Office 365

Conclusion:

When considering the level of Microsoft/Office and licensing, the biggest conundrum is generally around E3 versus E5 licensing. E3 licensing is closest to the capabilities organisations have had with perpetual licensing for the Office Pro suite. E5 licensing adds a slew of new services, including security, analytics, and advanced e-discovery and enterprise voice.

The Latest

19 August 2021: Microsoft has announced pricing increases for its Office 365 and Microsoft 365 offerings, which has resulted in a great deal of media coverage.Microsoft is at pains to point out that it has not increased its prices on 365 for a decade, and during that time has added a great deal of functionality (20+ applications) to the portfolio.

The Specifics

Microsoft is still working through how the new pricing will be applied in the Australian market and an announcement is expected soon. IBRS will perform a detailed cost analysis at this time. However, Microsoft has confirmed that any changes to local pricing will mimic the North American price changes. 

Based on the US data, enterprise and business plans will see increases in March 2021. Based on US$, the dollar amounts range from US$1 to US$4 per user per month, or US$12 to US$48 per user per year, with the percentage increases running from a low of 9% to a high of 25%. Microsoft F-series licences for frontline workers and Microsoft 365 E5 are not subject to price increases. Consumer and education-specific plans (the A-series) are also unaffected by the price increases.

The new pricing structures will disproportionately impact small businesses and those with the lower levels of the Microsoft suite, while enterprises with E5 licences will be left unscathed. That in itself reveals Microsoft’s clear intent to nudge the market towards its E5 offerings. It is estimated that only 8% of Microsoft customers globally opt for E5 licensing, though IBRS has seen strong interest among Australian organisations to at least explore the more expansive capabilities found in E5.

At this time, we believe the majority of IBRS clients will see price increases in the lower range. However, given that Australia has been one of the fastest adopters of Office 365, and has for decades suffered from ‘the Australia tax’ of software vendors, the increases will still be felt deeply across the industry.

Why it’s Important.

For many IBRS clients, the immediate impact is the need to set aside extra budget for its existing 365 environment. 

Something that is not gaining attention is that the new pricing also increases the cost of Microsoft’s Unified support, since it is calculated as a percentage (10-12%) of the overall Microsoft spend. IBRS recommends that organisations set aside a budget for this increase as well.

However, the price increase is not the full story. A closer look at how the new pricing is structured, plus other less publicised changes, suggests it is geared towards making E5 licences more attractive to mid-sized organisations. 

The increases came shortly after Microsoft announced that its perpetual-licence Office would see a 10% increase and that its service for Office would drop from 7 years (it was previously 10) to just 5. Even more telling is that Microsoft has effectively engineered a one year ‘gap’ in N-2 support for Office (with the persistent licensing model), which forces organisations with older Office Pro licences to either purchase an upgrade sometime before 2023, or migrate to Office 365. 

In summary, Microsoft’s recent changes to Office licensing are a strategy that makes the price difference from E3 to E5 licensing less imposing and makes sweating perpetual Office licences far less attractive, if not unworkable. The savings from sweating Office licences over a five-year period are still there, but they are significantly lower than with seven-year cycles.

IBRS has long stated that Microsoft’s goal is not necessarily to drive up ICT budgets. A closer look at the additional capabilities found in E5 licensing reveals that most are aimed at moving Microsoft into adjacent product sets. For example, the additional security capabilities that become available with E5 licensing are clearly aimed at security incumbents, such as Symantec. Microsoft’s E5 strategy is to pull ICT budget away from competitors and into its own coffers. It is about carving out competition.

Who’s impacted

  • CIO
  • CFO & procurement
  • Digital workspace teams

What’s Next?

In the Australian market, IBRS sees few enterprises still on persistent licensing for Office. Globally, Australia has been an early adopter of E3 licensing, though until the mass push to work from home in 2020, many organisations did not take full advantage of the additional features and collaboration capabilities of the 365 platform. Furthermore, Google Workspaces is only making marginal increases in the local market, meaning Microsoft has little real local competitive forces working to temper it in the office productivity space (though this is not the case in other markets in the Asian region).

