Analysis

End of an Era: How Microsoft Rebuilt Its Commercial Model for FY27

The EA volume discount is gone, list prices rise on 1 July 2026, value is being folded into the suites, and Microsoft has built a CSP Copilot motion spanning new SMB combo SKUs and a laddered set of CSP offers. For partners and customers, the moves compound at renewal. Here is what to model before you sign.

By Softspend Team, Team at Softspend 8 min read
  • Microsoft 365
  • CSP
  • Enterprise Agreement
  • Licensing
  • Pricing

End of an Era: Microsoft's 1 July 2026 Pricing Reset

Volume discounts gone, list prices up, value pushed down the stack, and a CSP Copilot motion that now runs from SMB to enterprise. What partners and customers should model before renewal.

June 2026

Microsoft's 2026 commercial changes are not a single pricing adjustment. They are the next phase of a decade-long strategy that began with Azure: the methodical dismantling of volume licensing economics, replaced by a model that rewards platform alignment, adoption, and consumption.

November 2025 removed the Enterprise Agreement (EA) volume discount. December 2025 confirmed list price increases for 1 July 2026. Around both, Microsoft has built a Cloud Solution Provider (CSP) x Copilot motion that now spans the whole customer base.

The EA volume discount waterfall ends

From 1 November 2025, Microsoft removed its longstanding programmatic volume discount tiers for Online Services under the Enterprise Agreement. On renewal, or when buying new online services, the price is now fixed at "a single consistent price across Price Levels A-D to include all online services", aligned to the rate published on Microsoft.com and no longer anchored to seat count.

The practical effect for customers is that everyone (in principle) now starts from the same published baseline, and the old A-to-D waterfall no longer sets the opening price.

This is, first and foremost, an enterprise story. The programmatic volume discount lived in the Enterprise Agreement, so it is EA customers who lose it. SMB never really had it: SMB clients buy through CSP at published prices and have never carried a negotiated 'volume discount' to begin with. That is why the reset lands so differently on each side, and why the two are worth treating separately. The rest of this piece does exactly that, enterprise first, then SMB.

The announced July 2026 price increases

In December 2025 Microsoft confirmed the second move. As the announcement put it, "these list price changes will go into effect on July 1, 2026." The per user, per month changes are:

  • Microsoft 365 E3: $36 to $39 (+8.3%)
  • Microsoft 365 E5: $57 to $60 (+5.3%)
  • Office 365 E3: $23 to $26 (+13%)
  • Business Basic: $6 to $7 (+16.7%)
  • Business Standard: $12.50 to $14 (+12%)
  • Business Premium: held at $22
  • Office 365 E1: held at $10
  • Frontline SKUs (F1, F3): the largest percentage rises in the catalogue, though still the lowest absolute prices

Where a suite's total increase exceeds ten percent, Microsoft has indicated the rise is phased at no more than ten percent a year; this was confirmed for the Government suites and is the pattern to expect for the larger commercial jumps. For European buyers, the February 2026 euro FX correction of roughly 7.4 percent softens the net local impact.

For an EA estate, the increase compounds with the lost volume discount, because the new list price applies to a baseline that no longer carries a programmatic discount. The list-rise portion is easy to verify: Microsoft 365 E5 moves up $3 per user per month, so a 25,000 seat environment sees a $900,000 a year jump from the list change alone.

On top of that, an estate that previously held a "Level D" programmatic discount now starts from list, so the effective renewal increase is materially larger. Independent licensing analysis (SAMexpert) estimates the combined effect for previously well-discounted estates at roughly 15 to 23 percent. The exact figure depends on the discount level you held, which is precisely why it has to be modelled per agreement rather than assumed from the headline percentage. For SMB there is no negotiated discount to lose, so these published rises are felt at face value, shaped only by where Microsoft has chosen to hold prices flat.

More value pushed down the stack: what E3 and E5 now include

Most of the increases arrive with capability folded into the base suite, rolling out across 2026. Several of these were previously higher-tier or paid add-ons:

  • Business Basic and Standard gain additional mailbox storage 100GB, URL click protection, and Copilot Chat enhancements.
  • E3 gains Microsoft Defender for Office 365 Plan 1 (previously a roughly $2 per user add-on), plus Intune Remote Help, Advanced Analytics, and Intune Plan 2.
  • E5 gains Security Copilot agents, Intune Endpoint Privilege Management, Enterprise Application Management, and Microsoft Cloud PKI.

