Microsoft 365 Price Increases: Navigating Recent Adjustments and Avoiding Overpaying

Microsoft 365 Price Increases

Price Hikes as the New Normal

Microsoft 365 customers have experienced a steady increase in prices over the past few years. What began with a significant global hike in 2022 was followed by regional “price consistency” adjustments in 2023, and now another increase in 2025 looks either imminent or already underway.

For enterprises using Microsoft 365 (M365), these hikes aren’t optional – they’re a new normal. Microsoft will raise prices whenever it sees an opportunity, so the onus is on customers to budget, plan, and negotiate more effectively to mitigate the impact.

The key point is clear: you can’t stop Microsoft from raising its fees, but you can avoid overpaying. By understanding the recent adjustments and proactively adjusting your licensing strategy, you can contain costs even as list prices climb.

Read more about Microsoft Licensing Trends 2025–2026: What’s Changing and How to Respond.

The sections below walk through what’s changed, why it’s happening, and practical tactics to navigate these “New Commerce” adjustments without breaking your IT budget.

Recent Price Hikes Recap

Microsoft has been methodically increasing the cost of Microsoft 365 and Office 365 subscriptions.

Let’s recap the major hikes and changes leading up to now:

• March 2022 Global Increase: Microsoft’s first across-the-board price hike in a decade hit in March 2022. For example, Office 365 E3 increased from $20 to $23 per user/month, representing a roughly 15% rise. Other popular plans saw similar increases (Office 365 E1 went from $8 to $10; Office 365 E5 from $35 to $38). Microsoft 365 Business Basic and Premium plans also rose by $1–$2. This was a substantial one-time increase, positioned by Microsoft as reflecting all the new apps and features added to the suites over the years.
• New Commerce Experience (NCE) Changes in 2022: Alongside the 2022 price increase, Microsoft introduced the New Commerce Experience (NCE) licensing model for cloud subscriptions. NCE introduced strict annual or multi-year commitments for CSP (partner-led) subscriptions. Critically, month-to-month subscriptions now carry a 20% price premium. In other words, if you want the flexibility of reducing licenses or canceling them every month, you’ll pay about one-fifth more than the annual rate. NCE forces customers to choose between flexibility and cost – and most enterprises are locked into annual terms to avoid that 20% uplift.
• 2023 Regional Currency Adjustments: In 2023, Microsoft began aligning global prices to the US dollar, resulting in regional price increases. Many customers outside the US saw increases of ~10–15% on Microsoft cloud services in 2023 due to currency fluctuations. For instance, European Office 365 customers were hit with roughly an 11% price increase in April 2023 to “balance” euro pricing with US pricing. Microsoft is committed to reviewing and adjusting local currency pricing on a semiannual cadence. The bottom line: depending on exchange rates, certain regions are paying more (occasionally less) for M365 as part of a new “price consistency” policy.
• 2025 Price Increase Announcements and Rumors: Looking ahead (or as of now), Microsoft has signaled further increases. Starting April 1, 2025, Microsoft will raise prices by 5% for certain plans – specifically, any annual commitment subscriptions that are billed monthly will cost 5% more than the outright annual price. This change is part of “standardizing” pricing across different billing options. Additionally, standalone products like Teams Phone Standard and Power BI are seeing their first price hikes in years (e.g., Teams Phone Standard jumping from $96 to $120 per user/year). Beyond these confirmed adjustments, industry watchers speculate that another round of base license price increases (perhaps an “inflation adjustment”) could be on the horizon for core M365 plans. In short, enterprises should prepare for the likelihood that M365 pricing will increase again in 2025, albeit in a different form.

To illustrate how these changes stack up, here’s an example of pricing progression for a few common enterprise licenses from 2021 to post-2022 increase, and a possible 2025 forecast if another hike occurs:

Table: Example of Office 365 enterprise plan prices, showing the March 2022 increase and a hypothetical 2025 adjustment. Actual 2025 prices for these SKUs have not yet been confirmed, but a single-digit percentage increase is a reasonable assumption, given Microsoft’s recent patterns. The trend is clear: the cost of Microsoft 365 is increasing over time.