Therefore, the question for organisations is, is this strategy to push customers from existing E3 licences to E5 licences a trigger to start re-evaluate ways to leverage more value from the Microsoft ecosystem (that is, double-down on Microsoft).  

Organisations may respond to this price increase and Microsoft’s strategy to push customers from existing E3 licences to E5 licences as a trigger to:

  1. Re-evaluate ways to leverage more value from the Microsoft ecosystem (that is, double-down on Microsoft).  Just prior to this announcement, IBRS had drafted a paper on how to decide between E3 and E5 licensing. It is due for publishing in the coming month. However, if you wish an advance (draft) copy, please request it from nbowman@ibrs.com.au. It is focused on how to evaluate the additional benefits of E5 in the context of your existing software ecosystem.
  2. Set up a ‘plan b’ for enterprise collaboration. In a practical sense, this would likely be a shift to Google Workspace for part of the organisation, coupled with a percentage (generally 20-30%) of the organisation also having Office software, though not necessarily Office 365.  
  3. Set aside 12-15% extra budget for the existing E3 environment, plus a similar increase for support of the Office environment, and re-evaluate the situation in 2-3 years

IBRS also recommends considering what will happen in another 10 years, when many organisations have migrated to E5 (which is likely). What new business risks will emerge from this? Migrating from Office 365 E3 to a competitive product (e.g. Google or Zoho) is hard enough. When E5 features are fully leveraged, the lock-in is significant, but so too is the value. At the end of the day, the ultimate risk factor is trust in Microsoft not to engage in rent-seeking behaviour.

Related IBRS Advisory

  1. Pros and Cons of Going All-In With Microsoft
  2. Special report: Options for Microsoft support - Key findings from the peer roundtable: August 2020
  3. The journey to Office 365 Part 6: Mixing up Microsoft’s 365 licensing and future compliance risks
  4. DXC Technology and Microsoft collaborate on workplace experience
  5. AIP Should be Essential to Any O365 and Workforce Transformation Strategy
  6. AIS and Power BI Initiatives
  7. Microsoft Pivots to Target Verticals

The Latest

28 June 2021: After a leak of an early pre-release version of Windows, Microsoft formally announced Windows 11 and have followed up with a series of posts, most aimed at promoting the new user experience of the operating system. A quick look on YouTube will find dozens of reviews and tests of the pre-release version of Windows 11, and from early tests, it appears as if there is little performance impact for the OS. Reviews of Microsoft’s documentation suggest that there is no significant change to how Windows 11 can be deployed. The bulk of the changes appear to be related to how Microsoft’s Office 365 products are put front and centre within the desktop experience. Teams, in particular, takes centre stage. As with the release of Windows 10, Windows 11 will start by building new expectations among consumers, which will in turn drive staff to demand the new environment from their ICT groups. In this sense, the key issues for ICT look to be identical to those faced in 2015.

Why it’s Important

While Microsoft executives famously touted that Windows 10 would be the last Windows, a clear reference to enterprises’ frustrations with continued hardware/software refresh treadmill and the expense of upgrading fleets of desktops en-mass, the statement was never officially enshrined in the product lifecycle. This means that enterprises, at least for the foreseeable future, will need to plan for generational shifts in desktop upgrades, complete with the demands of change management and the potential bulk hardware refreshes.  

The common driver for most organisations looking to refresh their desktop environment (device management, security, application deployment and change management), is to ‘flatten the investment’ needed to keep users up to date. From a device asset management perspective, the goal is to move away from four-to-five year bulk buys and move to a rolling schedule of device refreshes. For software deployment, it's a move to a self-service model. And for the OS, it's a move to a gradually updated, evolving platform.  

All the above have become critical enablers of hybrid working and by extension business continuity. 