This is a genuine offset if you run Microsoft's security and management stack. If you are standardised on a third-party stack, it is not: you are paying more for bundled capability you will not deploy. The value question cannot be answered at the price-list level. It has to be answered against what each tenant actually uses (this is where softspend comes in).

Business Premium held flat, and the engineered climb

With enterprise covered, the SMB picture is different in kind. SMB buys through CSP at list and never had a negotiated discount, so the lever here is not what Microsoft took away but how it has shaped the prices that remain.

Business Premium staying at $22 is the most informative line in the announcement. Microsoft raised the suites it wants customers to move through, and held the ones it wants customers to land on.

The effect on the SMB ladder is deliberate. Business Standard rises to $14, while Premium holds at $22, so the step up narrows from $9.50 to $8. The move onto the higher suite becomes almost 'free' at the margin, and the mass SMB base is gently pulled up the stack. Business Premium, with Intune, Defender for Business, Conditional Access, and device compliance included and no increase, is now the clearest value anchor in the catalogue.

The new SMB Copilot combo SKUs

Effective 1 July 2026, Microsoft now sells Copilot to the SMB segment four ways. Two are promotional add-on routes; two are new standard combination SKUs that fold Copilot into the suite:

  • Microsoft 365 Copilot Business: $18 per user per month, after a 15% promotion extended to 31 December 2026
  • Business Basic with Copilot Business: $21 per user per month, after a 25% promotion extended to 31 December 2026
  • Business Standard with Copilot: $23.50 per user per month ERP (was $35), the new standard combo price
  • Business Premium with Copilot: $32 per user per month ERP (was $43), the new standard combo price

(Note: ERP is the estimated retail price on an annual commitment; partner net pricing differs)

Microsoft describes the suite-plus-Copilot lines as "two durable SKUs, available at the current promotional price point", making the with-Copilot SKU the default the channel leads with.

The pricing economics of the combo is the interesting part. Business Premium with Copilot at $32 sits $10 above Premium at $22; Business Standard with Copilot at $23.50 sits $9.50 above Standard at $14. So the effective Copilot uplift inside the combo is around $10, well below the $18 to $21 standalone routes. The combo is, in practice, the cheapest way to put a user on Copilot, which is the point: it lifts average revenue per user (ARPU) across the base while feeling like a discount.

Copilot promotions extended to December 2026

The promotional cliff that had been set for the end of June has moved. The Copilot Business standalone (15%) and Business Basic with Copilot Business (25%) promotions now run to 31 December 2026, giving the SMB segment six more months of runway. That timing matters for partners: it turns the window from a June discount scramble into an assessment-led motion that can be run properly across a client book rather than deal by deal. Microsoft are combining this with their 'Defend Playbook' for MSP partners to lead with assessments to scale and activate their partner base.

The $15 security attach: Defender and Purview

Copilot's real blocker has always been governance, and Microsoft has priced up an 'unlock' strategy for SMB. Two enterprise-grade add-ons now sit on top of Business Premium:

  • Defender Suite: $10 per user per month, advanced threat protection across endpoints, identity, email, and cloud apps
  • Purview Suite: $10 per user per month, data governance and compliance, with a 50% promotion when paired with Copilot
  • Both combined: $15 per user per month, on a single line, for up to 300 seats on an annual commitment

The Purview discount is what resolves the governance objection that stalls most Copilot deployments. For partners, these suites are the attach that turns a licence sale into a services engagement. We covered the economics in full in the $15 Zero Trust piece.

