Microsoft New Commerce Experience (NCE): What Changed
Microsoft’s New Commerce Experience (NCE) has fundamentally changed how organizations purchase Microsoft 365 and other subscriptions.
Introduced as a unified licensing model, NCE in 2025 is the new normal – and it comes with stricter term commitments, reduced cancellation flexibility, and shifted price-protection rules that affect cost management and renewal negotiations.
This strategic guide breaks down the changes introduced under NCE (compared to legacy CSP and Enterprise Agreement models).
It explains how CIOs, procurement leads, and IT asset managers can adapt their licensing strategies in this new landscape.
NCE is only one dimension of negotiation; see where it fits in the Ultimate Guide to Microsoft Negotiations.
Term Commitments
Before diving into specific agreements, make sure you understand the fundamentals of Microsoft contract negotiation.
One of the most significant changes with Microsoft NCE is the introduction of fixed-term commitments for subscriptions.
Instead of the open month-to-month model many customers enjoyed under legacy CSP, you now commit to a subscription term of 1 year or even 3 years for many Microsoft 365, Dynamics 365, and other licenses.
This means subscription lock-ins are the rule rather than the exception:
- 1-Year and 3-Year Lock-Ins: Under NCE, a typical Microsoft 365 subscription requires a one- or three-year commitment to a set number of licenses (seats). Certain products even offer a 3-year term. Once you commit, you are locked into that subscription for the full term – much like an Enterprise Agreement, but now applied to CSP purchases as well. You cannot freely shorten or cancel during that period (exceptions are very limited, as we’ll see below). This provides price predictability for Microsoft, but shifts risk to the customer if needs change.
- Loss of Month-to-Month Flexibility: Month-to-month licensing – previously a hallmark of CSP flexibility – is largely gone unless you pay a premium. Under NCE, Microsoft still offers a monthly term option for those who demand flexibility, but it comes at about a 20% higher price per seat compared to the locked annual rate. In other words, you can choose not to be locked in for a year, but you’ll pay a significant premium for the privilege. Most enterprises, driven by the need for cost savings, will opt for annual terms, sacrificing the flexibility they once had.
- Budgeting Implications: These term commitments mean organizations must forecast and commit to their licensing needs 12 or 36 months in advance. For large enterprises, this is a cultural shift – you need to predict headcount and usage well into the future. If you over-commit (buy too many licenses for a year or more), you overspend on unused capacity. If you under-commit, you can add more licenses mid-term (you’re allowed to increase seat count at any time), but you might be adding them at a later date when pricing could be higher (and you’ll still be stuck with those additional seats for the remainder of the term). The bottom line: NCE’s fixed terms introduce a risk of overspend and require more disciplined capacity planning. Finance teams will need to be closely aligned with IT to ensure the number of subscriptions ordered accurately reflects genuine needs, as adjustments downward cannot be easily made until the term is up.
Cancellation Rules
Microsoft NCE enforces strict cancellation and seat-reduction policies, eliminating the easy cancellations that customers enjoyed in the past.
In legacy CSP, you could reduce license counts or cancel subscriptions at any time and pay only for the days or months used.
Under NCE, that flexibility is severely curtailed:
- Limited Grace Period for Cancellation: When you purchase or renew a subscription under NCE, there is only a brief window to cancel or reduce the quantity without penalty. Originally, this “grace period” was 72 hours, but it has since been extended to roughly seven calendar days for most commercial subscriptions. In practical terms, you have about a week from the start of a new term to make any changes. Within that window, you can decrease the seat count or cancel the subscription and receive a prorated refund for the unused portion. After the grace period, you are fully committed.
- No Cancellation After Lock-In: Once the 7-day cancellation window passes, you cannot cancel the subscription until the end of the term. You also cannot reduce the number of licenses you’ve committed – you can only maintain or increase it. If your business circumstances change (for example, a project is canceled or layoffs reduce your need for licenses), you’re still responsible for paying for all those licenses until the term expires. In effect, after day 7, Microsoft treats the subscription as non-refundable. The full-term payment obligation takes effect, and even if you stop using those seats, the bills will continue to arrive. There are virtually no exceptions to this rule (only extreme scenarios, like proven Microsoft billing errors, might be considered). This represents a stark contrast to legacy models, where usage and costs could be dialed down in real-time.