Why Microsoft Raises Prices

Microsoft’s official narrative for raising M365 prices is that customers are continually getting more value.

They point out that Office 365 launched over a decade ago, and since then, Microsoft has added dozens of apps and thousands of features: Microsoft Teams, robust security and compliance tools, Power BI reporting, automation with Power Platform, and more.

In Microsoft’s view, a higher subscription cost simply reflects the significantly broader suite of capabilities you now receive compared to years past. They also occasionally cite economic factors – for example, that prices need to adjust for inflation or currency changes to maintain value consistency.

However, the reality behind the price hikes is a bit more pragmatic: Microsoft is protecting its revenue and profit in a maturing market. Nearly every large enterprise already uses Microsoft 365, which means Microsoft’s room to grow by adding new customers is limited.

To keep revenue on an upward trajectory (and please shareholders), Microsoft must increase what each existing customer pays. Regular price bumps are an effective way to do that, especially when the Microsoft 365 stack has become deeply embedded and hard to replace for most organizations. Inflation and currency exchange shifts provide a convenient justification – a 10% “inflation adjustment” sounds more palatable than a plain profit grab – but often these hikes exceed actual inflation.

It’s also notable that Microsoft can introduce pricey add-ons (such as their new AI features) outside of the base subscriptions, which brings in more revenue without technically increasing the base license price too frequently.

Enterprise buyers should treat Microsoft’s “more value for more cost” story with healthy skepticism. Yes, Microsoft 365 has a lot of bells and whistles, but are they the ones your organization asked for or actually uses?

If you’re mostly using email, Office apps, and Teams meetings, do you really benefit from all the niche extras Microsoft has bundled in and now charges more for? In many cases, customers end up paying for features they either don’t need or already have through third-party solutions.

Checklist – Understanding the Drivers: Before accepting a Microsoft price increase at face value, ask yourself:

• Are we actually using the “new features” Microsoft cites as justification for the higher price? If Teams, Defender, or other added apps aren’t heavily used in your environment, the claimed value of those additions is questionable.
• Are we paying for capabilities in Microsoft 365 that we’ve already replaced with third-party tools? (e.g., using a separate security suite despite Microsoft 365 E5 including similar features). Redundant solutions mean you’re not realizing the value of what you’re paying Microsoft for.
• Is inflation truly driving this increase, or is Microsoft testing our price elasticity? Consider whether the hike is in line with economic inflation or if Microsoft is simply leveraging its market power, betting that customers will absorb the cost. Knowing the “why” can inform how hard you push back.

By understanding Microsoft’s motivations and comparing them to your own usage reality, you’ll be better prepared to challenge vendor spin and focus on minimizing the impact on your budget.

Mitigation Strategies

Faced with inevitable Microsoft 365 cost increases, what can enterprises do to soften the blow? Fortunately, you have a toolkit of mitigation strategies that can help contain costs or at least extract more value for the money.

Consider incorporating these tactics into your licensing and negotiation approach:

• Early Renewal (Beat the Clock): If you know a price hike is coming, timing can be your friend. Evaluate your license agreement end dates – if an increase will take effect before your term expires, you may want to renew early (or extend your agreement) to lock in the current pricing for the next cycle. Microsoft often allows customers to sign an early renewal of an Enterprise Agreement (EA) or a longer CSP term before an announced price increase takes effect. By doing so, you secure today’s lower prices for the next 2–3 years. This requires upfront budget commitment and approval, but it can save a significant percentage over paying the higher rates later. When making the case internally, show the cost avoidance: “Renewing 4 months early at $X per user vs waiting and paying $X+10% – that saves us $Y over three years.”
• Multi-Year Commitments under NCE: The New Commerce model rewards committing to longer terms. Locking in a 1-year or 3-year term for your Microsoft 365 subscriptions means the price is fixed for that duration, shielding you from any mid-term adjustments. For instance, if you sign a 3-year CSP subscription, Microsoft can’t raise your per-user rate until the term ends. This is a strong defense against year-over-year inflation. The trade-off is reduced flexibility – under NCE rules, you generally can’t reduce the number of licenses until the term renewal, and breaking a term early can incur penalties. However, if your user count is stable, a multi-year lock at a negotiated discount is often worth it for cost predictability. Tip: Even if you prefer CSP (partner-managed) licensing, consider an Enterprise Agreement if your volume is high; an EA is typically a 3-year commitment with price protection and can sometimes yield better discount percentages for large organizations.
• License Optimization and SKU Adjustments: One of the most powerful levers in your control is optimizing what you buy. Don’t blindly renew the same mix of licenses if some of them aren’t fully utilized. Audit your usage before a price increase compounds the waste. For example, if you purchased Microsoft 365 E5 for all users but half of those users never utilize the E5-only features (such as advanced security, telephony, and analytics), consider downgrading a portion of them to E3 at renewal. Similarly, if you have add-on licenses or services that are underutilized, consider eliminating or scaling them back now. Another tactic is to mix and match SKUs: perhaps 70% of users receive E3, while 30% receive E5 only where needed – you don’t have to give everyone the Cadillac if a Honda will suffice. Also, ensure you’re not paying for inactive licenses (accounts that were never assigned or belong to departed employees). Cleaning up these inefficiencies before the new, higher prices take effect will yield savings both immediately and in the long run.
• Leverage Microsoft Promotions: Microsoft often rolls out promotions, special discounts, or transition credits around the time of pricing changes – but they don’t always shout about them. Keep an ear out (and ask your Microsoft account rep or partner) for any promotional offers that can offset the increase. For instance, Microsoft might offer a limited-time discount (e.g., 5% off) if you renew your agreement before a specified date, or they might provide some free months of service when switching from a monthly to an annual term. Sometimes, there are promo bundles, such as a discounted rate on an add-on product when you adopt it alongside your renewal. The key is to ask – don’t assume the price on the first quote is fixed. Mention that you’re aware Microsoft has run incentive programs during past price hikes and you’d like to know what’s available this time. These promotions can save money or add extra value that compensates for the higher rates.
• Communicate ROI Internally: As much as we focus on pushing back on Microsoft, part of navigating price increases is selling the value within your own organization. When faced with a rising Microsoft 365 bill, be prepared to translate that cost into business outcomes. For example, if Microsoft pitches that the higher cost is due to advanced security features, gather metrics or anecdotes on how those security tools have reduced risks or saved time for your IT team. If Teams and collaborative features are touted, frame how they enabled better remote work productivity or eliminated other software expenses. By linking the technology to measurable benefits (e.g. “M365 E5’s security tools let us avoid spending $X on a separate solution” or “Teams has consolidated our conferencing and saved $Y per year from retiring Zoom licenses”), you can justify the budget increase to finance and leadership. This not only secures internal buy-in for the renewal but also puts you in a stronger position to demand that Microsoft prove the ROI of their products. In negotiations, you can then say, “We recognize the value we’re getting, but to pay more, we need Microsoft’s help to maximize that value,” which can lead to obtaining additional training, support, or other value-added benefits as part of your agreement.

Strategic Defense Against Add-On Inflation (Copilot & Beyond)

While base license prices are rising steadily, Microsoft has found another way to grow its spend: sell expensive new add-ons. The poster child of this strategy in 2024–2025 is Microsoft 365 Copilot, an AI-powered assistant for Office apps. Copilot is priced at $30 per user per month, in addition to the standard M365 license cost.

That means if you enabled it for every user, some organizations would nearly double their Microsoft 365 spend overnight. And Copilot is just one example; Microsoft also offers add-ons like advanced security, compliance, voice calling plans, and analytics, often at a premium price point.

This approach allows Microsoft to keep the base subscriptions ostensibly “flat” for a while, but generate more revenue by enticing customers to adopt these high-cost extras.

