Industry Blog

Unbundled Microsoft Teams – Customer Type Impact

08th May 2024

Starting in April 2024, Microsoft, in SKU and theory, “unbundled” Teams from Microsoft 365 and Office 365 suites (collectively “M365”) globally after antitrust challenges from the European Union resulted in a separation of the two offerings in the European Economic Area (EEA) and Switzerland in August 2023.

In practice, however, bundled and unbundled licenses may or may not be available depending on how Microsoft classifies an organization, further complicated by existing or new licensing scenarios. Ultimately, customers and partners must now wade through a more complicated licensing scheme to understand the financial impacts and opportunities.

Customer Type

Organization types that appear unable to buy M365 without Teams include:

Globally

  • Consumer
  • Education (“A” SKUs)

Outside the EEA/Switzerland

  • Government (“G” SKUs)
  • Not-for Profit / Nonprofit (“E” SKUs with “Nonprofit Staff Pricing”)

Commercial organizations can buy M365 “E” and “F” SKUs without Teams globally. But they can also buy M365 with Teams if they are an “existing customer.” They can even mix the two.

Are you an Existing or New Customer?

New customers cannot buy Teams bundled with M365. This effectively creates a price increase compared to prior licensing (list) prices:

  • $36 – Microsoft 365 E3 bundled with Teams
  • $39 – Separate subscriptions
    • Microsoft 365 E3 (without Teams) -$33.75
    • Microsoft Teams for Enterprise – $5.25

Existing customers can buy M365 bundled with Teams if they had prior subscriptions. They can also buy unbundled subscriptions, either as a replacement at contract anniversary or renewal, or in combination with the bundled SKUs. Mixing the bundled and unbundled SKUs can be interesting for Enterprise customer business units with differing Teams-related solutions employed.

However, Microsoft has yet to define what “existing customer” or “new customer” means in certain scenarios. For example, if an Enterprise customer divests a business unit, and it becomes its own company, what are the options? People were assigned M365 subscriptions that included Teams before. Are they now required, as a “new customer,” to buy Teams and M365 separately?

Existing or New Subscribers

Microsoft’s language is confusing, specifically, “…<M365> suites with Teams will no longer be available to net new subscribers, worldwide.”

  • People: “If you’re a Microsoft 365 subscriber you have access to…”
  • Customer: “Customers who are currently subscribed…”

For the context of M365 and Teams within commercial customers, subscriber and customer appear synonymous. For example, “<customers> can continue to use, renew, upgrade, and otherwise adjust their subscriptions as before.”

Impacts

While new customers have no choice, existing customers need to be diligent in their renewals, programs, and partner choices. For example, if an agreement ends and a customer doesn’t have any active subscriptions, they become a “new customer.” And switching purchasing programs or partners may also put a customer into the “new customer” bucket:

  • CSP: “Currently when a customer changes partner, they are seen as a net-new customer.”
  • Other: “…customers will also not be recognized as existing customers if they change their purchasing channel except when moving to EA/EAS or moving between MCA-E and Buy Online (Direct) in either direction.”

While Microsoft seems to be putting some mechanisms in place to address a change in purchasing channel or partner, don’t get complacent.  Customers who don’t renew on time, or that change their licensing program or partner, could see unexpected price increases under the unbundled SKU model.

Opportunities

  • New customers lose options, pay more for Teams: BOOO!  Who doesn’t like options, whether you use teams or not? SMB and Midsize companies are likely to account for the bulk of the revenue lost from existing customers leveraging the change. There are definitely viable alternatives – Zoom, Slack and more. However, if your new company is part of a private equity (PE) portfolio, the PE firm may have a purchasing structure you can leverage. Unfortunately, Microsoft is unlikely to publish detail about PE agreements, so this scenario may be customized per PE firm.
  • Customers that are using viable alternatives to Teams: REJOICE! You can now get a programmatic discount and have another reason to push back against your Microsoft team hounding you to move to M365 E5. But don’t cut too deep: keep a few M365 subscriptions with Teams around just in case a new CIO comes online with a new agenda, that conferencing partner goes out of business, or you want to keep some negotiating leverage around with, “Hey, we could switch to M365 with Teams for very little cost…”
  • Customers that require or leverage Teams: CAUTION! Whether it be a late renewal, channel or partner change, or a Microsoft licensing systems glitch, you don’t want to lose the ability to buy the bundled SKUs. You can use Teams viable alternatives in negotiations, but engagements with potential replacements should start at a minimum of 9–12 months prior to contract end.
  • Partners that saw opportunity for Zoom, RingCentral, or other displacements: SIGH. You may have more work ahead than you thought. The good thing is that you now have a comparative price for ROI or benchmarking purposes.  The bad thing is that it isn’t a slam dunk, as many internet posts seem to say.

Remend is your Microsoft Licensing Advisor

Remend’s M365 Snapshot, license plan structuring, and advisory services flow from decades of experience and a team with deep expertise.

Here are few questions to ask about your Microsfot contract:

  • How many subscriptions do we change over to the new SKU?
  • Who isn’t using Teams conferencing, phone, direct routing, Yammer, and related items?
  • Are there options for DLP outside M365 E5-related SKUs that leave out Teams and costs less?
  • What are other organizations doing?
  • How do we right-size our M365 licensing?

Let Remend help you answer those questions.

Contact us today!