- Risk of Paying for Unused Licenses: Due to these cancellation rules, organizations face a significant risk of incurring costs for unused licenses. If you over-provision or if your headcount drops mid-year, you cannot recoup that cost. For example, if you commit to 1,000 Microsoft 365 seats for a year and later find that only 900 are needed (perhaps due to staff turnover or efficiency improvements), you must still pay for 1,000 seats for the entire year. That unused 10% is effectively wasted budget. This puts pressure on companies to be very careful when ordering or renewing licenses, and possibly to leave a little buffer or use monthly subscriptions for uncertain portions of their workforce (despite the higher price). It also means IT teams must coordinate closely with HR and project managers – any anticipated drops in users or project cancellations should be timed with subscription renewals where possible, to avoid eating costs. In short, Microsoft’s NCE cancellation policy shifts a significant portion of financial risk to customers, requiring proactive management to avoid unexpected costs.
Learn about Microsoft Customer Agreement (MCA): Pitfalls and Protections.
Price Protection
NCE also reshaped how pricing and price protection work for Microsoft subscriptions. Under older agreements (like Enterprise Agreements or the legacy CSP), enterprises often had some price guarantees or at least negotiation leverage on pricing.
Here’s what changed regarding pricing and how it impacts your cost strategy:
- Annual Term Price Locks vs. Monthly Premium: The good news is, if you commit to an annual (or multi-year) term under NCE, the price per license is locked for that term. You won’t be affected by Microsoft’s price increases during your committed term. For example, if you signed up for Microsoft 365 E5 at $ X per user per year, that rate is protected until your renewal next year (or in three years, for a 3-year term). This is a form of price protection that can help with short-term budget stability. However, if you opted for the flexibility of a monthly term subscription, there is no long-term price lock – Microsoft can raise the price, and after your current month is over, you’ll pay the new higher rate. Moreover, as noted, monthly terms come with about a 20% price increase by default (the premium for not locking in). In summary, to get price protection, you must commit; if you stay month-to-month, you pay extra and carry the risk of price changes at any time.
- No Mid-Term Adjustments or True-Downs: In legacy Enterprise Agreements, large customers were used to the concept of “true-downs” – periodically adjusting their quantities down if usage fell, often with some annual reconciliation. Under NCE, mid-term price adjustments for reductions are no longer on the table. You cannot reduce your cost basis mid-year because you cannot reduce seats (as covered above), so the idea of a pricing adjustment mid-term is moot. Also, if Microsoft were to offer a discount or promotion after you’ve locked in, you typically can’t take advantage until renewal. The price you committed to is the price you pay, for better or worse, through the term. And suppose Microsoft announces a general price increase (as they did for Microsoft 365 in 2022, and possibly will again with new services in 2025). In that case, your annual subscriptions will shield you until the next renewal, but any new additions or monthly-term licenses will immediately reflect the increases. Essentially, NCE keeps prices predictable within a term, but rigid – you won’t see decreases either.
- Impact of Pricing Changes: In the current environment (2025), Microsoft has been adjusting pricing more frequently than before – including increases for certain Microsoft 365 plans and region-based price harmonization. Under NCE, the impact of these changes depends on your mix of term commitments. If you have locked in 1-year subscriptions, you have a temporary price shield: you’ll continue paying the old rate until the renewal time, at which point the new price list takes effect. Customers on multi-year (3-year) commitments get even longer protection from hikes on those particular subscriptions. On the other hand, if you maintain some licenses on the flexible monthly term (or if your renewal comes due right after a price jump), you’ll quickly feel the price increase. For example, an organization with many monthly subscriptions would have seen Microsoft’s recent price increases for Microsoft 365 roll in immediately, compounding the 20% premium they already pay. Another nuance in NCE is that Microsoft introduced a new 5% premium on annual subscriptions if you choose monthly billing instead of paying the year upfront – starting in 2025, spreading payments over the year incurs a slight additional cost. All these changes mean enterprises need to pay close attention to Microsoft’s pricing announcements and plan their commitment strategy accordingly. To avoid surprises, many are opting to secure longer-term contracts for core licenses before potential price hikes, while using short-term ones sparingly for flexibility.
