Microsoft has announced that it will increase its software and cloud service prices for UK enterprise customers, partly to avoid losing revenue as Sterling's value drops against the dollar.
From 1st January 2017, prices for on-premises enterprise software will increase by 13 per cent, whilst enterprise cloud prices will increase by 22 per cent "to realign close to euro levels," according to a Microsoft blog.
This price increase comes as Microsoft has just seen its share price hit its highest ever value, following the success of its cloud strategy, and an increase in revenue from Azure and Office 365.
A Microsoft spokesperson told V3: "As a part of its ongoing policy to maintain price consistency with euro levels across the EU/EFTA region, Microsoft is announcing a British pound price realignment to euro levels for enterprise software and cloud services. This adjustment will be effective from January 1, 2017 but will not apply to consumer software and cloud services."
Jonathan Watson, chief analyst at currencies.co.uk explained that many US-based services will become more expensive for UK firms due to the falling value of Sterling.
"The fall of Sterling and the rise of the US Dollar has made buying services from US-based cloud vendors much more expensive for UK-based firms," said Watson. "With the GBP/USD exchange rate at a 30-year low, having dropped over 20 per cent since the EU Referendum, the result could be a significant rise in costs to UK-based firms that wish to use cloud services from US vendors."
Mark O'Conor, IPT partner at law firm DLA Piper explained that in some instances, firms are able to exit cloud contracts when prices change.
"The ability to exit will depend on the terms and the type of cloud. There is a vast difference from commodity SaaS to complex IaaS and the market norms for the terms reflect that difference," said O'Conor.
"But the contracts are not handcuffs," he continued. "Most if not all will allow termination for convenience, although there may be a financial penalty for cutting a longer contract short.
"Start looking at the payment terms more closely and see whether you can include provisions in the contract allowing an express right to terminate if costs increase over a threshold. The ability to negotiate at all will, again, depend on the type of cloud solution and is largely a function of contract value."
For business customers, the Microsoft price changes will not affect existing orders under annuity volume licensing agreements for products that are subject to price protection.
"For example, customers with Enterprise Agreements have price protection on previously ordered enterprise software and cloud services, and will not experience a price change during the term of their agreement," wrote Microsoft on its blog. "Similarly, business customers with cloud commitment subscriptions such as Office 365 also receive price protection during their subscription term, which is normally twelve months from the start of paid subscription," it added.
Microsoft advises customers to speak to their account managers or Licensing Solution Providers for further information.
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