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Are you keeping up with pricing changes from Microsoft?

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Staying on top of Microsoft pricing changes is essential for IT Service Providers aiming to navigate the ever-evolving landscape of Microsoft Cloud Solution Provider (CSP) programs. With the recent adjustments in Microsoft’s pricing structure, this highlights the significance of implementing robust processes to track and adapt to these changes effectively.

Understanding the unique needs of your customers and guiding them through pricing adjustments is not only integral to maintaining your profitability but also an aspect of delivering exceptional customer experiences. Managing pricing changes is not solely about numbers; they present a unique opportunity to enhance account management strategies and a catalyst for both acquisition and retention efforts.

By leveraging these changes, IT Service Providers can not only drive sales but also strengthen existing client relationships, leading to sustainable growth and profitability in an increasingly competitive market.

Are you tracking changes?

In September 2023, Microsoft initiated a 9% uplift in pricing across all cloud and on-premise offerings in Australia, later followed by various countries experiencing up to a 12% surge in February 2024, and a notable 20% increase in Japan starting April 2024. These adjustments catch many IT Service Providers off guard, highlighting the importance of having reliable mechanisms in place to track pricing changes and understand their impact on their business and customers.

Manually tracking pricing changes can be time-consuming and error-prone, especially as Microsoft frequently updates its pricing models and offerings. IT Service Providers can leverage tools and processes to monitor pricing changes, assess their implications, and adjust their billing accordingly but the conversation is wider than this, how do you use this opportunity to increase your customer acquisition and retention.

Is it time to review your process?

Microsoft’s pricing adjustments can greatly affect your bottom line and customer relationships. Delaying the implementation of pricing changes can lead to revenue loss, customer discontent, and potential compliance risks. It’s crucial for IT Service Providers to have a streamlined process in place for identifying, communicating, and implementing these changes promptly.

Ensuring your contracts are up-to-date is essential. Do they include provisions for price changes, such as requiring 30 days’ notice? Pricing increases offer an opportune moment to scrutinise and refine your operational procedures, and minimise risk.

Identify

Identifying pricing increases and seizing the opportunity it presents to customers requires proactive monitoring and planning. While ideally, Microsoft would issue announcements regarding price uplifts, the reality is that amidst the hustle of daily business operations, these announcements can easily be overlooked. Therefore, it’s essential for IT Service Providers to regularly monitor Microsoft’s announcements, along with staying updated on industry news.

Utilising tools such as downloadable price lists from distributors or directly from Microsoft, staying informed via Partner Centre announcements, and leveraging automation can streamline the process, ensuring IT Service Providers are promptly notified of pricing changes and facilitating proactive customer engagement.

Finally, IT Service Providers should assess how their indirect providers support their business operations. Understanding the resources and assistance available from these providers can enhance efficiency and effectiveness in navigating pricing changes and delivering value to customers.

Communicate

Communicating effectively with customers about impending price increases is crucial for maintaining strong relationships and preserving your brand reputation. Providing ample notice allows customers to prepare for changes and reinforces transparency and trust in your business relationship. It also presents an opportune moment to emphasise the value of their partnership with their IT Service Provider and potentially offer guidance on navigating the pricing adjustments.

Maintaining records of subscription and renewal dates of customers is fundamental. This enables IT Service Providers to track when pricing adjustments will impact each customer, allowing for timely communication and action. Moreover, it presents an opportunity for upselling or pre-emptively reaching out to customers before price increases take effect.

This communication isn’t just about informing customers; it’s also an opportunity for upselling or cross-selling additional services before the price increase takes effect. By showcasing the value proposition of upgraded or supplementary services, you can demonstrate your commitment to meeting their evolving needs and maximizing their investment.

Implement

Establishing a clear pricing strategy and integrating it seamlessly with billing systems is essential to ensure accurate invoicing and minimise errors.

Automation plays a pivotal role in streamlining the implementation process. By leveraging APIs to connect billing systems with quoting tools, IT Service Providers can automate pricing adjustments and minimise manual intervention. This not only enhances efficiency but also reduces the risk of errors associated with manual data entry. Embracing innovation and automation allows IT Service Providers to stay agile and responsive in an ever-changing business landscape.

Don’t fall victim to revenue leakage

Regrettably, numerous IT Service Providers have fallen prey to significant financial losses stemming from delays or oversights in implementing pricing changes from Microsoft. The 20% price increase in Japan clearly shows that MSPs can suffer financial losses in a program where the maximum profit margin for Microsoft 365 licenses is also capped at 20%. These losses, sometimes reaching tens of thousands of dollars, not only impact profitability but also erode trust with clients.

The time element exacerbates the issue; the longer pricing changes go unaddressed, the greater the financial impact with the consequences extending beyond financial losses. IT Service Providers risk tarnishing their reputation and losing clients to competitors who are more adept at adapting to pricing changes.

In most cases, it is approximately 15% of underbilling that occurs, with 25% of this attributed to pricing problems and it is important to note that Microsoft doesn’t offer refunds for operational errors, and neither vendors nor distributors typically provide credits for revenue leakage.  Hence, proactive measures are imperative to mitigate revenue leakage and increase profitability.

In conclusion, viewing a price change as an opportunity rather than a hurdle can serve as an open door for meaningful conversations with customers. It is imperative to recognise that this process isn’t a one-time event but rather a continuous lifecycle, requiring ongoing account management to identify trends and opportunities (such as promotions).

Staying informed and proactive regarding pricing changes from Microsoft is key for IT Service Providers seeking to uphold profitability and competitiveness within the CSP market. Leveraging automated tools and processes, such as Xeneth’s MSPlus, not only mitigates risks but also optimises billing practices, enabling providers to thrive amidst the dynamic landscape of Microsoft CSP programs.

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