Learn about Microsoft Contract Negotiations: Core Principles & Prep.
Renewal Impact
Perhaps one of the most subtle yet significant shifts with NCE is how it changes the renewal process and the customer’s negotiation leverage.
Under the old ways (especially with Enterprise Agreements), the expiration of a contract was a major negotiation event – a chance for customers to renegotiate discounts or consider alternatives.
NCE, in contrast, creates a world of continuous, auto-renewing subscriptions that can dilute the customer’s power to negotiate.
Key points to note:
- Automatic Renewals: In NCE, all your subscriptions are set to auto-renew by default at the end of their term. When your 1-year subscription reaches its end date, it automatically renews for another year (unless you intervene to change or cancel it). The renewal comes with the same seat count, term length, and SKU – only the price will update to the then-current list price (if Microsoft has changed it). Automatic renewal ensures no disruption in service, but it also means you will not be prompted to re-sign or explicitly agree to new terms; the system simply continues your commitment. For busy organizations, it’s easy to let this happen in the background – which is exactly what Microsoft is counting on. The onus is on the customer to proactively manage and modify subscriptions before the renewal date if they wish to make changes.
- Reduced Negotiation Leverage: Due to auto-renewals and the standardized pricing model, customers have significantly less leverage at renewal time than they previously did. In an Enterprise Agreement, the end of a 3-year term was a point where you could negotiate with Microsoft – perhaps push for a discount, threaten to shift some workloads elsewhere, or at least re-evaluate and drop underused products. With NCE’s per-subscription renewal, there’s no single big contract expiration covering all your services; renewals are staggered and mostly procedural. Microsoft’s pricing is largely take-it-or-leave-it, especially since by 2025, Microsoft is moving to eliminate volume-based discounts in favor of one-size-fits-all pricing for online services. For most organizations, that means when an NCE subscription is up for renewal, you don’t have much room to haggle – the price is the price. Suppose you don’t like a price increase. In that case, your only alternative is to cancel that subscription (and thus lose that product/service for your users) or perhaps shift to a different licensing program (which is increasingly difficult as NCE becomes the default for all). In short, NCE has limited the traditional negotiation window, so enterprises must find leverage in other ways (such as consolidating demand or exploring competitive solutions) well ahead of renewal dates.
- Higher Renewal Costs & Planning Challenges: The combination of automatic renewals and fixed terms means that if you’re not careful, you could be caught off guard by unexpected costs. For instance, if Microsoft announces a price rise effective next year, when your NCE subscriptions auto-renew, you’ll automatically be paying the higher rate. There’s no renegotiation or new contract to sign – it just happens. This makes budget forecasting more challenging. In 2025, CIOs and IT asset managers will need to actively track when each subscription term ends and what the expected pricing will be at that point. Gone are the days of coasting for three years and then doing a big true-up and contract renewal negotiation – now you need a continuous renewal strategy. Every month or quarter, some set of your licenses might be coming up for renewal. The decentralized nature of these renewals can make it harder to manage and leverage. Procurement teams will need to adapt by creating an internal renewal calendar and governance process to review each renewal in advance. This is especially true if you have acquired numerous products (such as Microsoft 365, Dynamics, and Power Platform) at different times. Without careful attention, you may miss the 7-day renewal adjustment window and be locked into another term unexpectedly. All of this reduces your flexibility and could increase costs if not managed diligently. The key insight: Renewals under NCE are no longer an opportunity for deal-making, but rather an operational deadline to either recommit or make a change, with the default being recommit at the current rates.
Adapting Your Strategy Under NCE
With NCE’s stricter rules, enterprise customers must adapt their licensing strategy to manage costs and maintain some flexibility.
While Microsoft’s changes do impose limitations, you can still take strategic actions to mitigate risks.