Think of it this way: there may be an upper limit to what customers will tolerate for an Office 365 E3 base price (say $23 → $25 → $30 over the years), but there’s essentially no limit to what Microsoft can charge for new functionality if it’s compelling enough.

Copilot at $30/user is a huge multiplier relative to an E3 license, yet Microsoft is betting that the promise of AI productivity gains will make enterprises seriously consider it. Similarly, we’ve seen “E5 Security” or “E5 Compliance” bundles marketed as add-ons to E3 plans, effectively increasing the per-user cost for additional features.

To avoid runaway costs from these add-ons, organizations need a strategic defense plan:

• Deploy Expensive Add-Ons Selectively: You don’t have to (and likely shouldn’t) roll out every fancy new Microsoft feature to all users by default. With something like Copilot, evaluate which roles or departments would truly benefit from AI assistance. For example, software developers, content creators, or financial analysts may greatly benefit from AI assistance in writing code, generating documents, or analyzing data. On the other hand, many general business users might see only a marginal benefit. By enabling add-ons only for targeted users or as a pilot program, you contain costs and gather data on their actual usefulness. If 10% of your workforce reaps 90% of the benefit from Copilot, there’s no need to pay for 100% of users to have it. This selective deployment approach ensures you’re paying for value received, not speculative value.
• Treat AI and Extras as a Separate Negotiation: When it comes to ultra-premium offerings like Copilot, approach them with a fresh negotiating mindset. Don’t let Microsoft simply tack these onto your agreement without scrutiny. Negotiate these add-ons independently. For instance, you might agree to evaluate Copilot for a year, but on the condition of a discounted rate or with an opt-out clause if it doesn’t meet expectations. You could also bundle discussions of add-ons with other Microsoft spend – e.g,. “We might consider Copilot for 500 users, but in exchange we need a better discount on our core E5 renewal.” The idea is not to treat these new features as inevitable or fixed costs; Microsoft has an interest in driving their adoption, so use that as leverage. Also, be willing to say “not now” – there’s no rule that you must adopt every new thing immediately. It might be wise to let the hype settle and see if Microsoft introduces lower-cost tiers or if competitors force price pressure on these add-ons.

To put the impact of add-ons into perspective, consider a hypothetical enterprise with 10,000 users on Microsoft 365 E3:

In this scenario, adopting Copilot for everyone would add roughly $3.6 million to the yearly bill—an 83% increase in Microsoft’s spend for that organization. Few CIOs or CFOs would swallow that without a fight.

The lesson is clear: be extremely deliberate about investing in new, expensive services. Pilot them, measure the benefit, and expand usage only if the value justifies the cost. Microsoft’s strategy may be to bypass base license price limits via add-ons, but your strategy can be to limit their proliferation and negotiate their terms hard.

For more trends, The Rise of the Microsoft Customer Agreement: Is It Time to Move On from EA?.

Long-Term Tactics

In addition to immediate mitigation and selective adoption, enterprises should develop a long-term strategy for dealing with Microsoft’s ongoing price escalations.

Consider these tactics to strengthen your defensive playbook for the years ahead:

