Is Microsoft 365 E7 waiting in the wings?

Mary Jo Foley is the Editor in Chief at Directions on Microsoft. Before joining Directions, Mary Jo has worked as... more

Directions on Microsoft analysts often use the phrase “batteries not included” to refer to features and functionality that one would assume to be in an E3 or E5 subscription bundle, but which instead are sold separately. The Directions analysts have noticed that in recent months, Microsoft is making more and more services available as add-ons rather than including them in existing bundles — which means customers’ overall subscription bills are going even higher.

Directions analyst Wes Miller’s theory is we’re approaching the day when Microsoft will introduce a new, high-end bundle which will include a number of these add-in services. If Microsoft sticks with its established naming convention, such a bundle could be called E7.

E7 could roll up all the features of E5, plus at least some add-ins, such as Entra ID Governance; Intune Plan 2 and Intune Suite and/or Microsoft Defender Vulnerability Management, suggested Miller.

These add-on services are not cheap, especially when purchased by customers who need hundreds or thousands of seats. Entra ID Governance, which is an add-on to either Entra ID (the service formerly known as Azure Active Directory) P2 or Entra ID P1. It costs $4 per user per month when added to Entra ID P2 and $7 per user per month when added to Entra ID P1. Defender Vulnerability Management costs $2 per user per month on top of Microsoft Defender Endpoint P2 or $3 per user per month when licensed alone to use with a third-party endpoint detection and response product.

Teams Premium is another add-on bundle Microsoft introduced this year. Teams Premium, which costs $10 per user per month on top of an existing commercial Teams subscription, includes several features which Microsoft had announced previously as being included in the current paid Teams offering for no additional charge.

Microsoft also could opt to fold its still-in-preview Microsoft 365 Copilot AI assistant technology into some kind of new bundle. Microsoft officials have said Microsoft 365 Copilot, whenever it goes GA, will cost $30 per user per month. (It currently is available to a small group of invited preview customers for a rumored $50 per user per month.) Microsoft officials haven’t said whether they’ll make volume discounted pricing available for M365 Copilot, but they could also/instead go with a subscription bundle of services that includes M365 Copilot.

The Counter Argument to an Imminent E7

Microsoft officials have not hinted or mentioned publicly anywhere I’ve seen that a new E7 SKU is waiting in the wings. In fact, its sales emphasis seems to be on driving more customers to go with E5, which costs $57 per user per month. Microsoft used its M365/O365 price hike for E3 earlier this year as a way to try to convince more customers to go with E5 (which didn’t get a price increase above the $57 rate).

Microsoft hasn’t revealed a recent number around what percent of its customer base is on E5. But in July 2022, Microsoft officials said the E5 SKU of Microsoft 365/Office 365 accounted for 12% of the commercial installed base. In 2021, that number was 8%. I’d assume Microsoft would try to grow the E5 percentage before introducing an even pricer E7, or possibly add some of the newer, separate add-ins to the existing E5 and up the price for E5 in the process.

Directions analyst Rob Helm said he didn’t expect Microsoft to roll out a new high-end M365 bundle until one of its competitors introduced something similar which would force Microsoft’s hand.

“The key signal to bundle is hearing footsteps from a more focused competitor like Slack,” Helm said. “Bundling made Teams ‘free’ for Microsoft 365 customers to head Slack off.”

“But without that competition, it can make sense to keep a focused product separate and maximize its own revenue. Look at Visio, which never got bundled until Web-based competitors started to look troublesome.”

Whether Microsoft rolls out a new subscription bundle in the naming of helping customers “do less with more,” or sticks with its current add-in launch madness, customers said they need some relief. The additional cost of services they assumed would be included in a premium SKU like E5 is causing their budgets to grow at an alarming rate.