(This article originally appeared in Forbes)
When people discuss their concerns about the cloud it always seems that security leads the list. But to me, the biggest issue about the cloud isn’t about security. It’s about cost control. Or actually the lack of cost control. Microsoft is the latest example of this.
According to CNBC and other reports, Microsoft will be launching a new partner pricing program in 2022 for its cloud applications that will penalize users who pay monthly. The costs of their applications — which includes Office and Dynamics — will be 20 percent higher for those that choose not to enter longer term, annual contracts with the software giant.
“The new program (called New Commerce Experience…don’t ask) introduces a monthly term option that will enable partners to provide customers with flexibility at a premium price,” Microsoft told CNBC. The company, in a blog post, said that it expects its partners “to have transitioned all commercial annual term subscriptions in the existing business to the New Commerce Experience by July 2023.”
One thing’s for sure: this is definitely an experience in new commerce. Unfortunately, the “experience” means that our applications will cost more, whether we like it or not.
In defense of the software giant, just about all of my Dynamics clients are in it for the long haul and few have complained about the changes. “If I’m getting a discount for paying annually, that’s fine by me,” one client told me recently. “We’re not going to change anytime soon.”
But — with all due respect to my client — he’s being naive. That’s because he’s missing what’s really going on here. Microsoft — like any cloud provider — is flexing its muscles and forcing users to choose between a price increase or a longer term contract. Why? Because they can.
They can because when a company ultimately moves forward with a CRM, or any cloud based business solution, they’re doing so after investing significant resources not just in the software but in implementation, training, customization and integration. They’ve likely gone through internal changes, process improvements and cultural shifts in order to adopt to the new way of doing things. And after going through all that, few would be able to stomach a change. Cloud providers like Microsoft know this. Once embedded on a platform, no one’s going anywhere anytime soon.
All of this makes customers way more vulnerable to price increases then data breaches. This is why software companies like Microsoft can raise prices at will. Sure, they’ll get some blowback on Reddit or other online forums. The media — like me — may write about it. Users and partners will grumble at the next conference.
But like most cloud providers, whether they’re consumer driven like Netflix (who has raised monthly fees three times in as many years) or business focused like Salesforce (who can impose annual 7 percent increases as part of their contracts), Zoho (who recently raised prices 15 percent) and Netsuite (where users complain of initial discounts that go away the next year). These application providers know that the uproar will ultimately die down and they’ll then be raking in higher fees. You can attempt to negotiate longer term contracts but good luck with that.
Investors love this model because it basically gives companies the ability to indiscriminately increase their profits will little additional investment. But as for users? This is not so great. We’re stuck.
So welcome to the world of the cloud. After years of investing, companies like Microsoft can now sit back and reap the benefits. And the rest of us can expect more forced price increases like this one in the future and accept the new normal of having a cloud-based CRM system. We may have gained better security this way. But we’ve definitely lost control of our costs.