In March 2022, Microsoft introduced the New Commerce Experience (NCE) for commercial cloud subscriptions. This model changed how Microsoft 365 and Office 365 licenses are purchased and renewed, and it was introduced alongside price changes for many Microsoft 365 products.
At Convergence Networks, we want our clients to clearly understand how NCE commitments and terms work so you can plan renewals, control costs, and keep the right balance between flexibility and savings.
What changed with Microsoft NCE
Under NCE, organizations choose a subscription term for each license, either monthly or annual.
Key points to understand:
You can choose monthly or annual subscriptions, or a mix of both.
Monthly subscriptions cost 20 percent more than annual ones but allow greater flexibility to add, reduce, or cancel licenses.
Annual subscriptions can only be cancelled or reduced within 7 days of activation. After that 7 day window, the commitment remains in place until the anniversary date.
You can increase license quantities at any time, even after the 7 day window.
You can only reduce quantities at the end of the subscription term. For annual terms, this is on the anniversary date. For monthly terms, this is at the end of the month.
You can mix annual and monthly terms to balance cost savings with flexibility.
Subscriptions cannot be cancelled during the committed term, except within the initial 7-day adjustment period for annual terms.
Many organizations are now reaching their first annual renewal under NCE. The scenarios below show how these rules apply in practice.
Renewal Scenario 1 – All Subscriptions Are Annual
ABC Company has 20 employees who all use Microsoft 365 Business Standard. All 20 licenses were purchased with an annual term, and the anniversary is approaching. ABC is billed monthly by Convergence Networks.
In the past year, ABC has shifted 5 roles to seasonal work, so headcount will fluctuate.
Here are their options:
Keep 15 licenses on an annual term and move 5 licenses to a monthly term. The 5 monthly licenses can be reduced or cancelled at any time to match seasonal headcount.
Keep all 20 licenses on an annual term. The 5 seasonal licenses will remain unassigned during slow periods, but will still be billed.
Change annual licenses to monthly only on the annual anniversary. Re-terming an annual subscription to a monthly one is not available mid-term.
This approach helps ABC decide how much of its workforce is stable year-round and how much requires flexibility.
Renewal Scenario 2 – All Subscriptions Are Monthly
ABC Company again has 20 Microsoft 365 Business Standard licenses, but this time all licenses are on a monthly term. ABC is billed monthly by Convergence Networks.
During the year, several employees left, and some roles were not backfilled. The company now has 15 active users but still pays for 20 monthly licenses.
Here are their options:
Reduce to 15 monthly licenses and cancel the 5 unused licenses immediately.
If the 15 user count is expected to stay the same or grow, re term those 15 licenses to annual to save 20 percent on licensing costs.
Any new hires can be added on either monthly or annual terms, depending on whether their role is stable or may change.
This setup gives ABC a way to clean up unused licenses and then decide where annual commitments make sense.
Renewal Scenario 3 – Mix of Annual and Monthly Subscriptions
In this scenario, ABC Company decided in March 2022 to carry a mix of licenses for Microsoft 365 Business Standard:
15 licenses on an annual term
5 licenses on a monthly term
ABC is billed monthly by Convergence Networks, and the annual anniversary date is approaching.
Here are their options:
Renew as is, keeping the mix of 15 annual and 5 monthly licenses. Billing continues in the same way.
Re-term any of the 5 monthly licenses to annual if those roles are stable and long-term. This can be done at any time and will reduce costs for those licenses by 20 percent.
At the annual anniversary, convert some of the 15 annual licenses to monthly if headcount is expected to decrease or change frequently in the next 12 months.
This blended model lets ABC hold a stable core on annual terms while using monthly terms to manage change.
Are license terms tied to specific users?
No. Microsoft treats licenses and users as separate.
Licenses exist in a pool for each subscription and term.
Users are assigned licenses from that pool.
The features and services for a given product, such as Microsoft 365 Business Standard, are the same regardless of whether the license is monthly or annual.
This means you do not have “annual users” and “monthly users.” You simply assign licenses from your available pool.
What happens when a user is removed?
When you remove a user:
The license assigned to that user returns to the available license pool.
If that license is part of an annual subscription, the overall subscription and license count remain committed until the anniversary. You cannot cancel the subscription early, but you can reassign that license to another user.
If that license is part of a monthly subscription, you can reduce the monthly quantity and stop billing for that license going forward.
Convergence Networks can review your licensing before annual anniversaries so you can right-size ahead of renewal.
Upgrading Microsoft 365 plans under NCE
If you want to move from a plan such as Microsoft 365 Business Basic to Microsoft 365 Business Standard, you can do so under NCE, even with a mix of annual and monthly terms.
Key points:
Upgrades to higher tier plans can be done at any time.
The original subscription anniversary dates remain unchanged.
Billing is prorated so you only pay the correct amount for the upgraded period.
We can advise you on eligible upgrade paths and help you choose the right plan based on how your team actually uses Microsoft 365.
Downgrading Microsoft 365 plans under NCE
Before downgrading, it is worth checking whether your organization is making full use of the tools you already have. Many teams under use Microsoft 365 features for collaboration, security, and productivity.
Convergence Networks offers Modern Work and Microsoft 365 adoption services that help your team get more value from the platform you are already paying for.
If you still decide to downgrade:
Monthly subscriptions can be downgraded at any time, with costs adjusted on a prorated basis.
Annual subscriptions can only be downgraded at the subscription anniversary without penalty.
Planning ahead of renewal is important so you can line up any downgrades with your anniversary dates.
If you want help Understanding Microsoft NCE Commitments & Terms for your organization, reach out to Convergence Networks. We can review your current licensing, model different scenarios, and help you choose the right mix of annual and monthly terms for cost control and flexibility.