Here are some tactics for navigating Microsoft NCE in 2025:
- Mix Commitment Terms (“Hybrid Terms”): Not all users or projects in your organization have the same level of predictability. Identify which portion of your licenses can be safely committed to long-term and which portion may need flexibility. A common strategy is to do a mix of annual and monthly subscriptions. For example, commit your stable, core staff to one-year terms to secure the best pricing, but maintain a buffer of extra licenses on a month-to-month basis for roles that experience turnover or for trial projects. Yes, you’ll pay 20% more for those flexible licenses, but that premium can be cheaper than overpaying a whole year for unused licenses if you guess wrong. Similarly, if a 3-year term becomes available for a product you know you will need in steady amounts (and if it offers a price advantage or shields you from impending price hikes), use it selectively for that predictability – but avoid locking up anything that might change. In short, don’t put all your eggs in one basket: use long-term commitments for baseline needs and short-term licenses for variable needs.
- Seat Rightsizing and Vigilant License Management: Under NCE, it’s crucial to right-size your licenses before you commit and at every renewal opportunity. This means having a strong handle on usage and needs. Make it a practice to review your license allocation monthly or quarterly, identifying unused or underutilized licenses (for example, accounts that haven’t been active or employees who have left and haven’t been de-assigned a license). Before each subscription renewal date, adjust the quantity down to what’s needed. Since you can’t reduce the mid-term, the renewal time (or the initial purchase) is your only opportunity to trim the fat. Implement internal processes to catch changes in headcount or project status ahead of renewals. Some organizations establish a governance committee or, at the very least, a checklist before adding a large number of NCE licenses – double-checking that the count is accurate – to avoid overcommitting. Connecting HR departure notices with IT licensing is another governance step: ensure that when people leave, their licenses are flagged so you can reduce that count at term’s end. Proactive “rightsizing” in this way is essential to avoid the NCE trap of paying for shelfware.
- Leverage the 7-Day Windows (New Purchases and Renewals): The seven-day cancellation/modification window is a critical period. Ensure your team is familiar with its use. For any new subscription order, mark the end of that 7-day window on your calendar – during that time, verify you ordered correctly. If a mistake was made (e.g., ordering 500 instead of 50 licenses or the wrong product SKU), act immediately within the 7-day period to correct it. After that, you’re stuck. Similarly, at renewal, you also have a 7-day window to reduce or cancel before the change takes effect for the next term. Use those renewal windows wisely – even scheduling changes in advance if your portal or provider allows it. Many Microsoft partners (resellers) now provide tools or alerts to help manage this; take advantage of them so you don’t miss the opportunity to make adjustments.
- Consider Scheduling and Co-Terming: If possible, align your subscriptions to co-term on the same date. Having too many scattered renewal dates is a recipe for something slipping through the cracks. You might not be able to perfectly co-term everything (especially different product lines), but you can aim to have, say, all your Microsoft 365 plans renew in the same month. Microsoft NCE allows some flexibility to set a future renewal date for added seats or to extend/shorten one term to align with another (often by prorating a bit). Discuss co-terming options with your provider. A unified renewal timeline makes internal planning easier – treat it like an annual (or quarterly) “renewal season” where you examine all your expiring commitments together. This restores a bit of the discipline that enterprises had in the EA world when everything came up at once.
- Work Closely with Your Microsoft Partner: Under NCE, your Cloud Solution Provider (CSP) partner plays a key role. They are the ones transacting your NCE subscriptions. They can sometimes offer guidance or even slight commercial incentives (although Microsoft tightly controls pricing, some partners might offer a small discount or add-on services to win or retain your business). Engage your partner in planning discussions – ask about any promotions or new offers (Microsoft occasionally has promos for moving to longer terms or adopting new products). A good partner can also help by providing reports on your upcoming renewals and possibly tools to manage them (for example, some offer dashboards that display all your NCE subscriptions and their corresponding dates). Leverage their expertise to ensure you don’t miss deadlines. Additionally, if you feel you need more flexibility than NCE offers, discuss it with your partner;. At the same time, they can’t bend Microsoft’s rules. Still, they might help structure a solution (such as creating separate subscriptions for different teams or durations) to give you more manageability.
- Escalate Strategically if Needed: In rare cases, if you find yourself in a truly dire situation (e.g., a massive, unexpected staff reduction immediately after the grace period), you may attempt to request an exception from Microsoft through your partner. Microsoft has stated that it generally will not allow cancellations after the window, but extremely large customers or those facing unique hardships may receive a sympathetic ear. This is not something to rely on, but know that your only avenue for relief mid-term is through your partner escalating to Microsoft – and only Microsoft can approve an early termination (with likely financial penalties). Again, this is a last resort, and the best strategy is to avoid being in that position through the tactics above.