Microsoft’s Cloud-based approach to deploying devices and software with Autopilot is highly attractive as it supports the new digital workspace model. How best to migrate to Autopilot from the legacy ‘tiered’ desktop management approach is by far the most common question IBRS is asked in relation to digital workspaces.

Microsoft has noted that Windows 11 can be managed using all current tools and processes that are used to manage Windows 10. This means Windows 11 can be managed using the Cloud-based Autopilot approach and the ‘standardised desktop’ approach via SCCM (System Centre Configuration Manager). Third-party tools such as Ivanti are also expected to work without problem. Therefore, based on available information, there appears to be little additional benefit to Windows 11 over Windows 10 when it comes to deployment and management.

This is not to say that Windows 11 will not have other benefits to enterprises, but the (current) benefits appear to be more related to putting Office 365 services forward.

Who’s impacted

  • CIO
  • Desktop / end user computing teams
  • ICT asset management teams
  • CFO / ICT financial planning teams

What’s Next?

Enterprise desktop teams do not need to rush into Windows 11 planning. Device and software compatibility is expected to be high (despite some initial negative assumptions on YouTube). Instead, organisations should continue to focus their efforts on migrating from the standardised desktop management model to the ‘digital workspaces’ model which focuses on offering self-service capabilities and zero-trust security. In addition, adopting an iterative and ongoing approach to Office 365 change management is needed. Moving to the digital workspaces model will not only reap significant operational benefits over the older standardised desktop approach, but will also ensure a smoother transition to Windows 11 before the 2025 end of support deadline.

Related IBRS Advisory

  1. Digital Workspaces Master Advisory Presentation
  2. SNAPSHOT: Workforce Transformation beyond Mobility and Digital Workspaces
  3. How will you deal with Microsoft’s Pester Power strategy for Windows 10?
  4. The journey of Office 365: A guiding framework Part 3: Post-implementation

IBRSiQ is a database of Client inquiries and is designed to get you talking to our advisors about these topics in the context of your organisation in order to provide tailored advice for your needs.

The Latest

17 February 2021: At the Learning with Google global event, the Cloud giant announced a slew of new education-oriented features for its education productivity suite. Previously called G Suite for Education, the Google Workspace for Education is now being aggressively commercialised.  

What’s included

The free tier service - now called Google Workspaces for Education Fundamentals, had found strong acceptance in Australia by providing educators and students with collaborative learning capabilities. 

This free tier now has three paid tiers, each with increasing levels of security and manageability. 

  • Standard: Adds security and analytics capabilities. The new features are aimed at improving traceability and providing more nuanced access rights to information.
  • Teaching and Learning Upgrade: Adds features to better manage the classroom experience.
  • Education Plus: Combines all the features of the previous tiers, in addition to extra management capabilities. 

In addition, Google increased the baseline storage capacity for educational institutions to a whopping 100 TB, and added online-learning features to Google Meet.

Why it’s Important

Google and Microsoft are locked in a fierce battle for ‘hearts and minds’ in education. Both vendors know that student’s experiences with their productivity platforms today, will set expectations and habits for the workforce of tomorrow. This battle extends beyond the productivity suite to device, operating systems and ultimately, the entire digital workspace.

By introducing features that have been much in demand by education (especially K12) into commercial tiers, Google is fundamentally changing its stance in this war. In most State K12 and private education systems, Principals have the final say on the extent to which Google or Microsoft is used in classrooms. Often the decision is delegated down to the teachers and often both vendor’s offerings sit side by side.

Google’s evolving commercial stance means that this can no longer be the case. Given the total national cost (as ultimate schools are funded through State and Federal funds) educational policy setters now need to consider taking a side in the battle. 

Who’s impacted

  • Educational policy makers
  • CIOs
  • Educational ICT strategy leads 
  • Principals and senior leadership of higher education institutions
  • Digital workspace teams

What’s Next?

Stakeholders within education need to immediately begin the laborious task of evaluating Google’s and Microsoft’s offerings, not just from the perspective of current offerings, but from their likely future directions. While the need to rationalise to one platform today may not be a burning priority, the need will increase over the next decade.

