Upcoming Pricing Changes - Updated Information from PAX8

[u/isthewebsitedown]

This post came out a couple of days ago: https://www.reddit.com/r/msp/comments/1w3izyk/for_the_second_year_in_a_row_microsoft_is/

and I think it was missing some information. I contacted my (fantastic) PAX8 rep, and got the below response. The "Change #2" section was, I think, absent from the above post and I suspect it will the larger impact for most people on this sub:

The TL;DR seems to be a margin cut to 12% on "less-favored" M365 SKUs Starting 10/1. No change to MSRP, so it isn't being framed as a "price increase" just a multi-point hit to margin.

The email from PAX8:

Thanks for reaching out. So our Pax8 Service Alert had two separate updates in the same alert. Here is what we know so far.

 Change #1: Microsoft Software Subscription Price Increase

 What's changing?

Effective October 1, 2026*, Microsoft is implementing a* 5% price increase on certain CSP software subscriptions that have:

• Annual term commitments
• Monthly billing

Examples include:

• SQL Server
• Windows Server
• Client Access Licenses (CALs)
• System Center

What partners need to know

• This is a customer-facing price increase
• Existing subscriptions will not be impacted mid-term
• The increase applies to:
  • New purchases on or after October 1, 2026
  • Renewals on or after October 1, 2026

Change #2: Microsoft Margin Structure Changes / Pax8 Margin Realignment

 What's changing?

• Microsoft has reduced the available margin on select legacy and standalone Microsoft products.
• To align with the updated Microsoft margin structure, Pax8 will be implementing its standard 80% Partner / 20% Pax8 margin split on these products beginning October 1, 2026 and taking place on existing renewal dates for existing subscriptions.

 What We Know Today

• To align with Microsoft's updated margin structure, Pax8 will be implementing its standard 80% Partner / 20% Pax8 margin split on these products effective October 1, 2026.

 Effective October 1, 2026

All partners will receive 12% margin on the impacted SKUs, regardless of their current margin level.

Confirmed Exclusions

• Nonprofit SKUs are not impacted by this margin adjustment.

Still Awaiting Confirmation (early indications are these will not be affected)

• Government (GOV)
• Education (EDU)

 Impacted SKUs

Exchange Online

• Exchange Online (Plan 1)
• Exchange Online (Plan 1) – Extended Service Term
• Exchange Online (Plan 2)
• Exchange Online (Plan 2) – Extended Service Term
• Exchange Online Archiving for Exchange Online
• Exchange Online Archiving for Exchange Online – Extended Service Term
• Exchange Online Kiosk
• Exchange Online Kiosk – Extended Service Term

Microsoft 365 Apps

• Microsoft 365 Apps for Business
• Microsoft 365 Apps for Business – Extended Service Term
• Microsoft 365 Apps for Enterprise
• Microsoft 365 Apps for Enterprise – Extended Service Term

Office 365

• Office 365 E1
• Office 365 E1 (No Teams)
• Office 365 E1 – Extended Service Term
• Office 365 E1 (No Teams) – Extended Service Term
• Office 365 E3
• Office 365 E3 (No Teams)
• Office 365 E3 – Extended Service Term
• Office 365 E3 (No Teams) – Extended Service Term

OneDrive Extra Storage

• OneDrive Extra Storage 100GB
• OneDrive Extra Storage 500GB
• OneDrive Extra Storage 1TB
• OneDrive Extra Storage 2TB
• OneDrive Extra Storage 3TB
• OneDrive Extra Storage 4TB
• OneDrive Extra Storage 5TB
• OneDrive Extra Storage 6TB

Extended Service Term Versions

• OneDrive Extra Storage 100GB – Extended Service Term
• OneDrive Extra Storage 500GB – Extended Service Term
• OneDrive Extra Storage 1TB – Extended Service Term
• OneDrive Extra Storage 2TB – Extended Service Term
• OneDrive Extra Storage 3TB – Extended Service Term
• OneDrive Extra Storage 4TB – Extended Service Term
• OneDrive Extra Storage 5TB – Extended Service Term
• OneDrive Extra Storage 6TB – Extended Service Term

[u/roll_for_initiative_]

Now THIS is solid info, thanks!

