Most businesses default to monthly Microsoft 365 billing because they see it as being more flexible. In practice, though, annual subscriptions are the better choice for most organizations.
The most obvious reason to choose an annual subscription is cost. Microsoft charges a premium for a monthly commitment (typically 20% more per user than the annual rate). For a business with a significant number of users, that difference in pricing adds up to a meaningful amount over the course of a year, for identical service.
Another advantage of annual commitments is price stability. Microsoft periodically increases pricing, and monthly subscribers are subject to those changes in the month immediately following the increase. Annual subscribers have price stability for their full annual term, which makes budgeting more predictable.
The flexibility argument for monthly billing sounds appealing but rarely reflects how businesses actually operate. Most organizations don’t fluctuate dramatically in headcount from month to month.
For the occasional new hire, licenses can still be added to an annual plan, although they cannot be removed. If a company is concerned about paying for licenses they may not need for the full year, a practical middle ground is to put the majority of licenses on an annual plan and keep a small number on monthly billing to accommodate a possible reduction in headcount. That way the savings apply across most of the subscription base, while still leaving room to adjust without overcommitting.
If your business is currently on monthly billing across the board, it’s worth reviewing what you’re paying against what an annual commitment would cost. The savings can be substantial.
