The Price Change
Microsoft quietly rolled out its latest round of Microsoft 365 price increases effective July 1, 2026. For Australian MSPs and their clients, this means:
| Plan | Previous Price (AUD/user/mo) | New Price (AUD/user/mo) | Increase |
|---|---|---|---|
| Business Basic | $7.30 | $8.40 | ~15% |
| Business Standard | $19.10 | $21.00 | ~10% |
| Business Premium | $26.30 | $29.90 | ~14% |
| E3 | $41.80 | $46.00 | ~10% |
| E5 | $67.20 | $75.00 | ~12% |
These are annual price estimates β actual figures depend on the specific licensing agreement, reseller margin, and whether the customer is on annual or monthly billing.
The Pattern
This is not an isolated event. Microsoft 365 pricing has followed a clear trajectory:
- 2022: First major Business Premium price increase (~20%)
- 2023: Teams Premium introduced as an add-on
- 2024: Copilot for M365 β $30 USD/user/month add-on
- 2025: E3/E5 increases; Copilot mandatory bundling rumoured
- 2026: Broad 10-15% across all commercial SKUs
The strategy is transparent: Microsoft is using its dominant productivity suite position to drive per-user revenue growth year after year, while simultaneously introducing AI add-ons (Copilot) that effectively double the per-user cost for organisations that adopt them.
Impact on MSPs
The Margin Squeeze
MSPs who bundle M365 licensing into their managed services fees face a direct margin hit:
- Fixed-price contracts: The MSP absorbs the increase until the client's contract renewal
- Pass-through billing: Clients see their monthly bill rise, creating friction and churn risk
- Grandfathered pricing: Some CSP (Cloud Solution Provider) agreements delay the impact, but not indefinitely
Strategic Responses
Smart MSPs are responding in several ways:
- Contract renegotiation β adding price escalation clauses tied to Microsoft's published price lists
- License optimisation β auditing client licenses to eliminate unused seats (most organisations over-license by 15-30%)
- Alternative stacks β exploring Google Workspace for cost-sensitive SMB clients
- Value bundling β justifying the increase by adding security or compliance services alongside the license
What Engineers Should Know
As an MSP engineer, M365 pricing might seem like a "business problem" β but it affects you in real ways:
- Budget pressure β when margins shrink, training budgets and salary increases are the first to be reviewed
- Architecture decisions β clients may resist moving to E5 or Premium SKUs due to cost, limiting the security tools you can deploy
- Copilot push β expect increasing pressure from Microsoft and your sales team to upsell Copilot, even when clients don't need it
- Job security β MSPs that navigate pricing changes well grow; those that don't face consolidation or acquisition
The Bigger Picture
Microsoft's pricing strategy reflects a fundamental shift in the IT landscape:
The platform owner always wins. Once an organisation is embedded in the M365 ecosystem β Teams chats, SharePoint document libraries, Entra ID identity, Exchange email β the switching cost is astronomical. Microsoft can raise prices annually because the alternative (migrating off the platform) costs more.
For MSPs, this creates a structural challenge: your key technology vendor is also your biggest cost driver, and they have no incentive to stop raising prices.
What to Watch
- Copilot bundling β if Microsoft makes Copilot mandatory for certain plans, per-user costs could jump 50%+
- Azure commitment discounts β larger MSPs may shift licensing to Azure consumption models
- Open-source challengers β Nextcloud, OnlyOffice, and collaborative platforms are improving but remain niche
- Regulatory intervention β the ACCC has signalled interest in SaaS market concentration
Related Reading
- MSP Pricing Models Explained
- The MSP Profit Machine: How Margins Work
- MSP-to-SaaS Pivot: Escaping the Services Trap
- MSP Cost Calculator
- MSP Recurring Revenue Model
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