Need to Do Next

Organizations should review their current licenses to see if the recent changes impact them. If a business uses Microsoft 365 or Office 365 with Teams, keeping these licenses active is essential to maintain access to Teams. Companies should consider whether moving to a "No Teams" SKU could save costs, especially if Teams isn't a vital collaboration tool for their employees.

For those who depend on Teams, purchasing Microsoft Teams Enterprise separately will be necessary to keep access. Organizations with limited Teams usage might find switching to a "No Teams" plan more economical. A thorough assessment of how Teams are utilized within the organization will aid in making the best licensing decision.

It's important to plan for renewals and adjust budgets, particularly for businesses on monthly billing for annual subscriptions. Starting April 1, 2025, Microsoft will permit changes in billing frequency while keeping suites that include Teams. Companies should prepare for potential cost adjustments if they need to add standalone Teams licenses.

Collaborating with a Microsoft partner can be advantageous in understanding these licensing changes. Partners can offer valuable insights into the best compliance options while helping to optimize costs. Furthermore, businesses that are changing partners can utilize the new partner-to-partner transfer feature, ensuring a seamless transition without affecting their current subscriptions.

Assessing the value of Copilot is crucial for organizations looking into AI-driven productivity tools. If these tools fit with business objectives, companies should consider the newly available monthly billing option, which offers more flexibility in cost management. Microsoft provides a 15% discount for nonprofit organizations, making Copilot more attainable for mission-focused initiatives. Businesses need to evaluate if the efficiency improvements from AI assistance warrant the investment, especially as Microsoft keeps enhancing Copilot's features throughout its ecosystem.

These licensing changes represent a notable shift in how Microsoft bundles its productivity and collaboration tools. Some businesses might find it advantageous to lower costs by excluding Teams from their licensing structure, while others may have to plan for extra expenses by purchasing standalone Teams licenses.