CSP offers and the new three-year Copilot term

This is the CSP layer where the two segments meet: the SMB base that was always here, and the EA customers now flipping in. A laddered set of Copilot promotions runs through the new commerce platform, with the discount applied to the local list price:

  • Getting Started, 15% off, for customers new to Copilot buying 10 or more seats
  • Scale Up, 20% off, at 100 or more seats
  • Copilot for All, 30% off, at 300 or more seats
  • Copilot for All, 40% off, at 1,000 or more seats
  • New: a three-year term, 15% off, at 300 or more seats

The laddered offers above the entry tiers are, from 6 May 2026, limited to SMB and Corporate customers and validated through the ASPX dashboard; enterprise is excluded.

The three-year offer is the newest piece: introduced in May 2026, it brings Copilot in line with the existing Microsoft 365 E3 and E5 three-year SKUs, is open to new and existing customers, and is structured as a triennial commitment with annual billing. Microsoft positions it for customers "ready to scale AI across the organization", and it runs from 1 June to 30 September 2026. At the end of the term, pricing reverts to the then-current standard rate.

Taken with the sub-300 SMB combo SKUs, Microsoft now has a CSP Copilot motion across the whole base, and a direct incentive to route multi-year commitments through the channel rather than the EA. The partner play is to match the term to the customer's stage: one-year for pilots and early rollout, three-year for scaled deployment, with readiness, governance, and optimisation services attached to the larger commitment.

What this signals

Seat volume is no longer leverage. Since 2017 Microsoft has steadily withdrawn programmatic volume discounting, first on Azure, then the Level A waterfall, now the EA volume levels. Scale alone no longer earns a starting discount.

The economics reward use, not procurement. A single published price treats these suites as commodity infrastructure, not something you negotiate down. The advantage now comes from how well a customer deploys and adopts them, not from purchasing leverage.

The channel is realigning toward CSP. Margin that came from volume arbitrage is replaced by managed services, advisory, and standardised partner SKUs. The SMB combo SKUs and the laddered CSP Copilot offers are the clearest evidence of where Microsoft wants partners to play.

What to do before 1 July

Between now and 1 July, every renewal is an advisory call. Annual renewals completed before the increase lock current pricing for twelve months, so the timing question is live for both EA and CSP customers. For most small and mid-sized EA customers the removal of the volume discount takes away the main financial reason to stay in EA, and CSP becomes the logical path. Larger accounts can still negotiate bespoke terms, but those are now tied to platform alignment and adoption rather than seat count. An enterprise customer may see an aggressively ramped discount structure, sign for the big discount, but face massive sticker shock at renewal in 2030 when their E7 ramp hits and the baseline resets.

The work is the same in shape at any scale: model the compounded exposure (lost discount, list increase, and bundled value you may or may not use), decide which users need which suite, and choose the right Copilot term and route per tenant. Doing that across a whole client book, rather than one tenant at a time, is the difference between a discount scramble and a planned motion. Microsoft MCI Copilot funding is up year on year for FY26 (and expected in FY27), so a well-scoped advisory engagement can be largely self-funding.

This is the problem Softspend was built to solve. Run the scenarios before the deal closes: simulate each renewal pathway, compare EA against a CSP transition including the new three-year commits, right-size suites against the features users actually need, and surface Copilot readiness and security gaps at feature level rather than by SKU, automated per tenant across the book. Pre-purchase intelligence, before the deal, not after it.

Softspend Partner Checklist

Triage the book first

  • Segment every client: which are EA, which are CSP, and which renew before 1 July. Separate the enterprise estates that carried a volume discount, and so face the compounding, from SMB clients who already buy at list and have no discount to lose

Timing and renewals

  • Pull every client renewal dated before 1 July 2026 and flag where an annual renewal now locks current pricing for twelve months
  • Identify EA estates near renewal where the lost volume discount and the list rise compound, and model the combined exposure before quoting
  • For enterprise clients, model the EA renewal at list against a CSP transition (including the new three-year commit) before you recommend a path
  • Treat each pre-July renewal as an advisory call, not an admin task

Assess per tenant, not per SKU

  • Run a feature-level readiness check across the whole client book, rather than tenant by tenant
  • For each tenant, confirm which bundled additions (Defender for Office 365 P1 in E3, Security Copilot in E5, storage and SafeLinks in Basic and Standard) the client will actually use
  • Flag clients on a third-party security stack who are now paying for Microsoft capability they will not deploy, and decide whether to consolidate or right-size

