Three shifts define Microsoft’s latest commercial reset: large customers can no longer count on automatic volume discounts, Microsoft 365 prices rose on July 1, 2026, and the company is bundling more AI, security, and management capabilities into its core suites. None is dramatic on its own. Together, however, the shifts move pricing power toward the vendor and reward enterprises that enter renewal discussions prepared.
The following analysis explains what changed, why it matters, and four questions enterprises should answer before negotiating with Microsoft.
For years, scale had a built-in payoff. As online services deployments grew, customers moved up Microsoft’s A–D price levels and paid less per seat. That is no longer how the model works. Starting November 1, 2025, Microsoft standardized pricing across levels A through D for online services purchased under the Enterprise Agreement, Microsoft Products and Services Agreement (MPSA), and China’s Online Services Premium Agreement (OSPA). The change is reflected at the next renewal or when a customer adds an eligible service that is not already on the price sheet.
On-premises software, US Government, and worldwide Education price lists are carved out. For other customers, the takeaway is clear: scale no longer earns a discount by default. Customers must now negotiate any price advantage on a deal-by-deal basis. Although existing protections and concessions still shape the final net price, scale no longer automatically yields a discount.
Effective July 1, 2026, Microsoft raised commercial prices across selected Microsoft 365, Office 365, Business, Frontline, Government-equivalent, and standalone products. The increase is real, but it is not a flat percentage. The effect depends heavily on the exact SKU.
In Microsoft’s published US pricing, Microsoft 365 E5 rose about 5% and E3 about 8%, while some Frontline plans increased by a quarter or more. A few products, including Microsoft 365 Business Premium, did not move, and standalone Teams and Copilot were outside this update. Existing customers see the new price at the next renewal, so the financial impact depends on renewal timing, previously negotiated terms, and whether the suites include Teams.
One point to note: organizations also affected by the volume-pricing change should model both changes together against the actual bill of materials. Treating the changes as a single headline percentage can be misleading.
One aspect of Microsoft’s recent changes has created confusion: the combination of Teams unbundling and the addition of new AI, security, and management capabilities into Microsoft 365 E3 and E5 suites. Although these developments are occurring simultaneously, they are separate changes and are often conflated. Understanding the distinction is essential when evaluating renewal pricing and overall value.
Teams was unbundled: Microsoft now sells “with Teams” and “without Teams” versions of its suites. New buyers that require Teams can purchase it as a separate line, while existing customers can retain their current plans. This packaging split changes how organizations compare quotes.
Other capabilities were added: Separately, Microsoft is expanding E3 and E5 with added capabilities, including Copilot Chat enhancements, Defender for Office 365 Plan 1 for eligible E3 suites, and selected Intune and Security Copilot capabilities. The suites now include more capabilities, but at a higher price.
The additions can create value when an organization can retire an overlapping tool. However, inclusion is not the same as value. Customers may pay the higher suite price even if the new features are never activated. The key question is whether the additions replace existing spending or simply raise the baseline cost.
Microsoft’s AI pricing differs from standard user licensing, which can create budgeting uncertainty. There is no single “agent seat.” Depending on the scenario, an organization might use a Microsoft 365 Copilot subscription, an activity included for licensed users, prepaid Copilot Credit capacity, or pay-as-you-go consumption. Copilot Credits are the common currency, and the number of credits consumed by a task depends on its complexity, including the response, action, and feature involved.
The practical implication is straightforward: organizations should model workforce licenses and AI workloads separately. As adoption grows, Microsoft bills will depend less on head count and more on consumption that can be difficult to forecast and may lead to unbudgeted costs.
As renewals approach, the same four questions keep coming up in enterprise conversations. They go well beyond “can we get a bigger discount?”
For most enterprises, replacing Microsoft wholesale is not the goal. However, a serious assessment of an alternative, such as Google Workspace, that weighs collaboration, AI, security, and the true cost of change provides a reference point. Even when an enterprise remains with Microsoft, a credible alternative can strengthen its negotiating position, much as competing cloud quotes shape a negotiation.
With scale-based pricing standardized, enterprises can no longer assume that size provides protection. Before negotiations begin, decision-makers should understand how current pricing compares with peers, how support economics compare, and which concessions are realistically achievable. When published pricing represents only part of the picture, market intelligence becomes one of the most valuable assets available to a procurement team.
The fastest savings are often internal. Underused E5 licenses, inactive accounts, duplicate entitlements, and over-provisioned Frontline seats quietly inflate the bill, often because premium suites were rolled out broadly during a previous security initiative and never revisited. Recovering unused licenses can offset part of the increase before any terms are negotiated. However, some security and compliance value lies in coverage rather than usage, so the goal should be a defensible, persona-based licensing model, not a broad reduction.
As Microsoft folds email security, threat protection, and endpoint management into its suites, overlap with specialist tools becomes a real concern. Overlap, however, is not equivalence. Before retaining or retiring a tool, organizations should compare coverage, detection, integration, data residency, and operational effort. Where Microsoft is sufficient, consolidation can reduce cost and complexity. Where a specialist genuinely differentiates, the specialist earns its place, but the burden of proof now sits with the incumbent vendor, not with Microsoft.
Microsoft’s co-investment funds (ECIF): Microsoft will co-fund partner-delivered work, including migrations, deployments, and Copilot or security adoption, that accelerates its cloud and AI footprint. ECIF is not a licensing discount. It is field-driven and must be raised early with a clear adoption plan, rather than after terms are set. When positioned effectively, ECIF can offset the cost of change that a renewal is intended to support.
Support economics: Unified Support is typically priced as a percentage of total Microsoft spend, so the changes described above can automatically increase support costs even if ticket volume does not change. Organizations should challenge this effect by benchmarking the cost, testing the third-party support market for leverage, and negotiating support as a deliberate line item rather than accepting an ever-rising percentage of a growing bill.
These are not routine price increases to absorb and forget. Together, the changes reduce the predictability of Microsoft costs and reward preparation. Enterprises that come out ahead will benchmark effective pricing rather than headline discounts, rebuild the license baseline by persona, separate workforce costs from AI consumption, and lock in protections before signing.
The defining question is no longer “How much will Microsoft cost?” It is “How much of that cost can we still predict, control, and protect contractually?”
Avasant helps global enterprises answer exactly that through software benchmarking, license optimization, commercial modeling, contract analysis, and support for renewal negotiation. Walk in with a defensible baseline, and Microsoft’s reset becomes a source of leverage rather than a budget shock.
Avasant’s research and other publications are based on information from the best available sources and Avasant’s independent assessment and analysis at the time of publication. Avasant takes no responsibility and assumes no liability for any error/omission or the accuracy of information contained in its research publications. Avasant does not endorse any provider, product or service described in its RadarView™ publications or any other research publications that it makes available to its users, and does not advise users to select only those providers recognized in these publications. Avasant disclaims all warranties, expressed or implied, including any warranties of merchantability or fitness for a particular purpose. None of the graphics, descriptions, research, excerpts, samples or any other content provided in the report(s) or any of its research publications may be reprinted, reproduced, redistributed or used for any external commercial purpose without prior permission from Avasant, LLC. All rights are reserved by Avasant, LLC.
Login to get free content each month and build your personal library at Avasant.com