Dive Brief:
- Microsoft will raise prices across the Dynamics 365 business application suite starting Oct. 1, the company announced last week.
- The updated terms impact sales, customer service, finance, supply chain management, human resources and other Dynamics 365 ERP and CRM solutions, increasing costs by an average of 11%, the company said in a blog post.
- Microsoft has made Copilot central to its generative AI strategy, embedding the chatbot assistant across the Dynamics and 365 application ecosystems.
Dive Insight:
Microsoft has steadily built a broad portfolio of generative AI capabilities grounded in Copilot. The assistant is now deployed throughout the tech giant’s enterprise solutions, from its 365 general productivity tools to the Dynamics suite of function-specific solutions.
Forrester VP and Principal Analyst Kate Leggett attributed the price increase to the cost of running Copilot in enterprise products.
“The value that these products deliver in terms of cost savings and effectiveness of Dynamics users justifies the price increase,” Leggett said in an email.
Microsoft declined to comment further on the announcement in an email Tuesday.
The company rolled out Copilots for finance, sales and customer service in February and made the 365 assistant generally available in September. As part of the branding drive, Windows 11 PCs and surface devices will feature a Copilot key.
As the tools proliferate, Microsoft and its hyperscaler competitors are pouring money into massive data center build outs, adding AI-optimized silicon hardware and GPU servers designed to run large language model workloads. The investments inevitably drive up costs.
“This is one way for them to recoup on all those data centers and on the power consumption associated with a generative model,” Jason Wong, distinguished VP analyst at Gartner, said.
The costs don’t end with model training. As organizations tap into Copilot features, those workloads run on Azure infrastructure.
“There’s a cost for running these business applications and the price increases could be to cover some of that extra computing,” said Wong.
The Dynamics pricing announcement arrived just two weeks after Microsoft unbundled its Teams collaboration tool from 365. That move was prompted by growing regulatory scrutiny of the company’s software licensing practices and broader concerns related to cloud billing complexity from the European Union.
“For an enterprise customer, Dynamics is just one aspect of a larger bill they have to deal with,” Wong said. “There’s often Azure compute and cloud storage, as well as 365 and Power Platform business intelligence and Microsoft support.”
“It can be difficult for clients to understand or predict the cost of some of these services,” he added.
