Microsoft's lack of clear information on the monthly price bump has complicated conversations with customers, Schenk said. Clients that specifically buy through Microsoft's Cloud Solution Provider program are the ones affected by the subscription plan change, and Microsoft doesn't disclose what percentage of its customers buy products that way. Its stock is up 46% this year, pushing its market cap past $2.4 trillion, while revenue growth topped 20% in each of the past two quarters.Ī majority of Microsoft's revenue comes from business customers, rather than consumers, and 95% of the its commercial revenue is derived through partners. However, some smaller companies that are trying to preserve cash as they deal with pandemic-related challenges are frustrated by the changing model, which comes just after a price increase was announced in August for Microsoft 365, a bundle formerly known as Office 365.
Software vendors commonly offer discounts for annual subscriptions compared to monthly sign-ups, and many larger enterprises prefer that option. For Microsoft, the opportunity to lock customers into longer arrangements means potentially better visibility into revenue and less concern about churn, a critical element of subscription businesses.
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