Brace for 30% budget increase despite no flashy updates

Microsoft's March 2025 licensing updates are here, and while the policy changes in the entire first quarter have been minimal, the financial impact is anything but. Businesses worldwide are facing Microsoft budget increases between 15 and 35%, driven by seemingly subtle licensing tweaks. In today's update, Azure's complete ban on crypto mining, what it means for blockchain applications, Azure Local's new installation options, good news for flexibility and cost savings, Azure OpenAI data residency loophole, and actionable negotiation tips to keep your Microsoft spending in check.

Crypto mining is wholly banned in Azure

Let's begin with the fun one, crypto mining on Azure, which Microsoft has completely banned, with no more permissions and no exceptions. Previously, you could ask for explicit consent from Microsoft. You can't do it anymore. It may appear that this ban mainly affects hobbyists and smaller players. But what if you're using Azure for other blockchain operations?

In recent years, companies have emerged offering business applications on blockchain, and I'm not even talking about NFTs or FinTech. Think about smart contracts, tickets, or electronic notary services, for which blockchain is an exceptional platform. While these are not crypto mining, the line may be blurry.

If your business relies on Azure for blockchain, I would take steps to proactively prevent an unexpected ban that may put you out of business. If you're in that position, clarify your case with Microsoft, get written confirmation that you're compliant, and, if you think the risk is high, consider alternative cloud platforms.

Azure Local can be deployed on any hardware

In other news, Microsoft made Azure Local more flexible this month. Before, you had to install it on approved or listed hardware. Now, you can use it on any device. They literally changed the word "server" to "device" in their rules. We quite rarely proclaim good news on this channel, but this update clearly makes Azure Local more accessible for everyone.

For MSPs, it also means a broad client base. Do you see this as a win or just another way for Azure to creep into your IT infrastructure? Let me know.

Azure OpenAI does not respect data residency

On a more serious note, the recent clarification of Azure OpenAI services terms is worrying. Microsoft claims Azure OpenAI supports data residency, which is very important for European companies.

But the updated fine print tells a different story. Your training data, validation data, and custom model weights may be temporarily stored outside of your selected region. For businesses bound by strict data residency laws, this isn't just an inconvenience. It's a legal landmine. Regulators, when they wake up, won't care if the transfer is temporary. Your sensitive data could be moved to an unknown jurisdiction without clear accountability.

Playing Microsoft's advocate, I find it good that they warned us. But it still raises serious questions. Is Microsoft just ignoring EU regulations? Or is it really a technical issue on the OpenAI side that is impossible to overcome at the moment? And, are businesses risking non-compliance without realizing it? Because, honestly, who reads the small print?

As long as data residency matters, your businesses have three options. Demand written guarantees from Microsoft. Good luck getting them. Secondly, it may not be easy if you're deeply entrenched in the Microsoft ecosystem, but you may consider alternative AI providers that fully commit to EU-only data processing.

Or, you can choose to ignore it and hope regulators won't crack down. Is this a compliance time bomb? Or am I overreacting, as many suggested on LinkedIn? Let me know in the comments.

What drives the 30% budget increases

At first glance, the past three months have been quiet. No major licensing overhauls, no dramatic policy changes. But beneath the surface, something bigger is happening.

We're not just dealing with another routine price increase. There is a slow, steady escalation that keeps IT budgets climbing and businesses more dependent on the Microsoft ecosystem.

You have probably already felt it. There was a 10 per cent SPLA price hike at the start of the year. And if you use independent cloud providers, this should have been reflected in your bills. Since January, there's been a 5 per cent premium on monthly billing for Microsoft 365. And those of you who are just approaching an Enterprise Agreement renewal in 2025 will be affected by other price increases starting from 2022.

Because we negotiate Microsoft licensing agreements every day, we see the numbers before they hit the headlines. For months, we have been warning clients on this channel, on LinkedIn, and privately that Microsoft-related costs would rise by 20 to 35 per cent in early 2025. And this is one of those rare cases where I hate to admit that we were right. Most of the contracts we're working on right now are precisely within that range.

It's not just about price increases. It's a series of subtle tweaks and changes in the pricing and licensing that all lead to the same result. Higher spending, less flexibility, less control.

Why is this all happening? The still ongoing upgrade from Microsoft 365 E3 to E5 is the most significant contributor to the rising costs.

🖐 Optimise your Microsoft 365 costs. See how we can help: Microsoft 365 Planning and Optimisation.

Microsoft positions it as a security must-have, and I don't necessarily disagree. But it also locks businesses into a more expensive tier. The security components of E5 are rather attractive. The IT security teams that we talked to welcomed those. Finance teams, not so much. Then there are the premium add-ons.

Teams Premium, for example. It offers valuable features at an extra cost. Microsoft now has over 40 premium add-ons, turning all-inclusive E5 into almost inclusive. If you need the features, and if those features are valuable, you will obviously pay the premium.

And then there's Copilot. Despite not-so-positive feedback from early adopters, Microsoft keeps quite successfully pushing it into every agreement. At 30 dollars per user per month, this is not a minor cost.

Beyond Microsoft 365, the licensing models for Power BI and Power Apps are evolving in ways that often increase costs. I would even rephrase it into always increase costs. It almost seems like Microsoft is constantly reinventing pricing structures to make them more complex and nearly impossible to plan, predict, and control spending.

Finally, there is Dynamics 365, Microsoft's answer to Salesforce. After so many years, it's gaining serious traction. And because it is a key product in Microsoft's internal sales scorecard, their sales teams are under pressure to sell it more aggressively.

What will you do about it?

But what can you do about it? Microsoft is not easy to negotiate with. They're comfortable, they're confident, so you can't just say to them, your prices are too high. To win against Microsoft and put it back into control, you need a structured, strategic approach, and I'm not afraid to say a data-driven approach.

Start reviewing your usage as soon as you can. What do you actually need? It's a key these days. Challenge the E5 is the future narrative. It's not the only way forward. Maybe you don't need those security features. Perhaps you, or some of your users, can do it differently.

Clearly define your must haves versus nice to haves. Don't pay for the features you barely use, even if they're promising future value. Approach negotiation with proof and solid numbers, not opinions. Microsoft respects data-backed arguments. They don't negotiate on emotions.

The other thing you must do is benchmark costs. Compare with others in your industry. If you don't know how to do it, there are companies like ours that deliver benchmarking services. Don't ask large consultancies. They get the benchmarking data from Microsoft.

🖐 Negotiate better Microsoft agreements. Get expert support: Microsoft Contract Negotiation Support.

We share our tips here

One thing I don't want to leave you with is the thought that I just agitated you and gave you no actionable advice. That is precisely why I sat down with Daryl Ullman, a professional negotiator with 20-plus years of experience dealing with Microsoft and Microsoft only.

We broke down real tactics, including the exact steps we use to get better deals. Watch it now. It's a long one. And there's a lot of detail.

P.S.

The question is, are we still getting value from Microsoft, or are we just paying for an endless cycle of upgrades? Or is it time to ditch Microsoft entirely and look for alternatives?