Microsoft is rolling out a substantial set of price changes across its commercial software and cloud services, notably Microsoft 365 and Office 365, with new pricing taking effect from 1st July 2026. These changes represent one of the biggest updates to Microsoft's pricing in recent years and, for most businesses, will meaningfully increase annual IT spend.
Let's break down what's happening, why it matters and what your organisation can do to prepare for it.
What's changing?
Microsoft has confirmed that pricing for its commercial Microsoft 365 and Office 365 subscription plans will rise on 1st July 2026. List-price changes include:
The exact rates will vary by your region, renewal timing and local currency.
New bundled value
Microsoft isn't subtly raising prices without context. Many plans will come bundled with new security management and AI capabilities such as enhanced Defender threat protection, endpoint management tools, and deeper integration of Microsoft Copilot. Part of the price shift reflects a transition from traditional productivity tools to AI-enabled, security-centred platforms, and that comes at a cost.
Why this matters for your business
Many organisations worldwide rely on Microsoft platforms for core collaboration, security and productivity services. For IT and finance leaders, these increase mean:
- Higher operational expenditure on core productivity tools
- Budget pressure for various departments like IT,HR and finance
- Re-evaluation of licensing strategy and asking ‘are current user licenses appropriate for their needs?’
- Potential impact on renewals and strategies for large agreements.
Doubling down on annual contracts now could lock incurrent prices for longer, while renewals after 1st July 2026 will see the higher rates apply.
What can you do to prepare?
1. Conduct a licence audit
The most effective way to respond to Microsoft's 2026 price increase is to understand exactly how licenses re being used across your organisation. Many businesses accumulate Microsoft subscriptions that no longer align with how users are working (employees changing roles, teams growing or shrinking, and temporary access not being removed).
A thorough licence audit will help you to identify over-licensing, inactive accounts or premium licenses being used by employees who only require basic functionality. Addressing these inefficiencies early can help to soften the financial impact of the upcoming price increase.
2. Align licence types to employee roles
Not every employee needs the same level of tooling within Microsoft 365, and frontline staff, executives and contractors might all interact with Microsoft tools in very different ways.
Reviewing licence assignments through the lens of job type can allow you to reserve higher cost plans, like E5, for users who genuinely benefit from advanced security or analytics features.
3. Review contract terms and billing
The structure of Microsoft contracts can have a huge impact on your total cost, and businesses that delay the decision until after 1st July 2026 run the risk of absorbing the full financial impact of the price increase.
Renewing early, or committing to annual or multi-year agreements, before the increase takes effect can lock in your current rates for longer.
4. Assess value from new features
It's no surprise that Microsoft is positioning this increase as paving the way for a perceived value boost in AI and security capabilities, but paying these higher prices only makes sense if these features are actually being adopted.
Your business should be evaluating which Microsoft tools they are actively using, as well as which tools you have roadmapped to adopt in the next 12-24 months. Could any of these features replace current third-party tools? Could spend be better invested in engaging with a partner company to provide training or Microsoft 365 consultancy?
5. Engage early with Microsoft or your licensing partners
Proactive engagement is the most key preparation step, and waiting until a renewal deadline only reduces your options and negotiating power. By engaging early you allow your IT and finance teams to align budgets, avoid nasty surprises and make more informed decisions rather than reactive ones.
Microsoft's price increases are coming, and now is the time to prepare for it. Need some expert help or guidance? Get in touch with the Perspicuity team to talk through your options and help you control your costs with confidence.
