Microsoft will standardise pricing for its Online Services products, which include Microsoft 365 and Dynamics 365, effective Nov. 1 or at a customer’s next renewal date, the company said Tuesday. The change eliminates volume licensing program discounts under Enterprise Agreement and Microsoft Products and Services Agreement licenses but does not affect on-premises software pricing.

“This update builds on the consistent pricing model already in place for services like Azure and reflects our ongoing commitment to greater transparency and alignment across all purchasing channels,” Microsoft said.

The move hits Microsoft’s largest customers hardest, raising costs by 13.6% or more on ubiquitous SaaS products, according to Gartner. “This is a double-digit increase in list prices in the biggest software vendor expense for tens of thousands of customers,” said Gartner Senior Director Analyst Stephen White. “These are big companies that expect not to pay retail.”

Microsoft’s pricing model adjustment coincides with heightened IT budget scrutiny triggered by shifting U.S. trade policy. Last week, President Donald Trump threatened to impose levies of approximately 100% on imported semiconductors, which had previously been protected from the tariff regime.

The U.S. government, along with organisations partnered with Microsoft’s worldwide Education division, will not be subject to any pricing changes, the company said in the announcement. In Europe, where the company’s licensing practices have been under the regulatory microscope for several years, no such privileges were extended.

“That will be very visible to European governments and in other countries around the world. We’ve already seen examples of European governments that have chosen to move away from Microsoft,” White said, pointing to Denmark and Germany’s Schleswig-Holstein province.

Microsoft’s move also comes just two weeks after the U.K. Competition and Markets Authority took Microsoft to task for market-distorting product pricing.

“Microsoft’s licensing practices are adversely impacting the competitiveness of AWS and Google in the supply of cloud services, particularly in competing for customers that purchase cloud services which use the relevant Microsoft software as an input,” the watchdog agency said in the final decision of its nearly two-year cloud services market investigation.

Price increases aren’t new to Microsoft customers. Last year, the vendor updated terms for the Dynamics 365 business application suite, raising customer costs by an average of 11%. In 2022, the Microsoft 365 office productivity bundle received its first significant pricing bump in a decade.

The Tuesday announcement upends a tiered structure that had been in place for more than two decades for large enterprise customers, White said. Organisations with fewer than 2,400 seats — Level A customers — lost their Enterprise Agreement discounts in 2018, while the larger Level B, C and D tier agreements were left in place.

“One of the worst-kept secrets in the enterprise software market is that Microsoft wants to eventually dispose of the vaunted Enterprise Agreement,” Scott Bickley, advisory fellow at Info-Tech Research Group said. “With all eyes on the dual tailwinds of Azure cloud growth, powered by the current AI hype cycle, Microsoft has finally decided to exercise its near-monopolistic control of the office productivity and core O/S space to pull the rug out from under its largest customer base.”

The elimination of tiered pricing leaves room for enterprises with sufficient clout to negotiate individual discounts. Nonetheless, the changes will be a bitter pill for many customers.

“It’s a significant change for large organisations with 15,000-plus users that have historically benefited from volume-based cloud licensing incentives,” Jeff Elliott, principal advisory director at Info-Tech Research, said in an email.

The firm expects a wave of early renewals as customers try to lock in existing terms in advance of the November deadline. “The longer-term concern here is that this will simplify Microsoft’s path to phasing out the Enterprise Agreement model altogether, or consolidating licensing programs even more,” Elliott said.