Right-size the suite

  • Re-test E3 against E5 now that more value sits in E3, and check whether any E5 estates can step down
  • Use Business Premium ($22, held flat) as the SMB anchor and revisit the now-narrower Standard to Premium step ($14 to $22)

Position Copilot deliberately

  • Match the buying route to the client: standalone Copilot Business ($18), Basic with Copilot Business ($21), or the new Standard or Premium with Copilot combo SKUs ($23.50 and $32)
  • Match the term to the stage: one-year for pilots, three-year for scaled deployment
  • For 300-plus seat commitments, weigh the new three-year CSP promotion (15% off, 1 June to 30 September 2026) against the laddered one-year offers (15, 20, 30, 40%)
  • Decide which clients should be on Copilot at all; the SKU moves no one on its own

Attach security and services

  • Lead the Copilot conversation with governance, positioning the Defender and Purview suites ($10 each, $15 combined) as the unlock, and use the Purview-with-Copilot discount to clear the main blocker (confirm the current promo window in Partner Center)
  • Scope readiness, deployment, adoption, governance, and optimisation services onto every Copilot commitment

Get the commercials and mechanics right

  • Validate eligibility and customer segment in the ASPX dashboard before quoting; the 30 and 40% Copilot for All offers are SMB and Corporate only from 6 May 2026
  • Apply promotions at the point of purchase on a new qualifying subscription; they cannot be applied retroactively, so structure seat expansions as new subscriptions
  • Confirm billing: one-year offers are annual/annual or annual/monthly; the three-year offer is a triennial commitment with annual billing
  • Use MCI Copilot funding (up year on year for FY26, and expected in FY27) so the advisory engagement is largely self-funding

Turn it into a plan

  • Package each assessment into a dated renewal action plan and a costed upgrade path, so the output is a commercial recommendation, not a report
  • Decide the timing play per client: renew before 1 July to lock current pricing, or hold and move, with the numbers behind each

Closing thoughts

This is Microsoft's most significant commercial shift since Software Assurance (SA). The traditional licensing economics we learned with Contoso are ending, replaced by a deployment-first model that rewards consumption, adoption, and platform commitment over seat count. Seat volume was never the only lever, and now the headline list price isn't either. The real exposure is the way discount removal, list increase, bundled value, and term choice compound at the renewal event, and that is only visible if you model it per profile and per feature before you sign.

References

Published by softspend.com — Microsoft 365 licensing intelligence for partners.

Key Takeaways

Analysis by Tony Mackelworth (Softspend) of Microsoft's 2026 commercial reset and the CSP Copilot motion built around it. The Enterprise Agreement volume discount was removed from 1 November 2025, setting all online services to a single consistent price across Price Levels A to D, aligned to Microsoft.com. List price increases follow on 1 July 2026 across most suites, with capability folded into the base suites as a partial offset. Business Premium ($22) and Office 365 E1 ($10) are held flat as deliberate anchors, narrowing the Standard-to-Premium gap. For SMB, Microsoft now sells Copilot four ways, including new Business Standard with Copilot ($23.50, was $35) and Business Premium with Copilot ($32, was $43) combo SKUs, with the Copilot Business and Basic-bundle promotions extended to 31 December 2026 and Defender and Purview security suites priced at $10 each ($15 combined). For larger customers a laddered set of CSP Copilot offers (15/20/30/40 percent) plus a new three-year 15 percent term for 300-plus seats routes multi-year commitments through the channel. The practical conclusion: savings depend on per-profile, per-feature modelling and the right term and route, not seat volume, and the decision lands at renewal.