In summary, adapting to NCE means being proactive and precise with your Microsoft licensing.
You’ll need tighter internal controls and more foresight. Still, with a smart strategy (hybrid terms, constant rightsizing, careful renewal management), you can retain a measure of flexibility and cost control even within Microsoft’s stricter commerce framework.
FAQ – Navigating Microsoft NCE in 2025
Can we still negotiate flexibility under NCE?
Under NCE, flexibility isn’t something you can negotiate in a contract the way you might have in an Enterprise Agreement. Microsoft has essentially standardized the terms – you either accept a standard 1-year or 3-year commitment or pay more for a monthly term. You cannot negotiate away the commitment requirements or obtain special cancellation terms for your organization; these rules apply program-wide. That said, you can negotiate in a broader sense by working with your reseller for possible concessions (for example, they might throw in some free services or a minor discount if you’re a large client, or you might negotiate a custom solution like an Enterprise Agreement if you’re huge enough to qualify). However, the core NCE provisions (such as no cancellation after 7 days) apply to everyone. The best way to achieve “flexibility” is by using the built-in options (like mixing monthly and annual subscriptions) rather than expecting Microsoft to grant a unique exception. In short, you can no longer negotiate flexibility terms directly – you have to strategize around NCE’s fixed rules to get the flexibility you need.
How do NCE’s cancellation rules affect budget planning?
The strict cancellation rules mean that when planning your IT budget, you must treat subscription costs as fixed obligations for the full term. There is no longer an easy way to trim costs mid-year if your user count drops – so you should plan your budget on the assumption that worst-case license counts will be paid for all year. This often results in more conservative budgeting: you might budget for a slightly higher number of licenses than you think you need (to avoid running out, since you can’t drop later, you err on the side of a small surplus), but then you’re knowingly carrying some extra cost. It’s a balancing act. Additionally, since you can’t reduce commitments, it is essential to coordinate with business units on any planned downsizing or changes before renewal time – build this into the budget cycle. We recommend creating a license forecast aligned with your financial year: include expected new hires, project staffing changes, and potential downsizing. And remember to include a contingency for the licenses you might not end up using but will still pay for (essentially a “waste budget” line, which you’ll aim to minimize). On the flip side, the budget owner should also be aware that if you need to add licenses mid-term, you’ll pay more if prices have gone up – so there’s a risk of budget increase if your headcount grows unexpectedly and you didn’t lock those in. Ultimately, NCE’s cancellation policy forces budgets to be less agile – you have to plan with the assumption that costs are locked in, and manage any changes at renewal intervals.
Is monthly NCE ever worth it despite the 20% premium?
Yes – for certain scenarios, the monthly term option under NCE is worth the extra cost. The 20% higher price (and loss of long-term price lock) is essentially an insurance fee for flexibility. Consider using monthly subscriptions for cases such as seasonal or temporary staff, short-term projects or pilots, mergers and acquisitions (where you may need to onboard users for a transitional period), or any situation where you genuinely cannot predict a year-long need. In these cases, the cost of potentially overpaying for a few months is far less than committing for a full year and possibly paying for many unused months. Another case is if your organization is in flux (e.g., restructuring or uncertain economic conditions) – you might put a portion of your licenses every month to hedge against the risk of needing to drop quickly. Additionally, if a new Microsoft product is being tested, you may not want to commit for a full year until you’re certain. The key is to use monthly sparingly and strategically. Many enterprises find that a hybrid approach works: for example, 80% of seats are purchased annually (to receive standard pricing) and 20% are purchased monthly (to handle fluctuations). That way, you’re only paying the premium on a small subset that provides you a buffer. In summary, monthly NCE is worth it when flexibility or uncertainty exists – the premium is the price of adaptability, and in dynamic situations, that can be well worth paying.
What happens if Microsoft increases prices mid-term?
