New pricing and licensing for Microsoft Dynamics 365 Unified Operations apps planned for October 2019

July 18 2019

Diagram presented to partners at Inspire 2019

Microsoft revealed to partners at Inspire 2019 that the Dynamics 365 for Finance and Operations (D365FO) application will be licensed as separate Finance and Supply Chain Management applications starting on October 1, 2019. The move is part of a new approach to licensing the Dynamics 365 enterprise applications – categorized under Customer Engagement and Unified Operations – with the flexibility to assign specific combinations of applications to various users.

The change will introduce new pricing on a per-app basis that still allows for bundling multiple applications from the existing portfolio. Pricing, which was also revealed, this week, will impact customer differently depending on their needs, but Microsoft is advising up to a ten percent price increase on some customers. (A pricing breakdown is included below)

"For about 95 percent of users, you would be looking at a ten percent or less impact. And when you net it out over all the users that a typical customer has, it is going to be a single digit impact," said Ken Tracy of Microsoft in a recorded Inspire presentation. (The recording appears to have been removed from the Inspire site. -Ed.)

Microsoft also revealed how the Dynamics 365 Customer Engagement app licensing will change under the new approach.

The current "plan" offering known as Unified Operations will become four separate applications: Finance, Supply Chain Management (SCM), Talent, and Retail. Until now, Finance and SCM have been combined in the single application D365FO and in Dynamics AX before that. Here is the breakdown of where existing modules of D365FO, Talent, and Retail align with the new licensing.

Microsoft Dynamics 365 Unified Operations Application Definition

Since most D365FO customers today are running in Microsoft's public cloud, the company has gathered telemetry on usage to inform this decision. The company observed that seventy percent of users are using one or two applications today, and less than ten percent are using all four. The most common multi-app usage is some combination of Finance, Retail, and SCM, said Tracy.

Microsoft has noted reasons for the change including:

  • Plans are not aligning with value. For example, many of those customers end up paying less for the plan than they would if they were buying the single app that they really use.
  • Plans lead customers to focus on price rather than value in discussions with Microsoft and partners.
  • Paying for capabilities they don't need also impacts perception of value.
  • Plans prevent monetization of future enhancements.

The Attach model means each user is assigned a "base" app at a standard price and can add "attached" apps at a heavy discount. There are guardrails on this approach to ensure users aren't able to pay the discounted attached rate on the most expensive apps like SCM. Tracy noted that there is no difference between an app purchased as base or attached, it is just a pricing structure.

A Microsoft spokesperson told us that this information was shared with partners as an overview and is not final. She added:

The new “attach” packaging model will give more flexibility to mix and match required applications for individual users across our Dynamics 365 portfolio, this includes mixing application that are currently part of the F+O and CE bundles.

Microsoft will be moving toward technical enforcement of attach license assignment with the Unified Operations apps. They are working on a plan to role that out, said Tracy, hinting that some of that data is already available but that, if it were used, would show customers out of compliance already. He added that before any technical audits, there will first be reporting tools for customers to self-audit their usage and compliance levels.

Microsoft Dynamics 365 Unified Operations pricing

The base app pricing of $180 will be a slight decrease over today's $190 Unified Operations price point. It will be a $10 increase over today's Retail app price. Adding an Attach license will be $30. Tracy stated that Microsoft's analysis is that over the total spend, price increases will be offset by savings from single app users.

The changes role out on October 1, 2019. Customers on an existing license agreement from CSP or EA can continue to use the existing pricing until they are up for renewal. At that point, all customers will be transitioned. To minimize the impact in FY20, Microsoft will have a qualified offer in CSP of 50 percent off Attach SKUs, meaning $15 per user per month for Unified Operations apps.

The use of plans for licensing dates back to a change announced three years ago at Worldwide Partner Conference 2016. Apps, plans, and team members were the building blocks of the licensing strategy, partners were told at the time. Some of the goals stated at that time were flexibility, lower prices, and the ability to build in PowerApps and Flow usage.

