Microsoft's cheapest seats rose the most: F1 +33%, E3 +8%, bundled VMware ends 31 October

01The cheapest seats rose the most

Microsoft announced the July 2026 change on 4 December 2025 and published the full table on its licensing site. Every enterprise suite went up by a round US$3 a seat: E3 from US$36 to US$39, E5 from US$57 to US$60, Office 365 E3 from US$23 to US$26. Because the base prices differ, the same US$3 is an 8% rise on E3, 5% on E5 and 13% on Office 365 E3.¹

The frontline and small-business SKUs did not get a flat US$3; they got a larger share. F1 went from US$2.25 to US$3.00, a 33% rise, and the no-Teams variant from US$1.75 to US$2.50, a 43% rise. F3 rose 25%, Business Basic 16%, Business Standard 12%, Apps for business 21%. Of the 26 commercial SKUs with a stated percentage, only two moved by less than 8%: Microsoft 365 E5 and its no-Teams twin.¹

Microsoft’s justification is bundling. E3 now carries Defender for Office Plan 1, Intune Plan 2, Intune Remote Help and Intune Advanced Analytics; E5 adds Security Copilot, Endpoint Privilege Management and Cloud PKI on top. The features are real and they are rolling out through the summer of 2026.¹ The buyer’s problem is that they are not optional. A company that already pays a third-party email filter and a third-party device-management tool is, from July, paying for both twice. TechBag’s UEM and MDM guide puts third-party device management at roughly US$2 to US$8 per device a month on published list prices, which is the size of the overlap a Microsoft-committed shop should now go and find.⁷

02A 500-seat company pays 11% more, and frontline seats drive a third of it

Here is the arithmetic for a company we would call typical of TechBag’s enquiries: 500 people, a head office of knowledge workers, two or three branches, and a field or shop-floor workforce. We have assumed 200 seats of Microsoft 365 E3 for the people who need Intune and Defender, 100 seats of Business Standard for branch and back-office staff who need desktop Office and little else, and 200 seats of F3 for frontline workers. Business plans are capped at 300 seats a tenant, so the mix is permitted. All prices are Microsoft’s USD list on an annual commitment, per user per month.¹

Two things follow. First, the blended rise on a real estate is higher than the 8% headline because few Indian companies are all-E3; the frontline and small-business seats that make up the long tail rose two to four times as fast. Second, the increase is largest exactly where the per-seat value of the bundled additions is smallest: an F3 user gets no Intune Plan 2 and no Defender for Office Plan 1 for the extra US$2, because those were added to E3 and E5, not to F3.¹

031 October: paying monthly became a 5% price, and the E7 discount went away

The second lever is quieter. On 12 August 2026 Microsoft told its Cloud Solution Provider partners that “starting October 1, 2026, Microsoft applies a 5% cost of capital uplift for Cloud Solution Provider (CSP) software subscriptions (such as SQL Server, Windows Server, Client Access Licenses, and System Center) with annual-term commitments billed monthly.” There is “no change to annual billing or month-to-month subscriptions”, and for existing subscriptions the uplift “takes effect at renewal on or after October 1, 2026.”²

Read it as a finance person would. You commit to a year, you pay in twelve instalments, and Microsoft charges 5% for carrying the receivable. That is a financing charge presented as a licence price, and it is invisible unless your reseller quotes both billing terms side by side. Note the scope precisely: the notice names software subscriptions, not Microsoft 365 or Dynamics online services, and Microsoft’s FAQ on which subscriptions are in scope sits behind a partner login, so we could not read it.² If your SQL Server or Windows Server CALs are on a monthly-billed annual term through a partner, ask for the annual-upfront quote before you renew; on a ₹10,00,000 annual software subscription the difference is ₹50,000 before GST, which is arithmetic, not a price claim.

The growth-margin point matters to a buyer because it changes what your reseller is paid for. Until September a partner earned on the sale and on the promotion; from October it earns on your usage growing. Expect more adoption workshops and fewer discounts, and treat the E3 offers that survive to December as the last transactional discount of this cycle.

0431 October: the VMware licence leaves the Azure bill and lands on a Broadcom one

The third lever is a channel being removed. Broadcom no longer lets hyperscalers resell VMware Cloud Foundation inside their own services. Microsoft’s licensing reference, updated 27 October 2026, states that “as of November 1, 2025, Microsoft no longer includes a VCF license or subscription with new Azure VMware Solution node purchases”, that on 31 October 2026 “license-included pay-as-you-go deployments must transition to portable VCF to remain compliant”, and that by 30 August 2027 holders of license-included reservations “must exchange their reservations for VCF BYOL reservations or transition those workloads off Azure VMware Solution.”³ Google required portable VCF on its VMware Engine from 1 November 2025.⁵

What this does to a bill is the point. The Azure line falls, because Microsoft stops charging for the VCF it no longer supplies, and a new Broadcom line appears, sized by physical cores. Microsoft counts 36 cores for each AV36 or AV36P host, 48 for AV48, 52 for AV52 and 64 for AV64, so a four-node AV36P private cloud needs 144 registered cores, and “the total number of registered cores must not exceed the number purchased from Broadcom”; exceed it and the private cloud “becomes noncompliant and is at risk of suspension”.³ Registration is through the Azure portal, per private cloud, and a converted private cloud switches to portable-VCF pricing without downtime.⁴ Broadcom has published no VMware list-price change for 2025 or 2026 and still sells per core with a 16-core minimum per CPU, so the price of those 144 cores is whatever Broadcom or its distributor quotes you.⁶ We have left the per-core dollar figures circulating among partners out of this piece because Broadcom does not publish them.

05Microsoft is not alone, but it is the only one that raised the bottom of its list by a third

Set the Microsoft figures beside the other renewals an Indian IT department has signed since January 2025. Google Workspace Business Starter went from US$6 to US$7 and Business Plus from US$18 to US$22 in January 2025, with Gemini bundled. Salesforce Sales Cloud Enterprise rose from US$165 to US$175 on 1 August 2025. Atlassian Cloud Standard went up 5% and Premium 7.5% on 15 October 2025, and Atlassian Data Center about 15% at renewal from 17 February 2026: a 500-user Jira Data Center licence moved from US$51,000 to US$59,000 a year.⁶

The pattern across all four vendors is the same: raise the list, attach an AI or security feature to justify it, and leave negotiated prices to the account team. What is specific to Microsoft is the shape. Google and Salesforce raised their cheapest tiers by 17% and 6%; Microsoft raised its cheapest tier by 33% and its no-Teams frontline tier by 43%.¹ For a buyer that means the negotiation has moved. The E3 price is what it is, and the surviving promotions run to December. The place to push is the frontline count, the billing term, and the third-party tools that E3 now duplicates.