If Microsoft announces a price increase during your term, the impact on you depends on your subscription type. If you have an annual or multi-year NCE subscription, your price is locked for that term, so you will not see a price increase until your renewal. Microsoft honors the price you started with until the term is over. However, as soon as you renew (or add new subscriptions), you’ll pay the new higher price. On the other hand, if you’re on a monthly term subscription, Microsoft’s price increase will hit you as soon as the next monthly renewal after the effective date of the increase. Essentially, monthly subscriptions will float up (or down) with Microsoft’s current pricing, whereas annual subscriptions give you a buffer against changes. One strategy if you hear about an upcoming price hike (and you know you’ll need the licenses for a while) is to immediately lock in a longer term before the increase takes effect – that way you secure the current lower price for the next year or more. Note that Microsoft typically provides advance notice for major price changes, allowing savvy customers to take action. Also, remember, any price increase will also apply when you add new seats to an existing annual subscription if you add them after the hike’s effective date – actually, in NCE, additional seats during an existing term are usually charged at the original price for the remainder of that term, which is good. However, once you renew, all seats will be adjusted to the new price. To summarize: in the mid-term, your committed prices won’t change, but in the long-term, you need to be prepared for higher renewal costs. Always factor in known future price changes when planning, so you’re not caught off guard when the term ends.
What’s the best strategy to prepare for NCE renewals?
Preparing for NCE renewals should be an active, ongoing process. Here are several steps for a solid renewal strategy:
- Track All Renewal Dates: Maintain a central calendar or spreadsheet to keep track of all your NCE subscription end dates. Don’t rely on memory or email notices. For each renewal, set reminders at 60 days and 30 days out to begin review (since changes can be scheduled or at least decided ahead of time). This prevents the auto-renewal from sneaking up on you.
- Conduct a Pre-Renewal Audit: A month or two before a subscription renews, audit the usage of those licenses. Are all seats assigned and in active use? Identify any licenses that are unassigned or tied to users who don’t need them. This is your chance to plan a seat reduction at renewal (because after renewal, you’ll be locked again). Also, consider whether the license type is still appropriate – for example, perhaps some users assigned E5 could downgrade to E3 if they aren’t using E5 features, and you could renew a smaller number of E5 licenses and add some E3 licenses.
- Engage Stakeholders Early: Talk to department heads or application owners associated with that subscription. Verify their needs for the upcoming term. Maybe a project is ending or a new one is starting – incorporate that information. No one likes a surprise where IT cuts licenses that a business unit was counting on, or vice versa.
- Shop Around (if Possible): While Microsoft pricing is mostly standardized, you can still ensure you’re getting the best deal from your partner. At renewal time, check with your current CSP partner and a few others to see if there are incentives to switch or if your current partner can offer any concessions. Even if the license price itself can’t change, a partner might offer a rebate, additional support services, or flexible billing terms to keep your business. Enterprise Agreement vs CSP: If you are a larger enterprise and you see your CSP costs ballooning, it might be worth evaluating if an Enterprise Agreement (EA) makes sense to re-negotiate, especially before Microsoft’s November 2025 changes (when volume discounts go away). In some cases, consolidating under an EA could yield short-term benefits or at least simplify management; however, note that Microsoft is also aligning EA with NCE concepts.
- Plan for Renewal Adjustments: If you know you want to reduce or cancel a subscription at renewal, plan the execution. Some portals allow you to schedule a cancellation effective at the end of the term so that it won’t auto-renew. Alternatively, you may need to be prepared to log in on the first day of the renewal term and make the change within the 7-day window. Assign clear responsibility to someone for this action. Essentially, have a renewal plan in place for every significant subscription.
- Budget for the New Term: Finally, update your budget assumptions based on the renewal. If Microsoft’s list price is expected to rise 10% next year, ensure that’s accounted for. If you’re dropping seats, reflect that savings (but maybe keep a cushion in case you need to add back). The goal is no surprises – a renewal should be a well-anticipated event, not a sudden bump in cost.
By following these steps consistently, you turn NCE renewals from potential pitfalls into routine management tasks.
The best strategy is to treat license renewals with the same rigor as annual budgeting or contract renewals – don’t let them be automatic in practice, even if they are automatic in theory.
With preparation and proactive adjustment, you can keep your Microsoft licensing optimized year over year despite the constraints of NCE.
Read about our Microsoft Negotiation Services.
