Did you hear the news that Teams® has been decoupled from Microsoft 365® solutions? Earlier this month, Microsoft announced that its Teams communications software will now be sold separately and will no longer be bundled in 365 suites alongside other go-to applications like Outlook, Excel, and Word. These global changes also prevent partners from selling net-new subscriptions of enterprise suites that include Teams.
Why the change and what does this mean for SaaS managers and IT budgets? Here’s a look at the impact and why application license management is more important than ever.
Antitrust Concerns Spark Changes in Teams Licensing
Since 2020, Microsoft has been under increased scrutiny regarding antitrust laws that protect fair market competition. Competitors, including Slack (owned by Salesforce), complained that Microsoft’s practices were anticompetitive, which sparked a formal investigation that is still ongoing.
Antitrust laws prohibit companies from distorting competition and favoring their own products over rival products. As of mid-2023, Teams had roughly 280 million active users, and Microsoft included Teams inside its 365 subscriptions for free — rather than charging an added fee.
In 2023, Microsoft announced it was decoupling Teams licenses in the European Union, and one year later, those changes are rolling out globally. Microsoft officials messaged the global implementation as establishing consistency, clarity, and simplicity for its multi-national clients who want to standardize their application purchases worldwide.
Unpacking the Changes and Price Hikes
According to Microsoft…
“Starting on April 1, 2024, we’re offering a new lineup of Microsoft 365, Office 365, and Microsoft Teams SKUs worldwide to provide commercial customers with the option of purchasing Teams separately from Microsoft 365 and Office 365. Existing customers who wish to continue using SKUs to which they have already subscribed can continue to use, renew, upgrade, and add licenses to their current plans. If an existing customer wishes to switch to the new lineup of suites without Teams, they can do so on their contract anniversary or renewal.”
More details can be found on the Microsoft website here and here.
Want 365 + Teams? Licenses Cost $3 More Per User
To purchase a standalone Teams license, new customers must pay a list price of $5.25 per user per month (PUPM). A license for 365 + Teams will now set new customers back $7.50 PUPM – a price $3 higher than the old bundles.
Much like last year’s changes to the EU licensing, which spurred price hikes of €3 PUPM, U.S. Teams pricing is $3 to $4 higher PUPM when compared to the old bundle cost. (Microsoft 365 subscriptions were reduced by roughly $2.25 PUPM with Teams excluded. However, purchasing Teams separately costs $5.25 PUPM – thus a net increase of $3 PUPM. This article offers a helpful breakdown of all the pricing changes.)
For now, existing customers can stick with their old Teams bundle if they prefer, but this may not always be the case. More changes (including price modifications) may unfold as the antitrust investigation deepens and EU authorities impose new requirements on Microsoft.
Unbundled: What it Means for IT and Finance Leaders
These changes can have a financial impact, but they’re also an opportunity to use what you already own more efficiently. Here’s what IT and financial leaders need to consider.
Financial Impact: Teams is No Longer Free
The changes can potentially lead to an increase in overall application spending. The separation of Teams from bundled 365 suites means that IT leaders – particularly new clients and those adding new licenses – now need to budget separately for Teams and keep a tighter grip on their financial management for Teams and 365.
License Management: Usage Becomes Critical, Procurement Gets More Complex
IT leaders will need to reevaluate their software license usage and management strategies. With Teams no longer bundled with other Microsoft applications, companies will have to manage Teams licenses separately, which adds complexity to license tracking and renewal processes. This negatively impacts SaaS and procurement managers, as it requires close attention to contracts and application usage insights to avoid over- or under-licensing.
Questions to ask:
- How many people are actually using their assigned Teams licenses?
- Can we granularly see how frequently they’re using their Teams licenses and exactly which nested tools they use most?
- What do we currently spend on Teams/365, and is it more cost effective to use an alternative collaboration application?
- What would our costs be if we had to start paying $3 more PUPM?
Insights like these will help lead decision makers through the coming months and years, understanding their expenses and cost tipping points.
Strategic Management: Microsoft, IT Advisors, Industry Insights
For companies that rely on Microsoft Teams, managing the vendor and channel partner relationship will become even more critical. CIOs, IT financial analysts, and procurement leaders will need to stay informed about Microsoft’s pricing and licensing changes, negotiate favorable terms where possible, and consider alternative solutions if the cost of Teams licenses becomes prohibitive.
Decision makers may need to reassess their overall collaboration strategy. This includes evaluating the value proposition of Teams compared to other collaboration tools in the market, as well as considering the potential impact on user productivity and business continuity should a shift in providers be warranted.
These changes should serve as a call to action to familiarize yourself with the full details about what’s changing and how.
Actions to Consider
- Get ahead of any new license needs and your contract renewals – Tangoe’s clients review their 365 contracts as early as 6-12 months ahead of time to allow for effective analysis and contract negotiation.
- Check in with your strategic IT advisors and Microsoft account managers regularly to keep pace with any additional changes as the investigation continues.
- Stay up to date on the unified communications industry. For instance, a new bill was introduced into the U.S. Senate that would require Teams and Zoom to work together, thus allowing users on different platforms to talk to each other without switching tools.
It’s safe to say that as Teams goes under the microscope competitors stand to benefit, and it’s not just the competitive market to watch but also interoperability among popular business-critical communications tools. Larger developments could have positive changes and significant implications in how companies choose, use, and purchase their collaboration tools.
Application License Management: Getting the Deepest Visibility into Teams and Microsoft 365 Usage
As more shifts in the market emerge, application usage analytics will play a leading role in helping IT and financial leaders make the smartest decisions about their collaboration tools. Tangoe specializes in Microsoft 365 SaaS management, offering unparalleled insights into license usage and Teams costs.
5 things you can expect from Tangoe’s application license management:
- Insights into Teams and 365 license types, usage, and costs, as well call record details for Teams and other leading video conferencing applications and collaboration apps
- Detailed information on the number and types of licenses owned, additional app purchases made, and user distribution across license tiers
- Unique advantages in identifying users of nested sub-products, such as Outlook and OneDrive, and analyzing their usage frequency — deep integration with Microsoft allows for comprehensive data analysis, revealing detailed sub-product utilization under each license
- A centralized platform with tools to help you visualize app usage, optimize license assignments, downsize licenses without functionality impact, and automate license assignment and reallocation
- Through advanced analytics, Tangoe helps clients enable detailed cost optimization and forecasting for more informed purchasing decisions
Competitors often lack the resources and stamina to achieve this level of Teams and Microsoft 365 license insight. Get our brochure to learn how Tangoe simplifies SaaS management for Teams and Microsoft 365.