© 2026 Procr
Microsoft 365 is licensed per user, per month, billed annually. The plan landscape splits into two main tracks:
Business plans (up to 300 users): Business Basic, Business Standard, Business Premium, Microsoft 365 Apps for Business.
Enterprise plans (300+ users, but available to smaller orgs): Office 365 E1, E3; Microsoft 365 E3, E5.
Most mid-market companies (50-500 employees) run Business Standard or Business Premium for general users, sometimes with E3 for IT or power users. The choice matters for pricing, but also for what's included. The jump from Business Standard to Business Premium adds Microsoft Defender and Intune, which may allow you to retire separate security tooling.
| Plan | Current price (annual commit) | Best for |
|---|---|---|
| Business Basic | $6/user/month | Email, Teams, web Office apps only |
| Business Standard | $12.50/user/month | Full Office apps, Teams, SharePoint, 1TB OneDrive |
| Business Premium | $22/user/month | Standard + Defender, Intune, Azure AD P1 |
| Microsoft 365 Apps | $8.25/user/month | Office apps only, no email or Teams |
| Office 365 E1 | $10/user/month | Enterprise email and Teams, no desktop Office apps |
| Office 365 E3 | $23/user/month | Full desktop apps, compliance, e-discovery |
| Microsoft 365 E3 | $36/user/month | E3 + Intune, Azure AD P2, advanced security |
| Microsoft 365 E5 | $57/user/month | E3 + advanced compliance, Power BI, Defender P2 |
Microsoft announced in December 2025 that commercial pricing for most Microsoft 365 plans will increase effective July 1, 2026. This is the largest broad pricing increase since 2022, which was itself the first increase since Office 365 launched in 2011.
The changes vary significantly by plan:
| Plan | Current price | Post-July 2026 price | Increase |
|---|---|---|---|
| Business Basic | $6.00/user/month | ~$7.20/user/month | ~20% |
| Business Standard | $12.50/user/month | ~$14.00/user/month | ~12% |
| Business Premium | $22.00/user/month | No change announced | 0% |
| Office 365 E1 | $10.00/user/month | No change announced | 0% |
| Office 365 E3 | $23.00/user/month | ~$26.00/user/month | ~13% |
| Microsoft 365 E3 | $36.00/user/month | ~$38-40/user/month | ~8-11% |
| Microsoft 365 E5 | $57.00/user/month | ~$60/user/month | ~5% |
Most increases range from 5% to 33% depending on SKU. Frontline plans (F1, F3) see some of the largest percentage jumps. Business Premium and Office 365 E1 are notably not increasing, which means the value proposition of Business Premium (relative to Standard) is improving.
What triggers the new price: New customers purchasing after July 1, 2026 pay new prices immediately. Existing customers pay new prices at their next renewal after July 1, 2026. Contracts locked in before July 1 honour current pricing through the full term.
The July increase creates a specific and time-bound opportunity depending on when your renewal falls.
If your renewal is before July 1, 2026: Renew on schedule. If your renewal is in Q1/Q2 2026 and you want to lock in current pricing for longer, ask your Microsoft partner or CSP about early renewal on a multi-year term. A 3-year commitment signed before July 1 locks in current pricing through mid-2029.
If your renewal is after July 1, 2026: You're paying the new rates at your next renewal. The options are: (a) right-size your licence count aggressively before renewing to offset the increase, (b) evaluate whether a plan change (e.g., Business Standard to Business Premium) makes more sense at the new price points, or (c) negotiate a multi-year term that provides pricing certainty beyond the initial increase.
If you're on an Enterprise Agreement: EA pricing is negotiated and often less affected by list price changes. Contact your Microsoft account team or licensing partner to understand how the July changes apply to your specific agreement.
For most mid-market teams, the biggest cost control lever isn't negotiating the per-seat rate. It's auditing what they're actually using and removing licences that aren't delivering value.
Common sources of Microsoft 365 licence waste:
Departed employee licences: Every employee who leaves should have their Microsoft 365 licence reclaimed. In practice, this frequently doesn't happen cleanly. A 200-person company with 15% annual turnover can easily accumulate 20-30 ghost licences over two years. At $12.50/user/month, that's $3,000-$4,500/year in wasted spend.
Wrong plan for the user: Many organisations default to Business Standard or E3 for all users, including people who only need email and Teams. A user who only reads email and attends meetings doesn't need $12.50/month of Business Standard. They could run on Business Basic at $6/month. Segmenting your user base by actual usage and assigning appropriate plans can cut per-user costs by 40-50% for a portion of your workforce.
Duplicate licences from Teams unbundling: In the EU/EEA, Microsoft has unbundled Teams from Microsoft 365 plans. Some organisations are inadvertently paying for bundled plans plus a separate Teams licence. Outside the EU, this doesn't apply, but it's worth verifying your invoice.
Auto-renewal is the default: Microsoft 365 subscriptions auto-renew at the end of each term. Annual subscriptions renew annually; multi-year subscriptions renew at the end of the committed term. You need to take active steps to cancel or modify. The default outcome is renewal at whatever the current price is.
Notice requirements: Changes to licence counts or plan selection generally need to be made before the renewal date. For CSP (Cloud Solution Provider) subscriptions, the notice window is typically 30 days. For Enterprise Agreements, changes are made at the EA anniversary date.
No mid-term downgrades: If you're on annual commit pricing (the default for most mid-market companies), you cannot reduce your licence count mid-term. Any reduction takes effect at the next renewal. This means you're paying for departed employees' licences until your renewal, which makes proactive auditing before renewal critical.
Copilot add-on: Microsoft 365 Copilot (the full AI assistant, not just Copilot Chat) is available as an add-on to E3 and E5 at $30/user/month. This is separate from the Copilot Chat basic features being bundled into plans as part of the July 2026 update. The distinction matters for budgeting: bundled Copilot Chat is basic, standalone Copilot is the full productivity AI product.
Direct negotiation on Microsoft 365 list prices for Business plans is limited. Microsoft doesn't discount Business plans the way enterprise SaaS vendors discount seat pricing. The leverage is primarily in:
Channel partner selection: Microsoft 365 purchased through a CSP partner often comes with value-added services (support, management, advisory) at similar or lower effective cost than direct. Some partners offer promotions or bundles that reduce effective per-seat pricing.
Enterprise Agreement for 300+ users: EA pricing is negotiated and consistently below list price. If you're approaching 300 users, an EA conversation is worth having. EA buyers also get pricing stability through the three-year term, which matters significantly with the July 2026 increases.
Multi-year commitment: Locking in a three-year annual commitment before July 1, 2026 is the clearest negotiation available right now. Microsoft is explicitly telling partners to use this period to drive early renewals. Use that incentive for your benefit.
Bundle rationalisation: If you're using Microsoft 365 alongside separate security tools (endpoint protection, email security, identity management), Microsoft's Business Premium and E5 bundles may actually reduce total spend by consolidating tools. This is worth modelling before renewal if you're on Business Standard or E3 with separate security spend.
| Company size | Common plan | Current annual spend | Post-July 2026 estimate |
|---|---|---|---|
| 50 users | Business Standard | $7,500/year | ~$8,400/year |
| 100 users | Business Standard | $15,000/year | ~$16,800/year |
| 150 users | Business Premium | $39,600/year | No change announced |
| 200 users (mixed E3) | Microsoft 365 E3 | $86,400/year | ~$91,200-$96,000/year |
| 300 users (E3) | Microsoft 365 E3 | $129,600/year | ~$136,800-$144,000/year |
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