MicrosoftIt is using its dominance in productivity software market to make some Office Suite customers decide whether to pay more or to commit to a longer subscription.

Microsoft will launch the New Commerce Experience (NCE) for Office in 2022. This is a revamp of the process by which customers purchase its software from business partners. The company is not revealing a price increase, but it did inform partners that businesses paying monthly for Microsoft Office software will be subject to a 20% rise unless they upgrade to annual subscriptions.

Microsoft believes that customers who sign up for longer terms will have better revenue visibility. They also can avoid churn. Larger enterprises often prefer annual subscriptions to those that are monthly. Many software vendors offer discounts.

Some smaller companies are struggling to save cash while they face pandemic-related problems. The change comes shortly after a price rise was announced for Microsoft 365 in August, a bundle formerly called Office 365.

Microsoft continues to thrive. Microsoft’s stock has risen 46% in the last year. This pushes its market capital to $2.4 trillion. Revenue growth was above 20% for each quarter.

Microsoft generates 95% of its revenue through partnerships, while business customers make up the majority. Microsoft has not disclosed how many of its clients buy Microsoft products through the Cloud Solution Provider program.

Rob Schenk is co-founder IntivixA Microsoft partner with Bay Area offices said that he has started to tell clients about the 20% monthly increase. He said that there have been mixed responses and customers told him some of them don’t like the idea. Distribution partners such as Intivix can find it difficult to roll out the product, since they are often acting as messengers to their customers.

Schenk explained that Microsoft’s inability to provide clear information regarding the monthly price increase has made it difficult for customers to communicate with them. CNBC obtained an internal document that showed Microsoft expecting payment to continue their subscriptions, even if the customer decides not to renew.

In a variety of forums, partners have responded. Many people have spoken up on RedditMore than 1,400 others have also signed. a Change.org petitionMicrosoft must reverse its plans to increase prices. According to a source familiar with the launch, intense discussions took place between Microsoft and its partners after the backlash. The person did not want to be identified because they were concerned about confidentiality.

A spokesperson for Microsoft told CNBC via email that “Microsoft offers flexible buying options to satisfy our customers’ varied needs.”

The new program “introduces a monthly term option that will enable partners to provide customers with flexibility at a premium price,” the email said. Partners said that although Microsoft doesn’t sell Office 365 subscriptions at a monthly rate, they have allowed customers to change the number of users from month to month. This option was useful for companies that had to reduce their headcount due to lower demand.

Customers may find the inability to reduce subscriptions more problematic than higher prices, according to George Hammerschmidt, an executive vice president of Nortec Communications, which is based in Washington, D.C.

Hammerschmidt stated, “There are some people who will be upset.”

Microsoft originally planned to launch the New Commerce Experience by October, but it was delayed until January 2022. Microsoft stated in an announcement that new orders must go through the New Commerce Experience beginning March and renewals must start in July. blog post.

Microsoft said that it will continue to charge the same prices for annual and monthly offers between January and June. After this, you will see a monthly increase.

Following the change is a publicly-announcedAug. increase, Microsoft stated that in March 2022, it will raise subscription prices to Microsoft 365 bundles, by between 8.5% and 20% per user. This varies depending on which tier. Microsoft stated at that time that this was “the first substantial pricing update since Office 365’s launch a decade ago.” Microsoft stated that the new bundle offers more automation, security and collaboration tools.

Adam Mansfield helps businesses to negotiate software purchases from Microsoft. Salesforce ServiceNowConsultancy UpperEdgeCNBC interviewed a source who said that some organisations were not happy with the August hike announcement.

Microsoft bets that customers will remain loyal, partly due to the fact that Google’sBundle for Workspace previously known as G SuiteThe only competition is from.

Hammerschmidt explained that Google customers are price sensitive and/or very small today.

Mansfield indicated that Microsoft must be concerned about the likelihood of customers who are unhappy choosing another public cloud provider in their future projects. Microsoft is the leader in this market. AmazonWeb Services are being promoted by Google, who is also investing in the acquisition of new clients.

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