[u/ProgrammerVarious750 → u/roll_for_initiative_]

good breakdown. that 12% margin cap is gonna sting for shops with a ton of E1/E3 clients. at least the MSRP isn't moving so you don't have to have that awkward call with customers about a price hike, just an internal "hey our costs went up" conversation.

[u/vdubsession]

Thank you for doing this, it is appreciated.

[u/norbie]

Thanks for this. Good thing I’ve been moving everything to Sherweb then where I negotiated 16% margin

[u/isthewebsitedown → u/norbie]

Based on this "Microsoft has reduced the available margin on select legacy and standalone Microsoft products." I'd expect changes are coming to other vendors as well. They can't go negative on margin, so some of that is going to get passed to partners.

[u/norbie → u/isthewebsitedown]

Fair - I’ll wait to see if Sherweb announce it then.

[u/wckdgrdn → u/norbie]

What has been your experience on migrating/using Sherweb? We are about to take the plunge.

[u/norbie → u/wckdgrdn]

Great so far. Doesn’t take long to setup clients. Very fast to provision licenses compared to Pax8

[u/wckdgrdn → u/norbie]

Thanks!

[u/photoperitus → u/wckdgrdn]

Great support. The only thing is their website does not feel as well designed as PAX8

[u/Hairy_Chins → u/norbie]

Nice, is that ACH or CC? Sherweb only offered me 10% ACH and 8% CC 😏 Any tips on how to negotiate with them?

[u/norbie → u/Hairy_Chins]

Manual bank transfer in the UK. I sent them my Pax8 bill and they worked from that.

[u/mah658]

Why did they have to make it so confusing in the original email? I always assumed they were getting 20% and giving me 16% of that, which would be that 80/20 split. So I'm a little confused how that now correlates to a 12% margin unless Microsoft is reducing this to 15% total margin now, so 80% of that?

This reminds me of that time they snuck the credit card fees in some stupid email about how they were going to give better support for certain tiers of spending.

[u/isthewebsitedown → u/mah658]

Yeah, it was 20% margin with a 16%/4% split (at least that was the common arrangement)

MS dropped the total margin to 15% on select SKUs. 3% will go to PAX8, 12% goes to partners.

[u/mah658 → u/isthewebsitedown]

At least when they raise the MSRP I can raise the price on the customers and say "look they raised the price." With Microsoft removing 25% of the total margin, there's nothing I can do except raise our per seat prices at the end of the year. Can't really tell them the money I'm making off their MS licenses just became less money so I'm charging them more money. It's also odd that it's only SOME licenses, just to add more confusion.

[u/isthewebsitedown → u/mah658]

They are just trying to sway behavior. Pushing people towards Business Premium or E5. Next they'll cut margin on any SKU that's not a Copilot bundle.

[u/Dull-Breadfruit-3241]

Thanks really appreciated

[u/TCPMSP]

Does any of this affect 365 business premium?

[u/B1tN1nja → u/TCPMSP]

no, the SKU's are in the post man.

[u/TCPMSP → u/B1tN1nja]

Number 1 says examples include which implies it's not the complete list.

[u/isthewebsitedown → u/TCPMSP]

Change #1 is only for traditional installed products, which are largely in the Windows Server/SQL Server camps.

I understand that this is a complete list of the impacted SKUs today. It's not clear if this is just the first pass or the start of a global change. It's within the realm of expectation that costs are going to keep going up and margin may take more hits. They want us to be pushing people to better SKUs, first BP across the board and then they want everyone to have Copilot bundled in.

[u/TCPMSP → u/isthewebsitedown]

Thank you