Key Facts

  • Microsoft removed programmatic EA volume discount tiers for Online Services from 1 November 2025.
  • The new model applies a single consistent price across Price Levels A to D for all online services, aligned to Microsoft.com list pricing.
  • The volume discount change covers the Enterprise Agreement (including OSPA in China) and the MPSA; on-premises software is unchanged.
  • US Government and worldwide Education price lists are excluded from the volume discount change.
  • On 4 December 2025 Microsoft announced commercial Microsoft 365 suite price increases effective 1 July 2026.
  • Microsoft 365 E3 rises from $36 to $39 per user per month, an increase of 8.3 percent.
  • Microsoft 365 E5 rises from $57 to $60 per user per month, an increase of 5.3 percent.
  • Office 365 E3 rises from $23 to $26 per user per month, an increase of about 13 percent.
  • Business Basic rises from $6 to $7 per user per month, an increase of about 16.7 percent.
  • Business Standard rises from $12.50 to $14 per user per month, an increase of about 12 percent.
  • Microsoft 365 Business Premium is held unchanged at $22 per user per month.
  • Office 365 E1 is held unchanged at $10 per user per month.
  • Frontline SKUs such as F3 see the largest percentage rises in the commercial catalogue.
  • Where a suite's total increase exceeds 10 percent, the rise is phased at no more than 10 percent per year, confirmed for the Government suites.
  • The Microsoft 365 E5 list rise of $3 per user per month equals about $900,000 per year for a 25,000-seat estate from the list change alone.
  • Independent analysis (SAMexpert) estimates the combined effect of the list rise and lost volume discount at roughly 15 to 23 percent for previously well-discounted EA estates.
  • E3 gains Microsoft Defender for Office 365 Plan 1 (previously a roughly $2 per user add-on), plus Intune Remote Help, Advanced Analytics, and Intune Plan 2.
  • E5 gains Security Copilot agents, Intune Endpoint Privilege Management, Enterprise Application Management, and Microsoft Cloud PKI.
  • Business Basic and Standard gain additional mailbox storage, time-of-click URL protection, and Copilot Chat enhancements.
  • The Business Standard to Business Premium gap narrows from $9.50 to $8 once Standard rises to $14 while Premium holds at $22.
  • From 1 July 2026 Microsoft 365 Copilot Business is $18 per user per month after a 15 percent promotion extended to 31 December 2026.
  • Business Basic with Copilot Business is $21 per user per month after a 25 percent promotion extended to 31 December 2026.
  • Business Standard with Copilot is a new combo SKU at $23.50 per user per month ERP, down from a $35 standard combo price.
  • Business Premium with Copilot is a new combo SKU at $32 per user per month ERP, down from a $43 standard combo price.
  • The effective Copilot uplift inside the combo SKUs is about $10 per user, below the $18 to $21 standalone Copilot routes.
  • The Defender Suite and Purview Suite for Business Premium are $10 per user per month each, or $15 combined, for up to 300 seats.
  • Purview Suite carries a 50 percent promotion when paired with Microsoft 365 Copilot.
  • CSP Copilot promotions run as a ladder: 15 percent at 10-plus seats, 20 percent at 100-plus, 30 percent at 300-plus, and 40 percent at 1,000-plus.
  • From 6 May 2026 the 30 and 40 percent Copilot for All promotions are limited to SMB and Corporate customers via CSP; enterprise is excluded.
  • In May 2026 Microsoft introduced a three-year CSP purchasing option for Microsoft 365 Copilot, aligning it with existing E3 and E5 three-year SKUs.
  • A new three-year CSP promotion offers 15 percent off for 300-plus seats, running 1 June to 30 September 2026, as a triennial commitment with annual billing.
  • Microsoft MCI Copilot funding is up around 50 percent year on year for FY26, which can help fund partner advisory engagements.

Sources

  • https://www.microsoft.com/en-us/licensing/news/online-services-pricing-consistency-update
  • https://www.microsoft.com/en-us/microsoft-365/blog/2025/12/04/advancing-microsoft-365-new-capabilities-and-pricing-update/
  • https://partner.microsoft.com/en-gb/blog/article/partner-led-smb-m365-copilot
  • https://learn.microsoft.com/en-us/partner-center/announcements/2026-may
  • https://learn.microsoft.com/en-us/partner-center/announcements/2026-june
  • https://aka.ms/CSPPromos
  • https://aka.ms/CSPCopilotPromoKit
  • https://samexpert.com/microsoft-365-july-2026-price-increase/
  • https://softspend.com/community/post/microsoft-partner-ecosystem-scaling-copilot-adoption
  • https://softspend.com/community/post/15-zero-trust-microsoft-smb-security-economy