Stakeholders outside of education should monitor the decisions of education networks, as the platforms they select will impact new staff expectations and work habits. 

Related IBRS Advisory

  1. Dr Sweeney on the Post-COVID Lessons for Education (Video Interview)
  2. Kids, Education and The Future of Work with Dr Joseph Sweeney - Potential Psychology - 25 July 2018
  3. Higher Education Technology Future State Vision
  4. BYOD in Education: A report for Australia and New Zealand

The Latest

2 December 2020: DXC Technology is partnering with Microsoft to create modern workplace experience. This effort is aimed at addressing the demand by enterprises to improve workplace agility, which has come into sharp relief during the pandemic.

Why it’s Important

This announcement clearly shows Microsoft’s strategy for securing not just segments of the enterprise architecture of the future but the lion’s share. 

Enterprise companies are driving the business transformation to enhance collaboration, increase mobility, and improve customer engagements. This announcement comes as competition such as Salesforce heats up through several acquisitions, and Microsoft’s long-time rival, Oracle, makes inroads into new models of SaaS.

Who’s Impacted

  • CIO / CTO
  • Enterprise software architecture team

What’s Next?

Microsoft, like all vendors, has a strategy to extract ever more revenue from its clients.  However, Microsoft's unique position in the market gives it huge power. Understanding how Microsoft will evolve its services and licensing models is essential for keeping budgets in control.

As explored in this week’s Salesforce Slack announcement, IBRS sees that one option for the future digital workplace architecture is based on five platforms.

  1. A platform consisting of central systems of record (e.g., CRM, ERP, etc.) in the Cloud or Cloud-like environments
  2. An integration platform that surrounds the mentioned platforms 
  3. A one (or likely two) low-code platform(s) 
  4. A platform that provides the needed collaboration tools  
  5. A federated information management platform.

Indeed, Salesforce is buying the platforms it needs and integrating them then, leveraging its strength in selling it to both technical and non-technical executives. On the other hand, Microsoft is starting from a position of technical strength and deep connection with the systems integrators. 

This is evident with the DXC agreement, which is a classic strategy. Leveraging larger SIs as a strategy to deliver a future digital workplace architecture, with Microsoft 365 and Teams (collaboration), Dynamics 365 (core systems), Power Platform (low code and automation), and Power BI (business intelligence).  

Related IBRS Advisory

The Latest

CommsChoice Group has announced expanded Centre functionality for Microsoft Teams Direct Routing. The new service allows companies to implement a call centre natively within the Teams environment, leveraging Direct Routing.

Why it’s Important

Many Australian organisations - in particular public sector and local government - are in the process of re-architecting customer engagement from traditional ‘centralised call centre’ models to multichannel and then to omnichannel. The introduction of collaborative telephony solutions with rich API support, such as Teams, brings the possibilities of accelerating the move to true omnichannel services. Direct Routing allows contact centre agents to make and receive calls within Microsoft Teams, while also engaging in mixed mode communications, such as chat (potentially assisted by chat bots) and video meetings.

Who’s Impacted

  • Call centre managers and architects
  • Sales managers
  • Telephony teams
  • Office365 teams

What’s Next?

While CommsChoice is not the only vendor offering call centre integration with Teams, its announcement shows the likely future of calls centre architecture: a blend of collaborative tools and telephony, linked to internal and external-facing service channels. However, IBRS cautions organisations against rushing to adopt omnichannel call centre architectures. We have noted that the most successful organisations take a measured, phased approach, moving first to a multichannel operating model and only then to omnichannel. Many organisations have departmental processes that struggle to support true omnichannel. Staging through a multichannel model first allows organisations to identify and address the internal departmental silos before making the biggest step to omnichannel.

Related IBRS Advisory

  1. Omnichannel Customer Service must be more than Multichannel done properly
  2. Improve the customer experience within a digitally transformed world
  3. Modern telephony: Considerations