During a question period at the Inspire 2019 presentation, Tracy heard a range of feedback from partners and provided additional information in response, including the following:

  • Microsoft understands that the new licensing model will result in a price increase for many customers, but the Microsoft team feels it is an increase the market will bear and will be seen as fair.
  • For AX 2012 R3 customers, a new discounting offer will be announced using the new SKUs.
  • Common Data Service will still be allocated with Unified Operations apps without additional licensing, but multiplexing issues will still apply.
  • There is no change to on-premises licensing.
  • Partners wanted to know how quickly they can get the full pricing details to understand the impact on deals being negotiated now. Microsoft will publish the licensing guide "as soon as we can" but Tracy advised that partners can do the price mapping now already based existing licensing tables and on what has been shared already about the new approach.
  • Power Platform entitlements will continue, but Microsoft is "working through" some of the details. The spokesperson told MSDW that "PowerApps and Flow will continue to be an important of the extensibility model for Dynamics 365 applications."
  • Partners in the audience applauded at a complaint by a partner claiming that the changes will increase complexity and lower their clients' trust. Tracy countered that Microsoft gets feedback that the apps and plans today add complexity.  
  • The minimum number of users of 20 will stay in place purchasing these apps. But with CSP customers cannot buy ten Finance and ten SCM base app licenses to satisfy the minimu. They would have to purchase at least twenty of one, and then add ten Attach apps of the other. Kasey acknowledged this "isn't great" but blamed it on a technical limitation to how CSP enforces rules around crediting purchases as the problem Microsoft has tried an honor system on purchasing a minimum of twenty licenses, Tracy said, but they abandoned that when hundreds of orders came in for single D365FO licenses.
  • Deals closing before October 1st should use the existing "plans and apps" model for the length of the assignment – one year for CSP and three for EA.
  • Storage SKUs will remain unchanged and can be allocated to the applications being used.

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Comments

magic1949's picture

The last lot of license changes more than doubled the cost.

This seems significantly more than a 10% increase. I don't understand the logic that selling an integrated solution with business processes that cut across functions is sensibly supported by this. From $190 to $360 seems a little more than 10%.
Its not clear what is an attach user -
Task users and activity users - do they work across all apps? - they a re of little use - few jobs could be sensibly done without enterprise - which I assume is what the license compliance gap is reflecting.
What happens to HR, Service module. Public Module?, CallCentre? Cross functional ISV apps ?
How do you do inventory without finance or Projects without SCM?
We were told that telemetry was to be used to enhance the system design to be more efficient not to justify price increases., and a back door to license audits.
I don't have a problem about fair pricing. I do have an issue with trust - customers are still being told they will save money by moving to D365 on the cloud than staying on Ax 2012 - partners see record Microsoft profits reported, yet have rising partner costs and declining margins.
In the real world both customers and partners don't have elastic budgets. Sales cycles and proposal pricing last longer than 3 months often there bid/tender bonds and price guarantees required by rfps. The licensing of Ax 2012 and d365 tied to security considerably complicated the sales cycle - I don't see this making it any easier.

This is not the way . nor the time frame in which to communicate such news.


jgumpert's picture

While I don't dispute your concerns, your understanding of the calculated prices is not correct. Unfortunately, Microsoft appears to have removed the recording of the related presentation from the Inspire site, which contained some pricing examples. But the basic price calculation for Finance (base) + SCM (attach) would be $180 + $30 = $210, which would be right at the existing plan pricing level. Finance + SCM + Retail would be $240. Their point was that the mix of D365FO users would now be using 1, 2, 3, or 4 apps, as needed, and in aggregate the pricing will result in zero to ten percent license increases.


cheikh faye's picture

The license pricing has been made more complex and expensive, all these decisions should be largely discussed and shared in Partner Community.


ianwaring's picture

So, 60 users D365FO, going to 120 UOP plus 580 Team subscriptions. Need to use Retail ops APIs and Retail Promotions Pricing Engine (with basket handling) to serve front end web sites and allow them to query order history. Need to add Prospect to Cash (which MS have built upon D365CE). Add Talent.

If you implement the above, that's 120 Plan subs and 580 team subs.

Unless you can split subscriptions by user profiles (HR staff count as Talent users, Finance as Finance, AR as Prospect to Cash, somehow count Retail Ops API use, etc), then manageable. However, the licenses don't work that way. This looks like a big and very costly mess about to happen...


RalphZ1952's picture

You could purchase a single seat but with this change it appears to be gone and now back to minimums of 10 - 20 seats!