• Bake in 5% (or More) Annual Increases to Budgets: It’s wise to assume that Microsoft 365 will cost ~5–10% more each year and plan accordingly. By setting an expectation of, say, a 5% annual increase in your IT budget projections, you create a financial cushion. If Microsoft’s price adjustments come in at or below that range, you’re covered; if they threaten to exceed it, you’ll spot the issue early and can push back or adjust the scope. This proactive budgeting turns price hikes from surprises into anticipated events. Essentially, treat Microsoft’s cloud like a utility bill that goes up a bit every year – not pleasant, but manageable if forecasted. Over a 3-year planning horizon, this might mean expecting a total increase of ~15–20% in licensing costs. It’s better to budget high and then work to negotiate it down than to be caught underestimating.
• Negotiate Annual Review Clauses in Agreements: When signing large, multi-year contracts (such as an Enterprise Agreement or a Microsoft Customer Agreement for major clients), consider including price review or benchmarking clauses. For example, an annual review clause might stipulate that if Microsoft introduces new bundles or pricing models that could lower your costs, you have the right to re-evaluate and incorporate them. While Microsoft typically doesn’t lower prices, they do occasionally release new license bundles or add new value at the same price – your agreement should allow you to take advantage. Additionally, having a formal yearly check-in as part of the contract means you can revisit your terms regularly. Even if it doesn’t reduce the unit prices, it creates an opportunity to negotiate adjustments (like adding more licenses at a discount, or swapping products) in response to any changes in Microsoft’s catalog or your business needs. Make Microsoft earn those increases by ensuring you can realign on value each year.
• Hybrid Licensing Approach (EA + CSP): Not every user in your organization needs to be on the same licensing agreement. A savvy tactic is to blend licensing models to optimize both cost and flexibility. For your core, stable workforce and products, use a traditional Enterprise Agreement – this covers the bulk of your users at the best volume discount, locked in for 3 years. For other needs, especially fluctuating or project-based users, consider using CSP or month-to-month subscriptions outside the EA. For example, maintain 1,000 users on an EA (annual commitment) and handle an extra 100–200 temporary or seasonal users via CSP licenses that you can drop when not needed. Yes, those CSP monthly licenses might carry a 20% premium, but if you only pay them for a few months, it’s cheaper than over-committing in an EA for the whole year. This hybrid approach means you’re not paying year-round for peak headcount. It also provides leverage: if Microsoft knows you’re willing to put some users on non-EA subscriptions, they may offer better EA terms to “win” those users back. Use the flexibility of multiple channels to your advantage.
• Push for Enterprise-Wide Incentive Bundles: Whenever Microsoft announces a price increase, it’s a moment of leverage for customers too – the vendor knows customers are unhappy, so they might be willing to offer sweeteners to ease the pain. Proactively ask Microsoft (or your reseller) about incentive bundles or funding programs that could offset costs if you agree to strategic adoption goals. For instance, Microsoft often has FastTrack funding or deployment funds for organizations that roll out new security features broadly, or Azure consumption credits if you commit to moving certain workloads to their cloud. During your negotiation, say something like: “We understand prices are going up; to justify this, we need help adopting X and Y services to get full value. What can Microsoft provide in terms of support or discounts?” You may be eligible for free training for end-users, architectural consulting hours, or direct discounts on complementary products. Another angle is committing to an “all-in” deployment (e.g., upgrading all users to E5 security) in exchange for a discounted rate or rebate. Microsoft’s goal is stickiness – if you agree to use more of their stack, they have been known to financially assist that effort. Take advantage of that dynamic so that each price increase comes with something in return for your organization.

Checklist – Negotiation Prep:

• Benchmark your current costs against similar companies or published industry data. Know if you’re paying above average, and use that data to argue for better pricing or discounts.
• Build a business case for early renewal if a known price jump is approaching. Present leadership with the savings scenario: “By renewing 6 months early, we avoid a 10% hike, saving $X over the term.” Hard numbers get attention.
• Evaluate your licensing program options (EA vs. CSP vs. direct via MCA). Have a clear plan B and a plan C, just in case. Let Microsoft know you’re considering moving some licensing to a different channel or splitting vendors. This can create pressure for them to offer a more competitive deal in your EA renewal to keep all your business.
• Engage finance leadership early. Prepare your CFO or budget owners for the reality of 5–10% annual growth in Microsoft costs. If finance is aware and supportive, they can help advocate for the right negotiations or allocate funds for an early renewal. A united front internally means you won’t be forced into a bad deal due to last-minute budget panics – you’ll have a strategy and the funding aligned to execute it.

Do you want to know more about our Microsoft Advisory Services?

Please enable JavaScript in your browser to complete this form.

Name *

First

Last

Email *

Company

Message *

Submit