Microsoft unbundling Teams is to appease regulators, not give customers a better deal

Think before you pull the trigger, warn analysts

If you're planning to save money by cutting out the unbundled Teams product from your Microsoft 365 subscription, the decision might not be as straightforward as you'd think.

Earlier this week, Microsoft confirmed that it would be introducing new commercial terms for Teams, including offering Office 365/ Microsoft 365 without the collaboration app, and selling it as a standalone product. Customers can also still buy Teams as part of an O365/ M365 bundle.

The latest tweaks unify Microsoft's global licensing position following alterations made by the company last autumn when it unbundled the platform for business customers in the European Economic Area (EEA) and dropped the monthly cost of the suite by €2 ($2.17).

The challenge facing finance departments within enterprises which use Microsoft is that, for example, adding Teams to a new enterprise subscription without the service costs €5 for EEA and Switzerland customers. US commercial customers, meanwhile, will pay $5.25 per user per month.

At first glance it might make sense to save a few dollars per user per month if an organization does not use Teams. However, since its debut, the platform has become so entrenched in Microsoft's productivity suite that unpicking it would present a challenge.

Writing in Directions on Microsoft, analyst Mary Jo Foley explained it like this: "If a M365 E3 user paying $36 USD per user per month for a subscription with Teams bundled as part of it gets moved to the M365 E3 No Teams SKU for $33.75 per user per month, but later needs the Teams Enterprise add-on for $5.25 per user per month, that customer is now paying $39 per user per month, or $3 per more per month, for the same set of features."

Then there is the question of how long Microsoft will allow existing customers to stick with subscriptions where Teams was bundled in for free. Foley wrote: "There's no guarantee it couldn't opt to remove this allowance the next time a customer's licensing contract is up for renewal."

Forrester VP and principal analyst J P Gownder commented: "Pricing is going to be the next battleground. Microsoft will argue that offering products à la carte and unbundled should command a higher price for each component of the former bundle, because the costs to them are higher.

"This contention is true, at least to some extent: it's more expensive for them to manage, develop, and sell a set of unbundled products. It will also necessitate higher marketing budgets to clarify their offerings in the unbundled world.

"Regulators won't like seeing prices rise and will be inclined to think Microsoft is punishing EU companies over the unbundling rules. But regulators will be overstating their case if that's their contention."

The unbundling of Teams has mostly been welcomed, especially by other vendors. Matthew Hodgson, CEO and co-founder of UK-based E2EE messaging platform Element, said: "It's about time Microsoft unbundled Teams from Office globally – businesses can finally make the switch to end-to-end encrypted solutions without being locked in."

He added: "This move only addresses longstanding antitrust concerns after the EU cracked down."

The choice is simpler for businesses that are already using alternative platforms. The decision is more difficult for customers already using Teams in some parts of their organization.

Directions on Microsoft analyst Jim Gaynor said: "In the end, this move is about Microsoft trying to stay ahead of regulatory scrutiny, not about offering customers a way to reduce costs." ®

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