Top 3 Opportunities & Challenges With Microsoft NCE (New Commerce Experience)

What does NCE stand for Microsoft partners?

The full form of NCE is New Commerce Experience. As stated above, it is meant to make pricing and licensing easier for customers. It also brings changes to Microsoft cloud services pricing and some important requirements for CSPs.

When was Microsoft NCE Launched?

The tech giant had first introduced the New Commerce Experience in 2019. It was initially meant for Microsoft Azure, which further extended to other cloud solutions under the CSP program, including Microsoft 365, Dynamics 365, Windows 365, and Power Platform.

Seat-Based Offers for Microsoft 365, Windows 365, and Dynamics 365

Another important term to know is that Microsoft is bringing seat-based offers to the CSP New Commerce Experience. But what are seat-based offers?

In simple terms, you can consider a seat-based offer as a subscription. Here, this subscription will be provided on the basis of per seat per user. The number of devices used by the customers isn't counted for the cloud service.

The seat-based NCE offers were previously available for Azure. Now, these are also extending to Microsoft 365, Windows 365, Dynamics 365, and Power Platform.

General Availability of Microsoft NCE

Microsoft had brought the NCE commercial seat-based offers to the technical preview in October 2021. The New Commerce Experience became Generally Available on 10th January 2022.

Suggested Reading- 6 Impactful Ways To Scale Up Your Cloud Reseller Business

Monthly Commitments In Place of Short-Term Commitments

The option for customers to pay per day will no longer be available from March 2022. They can upgrade some of the cloud services for the mid-term. Furthermore, the customers will not be able to downgrade any license.

The cancellation window for customers will be available for the next 7 days only. If the customers want to increase the product quantity, they can go for it. However, they won't be allowed to decrease the product quantity once purchased.

There will be no price protection. It is being replaced by a month-to-month exchange rate. The place of short-term commitments is taken by monthly premium subscriptions.

Yearly Commitments In Place of Long-Term Commitments

Customers can choose the long-term commitments on an annual basis. It should be at least one year. They will need to make payments on a monthly basis or go for upfront pricing. The benefit of the annual product pricing will be a reduction in the pricing.

The responsibility of payments will lie with the reseller or CSP. In case the reseller fails to transact annual payments from the customer, the payment for the full term will be paid by the reseller itself.

The customer can cancel the term within 7 days of a service purchase or at the end of the service period. Service downgrading won't be available.

Similar to monthly commitments, the customers can't decrease the product quantity, but can increase it.

Here is the quick comparison of changes coming to Microsoft NCE in 2022 in terms of pricing, cancellation policy, trials, and billing terms:

Must Read: 3 Ways Cloud Resellers Can Boost Profit Margins With Operational Efficiency

1. Increased Product Pricing Means Increased Business Revenue

As stated above, the pricing for most of Microsoft 365 and Office 365 plans have increased. For instance, the cost of the O365 E1 plan has gone up by 25%, whereas the cost of O365 E3 is up by 15%. On average, the total pricing has increased by 12.5%.

If you are selling all the Office 365 and Microsoft 365 subscriptions, you are very likely to increase your annual revenue by more than 12.5%.

For example, your current annual revenue in the CSP program is $10 million. When you shift from the legacy model to the NCE model, this revenue can go above $11 or $12 million with the same number of subscriptions.

Hence, Microsoft New Commerce Experience brings good opportunities in terms of CSP revenue.

2. Decreased Customer Churn

The cancellation policy for the customers has changed now. With the legacy model, customers could cancel the newly purchased subscription within 30 days and get a 100% refund.

Moreover, if they chose subscription cancellation during the term, a prorated refund was available.

However, this has changed with the NCE. Now, the customers can get a full refund only if the subscription is cancelled within 24 hours of purchase. A prorated refund is available for 7 days only.

In case they cancel the subscription after 7 days, no refund will be offered (neither full nor prorated).

It is beneficial for cloud service providers in the CSP program, as the number of customers cancelling the subscriptions will significantly decrease. Hence, it reduces customer churn and increases retention.

3. Customers Can't Downgrade Subscriptions At Mid-Term

Another benefit of NCE is that customers are allowed to upgrade the subscription whenever they want, but they can't downgrade it once purchased (until the term ends).

In the legacy model, the customers could choose to upgrade or downgrade during the mid-term.

Now, since there will be no option for subscription downgrades, it will avoid the loss of revenue for CSPs, in case some customers might have wanted to downgrade to a low-cost plan.

1. Renewal Complexity

With new changes and pricing increase in NCE, especially in the form of a 20% premium on monthly SKUs, a seller ideally must reconfirm with the customer before locking the renewal order.

Else you may be stuck with the liability of paying for the year, even if the customer ends up leaving before the end of term.

Having said that, it will be a good idea to modify your contracts in a way that you collect upfront for annual SKU and skip the option of monthly payment for an annual term. Insist on selling a monthly SKU with a 20% suggested premium if the customer only wants monthly payment. This will help you avoid any heartaches later.

This is all good theoretically, provided you only manage a handful of customers with a few subscriptions. But with several customers having multiple subscriptions, it would be a nightmare without some form of subscription billing automation in place.

The right automation platform will help you ensure that the customer gets these notifications on time and accept new terms/contracts/proposals online and make payments instantly/upfront before you are obligated to provide them with their subscription.

Related Reading: 6 Biggest Challenges For Cloud Resellers In 2022

2. Co-term Management

Let's look at this with an example of a customer who purchases M365 and Azure from a reseller.

Now the customer may end up having different terms for each product and different anniversary dates within each product as well. Let us say he purchases most quantities on annual commit, but for interns or temporary workers, they would prefer a monthly basis only as they most likely leave before 12 months.

To add to the complexity, they end up placing orders for a few quantities on a 3-year commit which can be used by the directors, founders, or management team. Now each one of them may have an individual anniversary date.

This not only brings out the complexity of managing this single customer but also the way you bill across these multiple anniversary dates without fail and without frustrating the customer.

3. Transition and New SKUs

The management of products, agreements/contracts, and renewals will be a nightmare for you without a Microsoft CSP billing software in place.

With New Commerce Experience (NCE) and switch over timelines coming up, there are several hoops to jump through both for the Providers/Distributors and Resellers.

For a smooth transition to Microsoft NCE, you must reconfirm with your customers before locking the renewal order. It is because of the NCE price increase, premium of monthly SKUs, and 7 days cancellation window.

If you don't reconfirm with your customers, you might get stuck with the liability of paying for the year, even if the customer ends up leaving before the end of term.

Read Next: Top 8 Biggest Cloud Computing Trends To Watch In 2022