It’s not that common to see Microsoft make an announcement where the price of existing products is cut in half. Today, however, is a special day where we heard that the prices of Power Apps licenses are going to be reduced by 50% :
- Power Apps per user: from $40/month to $20/month
- Power Apps per app: from $10/month to $5/month
Note that this is the new list price – not a temporary campaign price. Using Microsoft’s low-code application platform is therefore becoming considerably cheaper for all customers (eventually).
More revenue via lower pricing
What’s the story behind such a dramatic pricing change? Was Microsoft struggling with selling the platform to customers at the old price point? Well, we will of course never know the full details behind the business planning decisions and the calculations MS has been performing in their own Excels.
My own interpretation is that there certainly hasn’t been any shortage of interest towards Power Apps from the customers’ side. What’s probably happening here is that the high ambitions Microsoft has set for scaling up the broad commercial coverage of Power Platform technologies within their customer base haven’t quite been met with the current pricing model introduced in October 2019. I can easily see how the speed at which low-code is taking over the world isn’t well aligned with the slow licensing agreement negotiation cycles around enterprise software. These are both a blessing and a curse for MS, compared to more nimble competitors in the low-code / no-code space.
To address this need for pricing agility, Microsoft had already launched a promotional offer at the end of 2020 to give volume discounts on per user and per app licenses: $40 > $12 and $10 > $3 respectively. This offer basically made the previously confidential discount levels publicly available, giving a much better indication to larger customers about what the expected true cost level of Power Apps licenses would be. Since there are so many different potential user groups for low-code apps within a typical enterprise organization, it’s problematic if every team does their own business case calculations based on list prices. That doesn’t really deliver the optimal outcome for Microsoft who’d want to sell the one platform for the whole organization through a single high volume deal.
Based on my discussions with customers, it’s pretty obvious that most of them are already confident with the technical abilities of Power Platform. What they are not very comfortable with is the complexity of how the platform has to be licensed. All the confusion and uncertainty is quite understandable, given the many moving parts and the licensing model that appears to have been in flux during the past couple of years.
Any temporary campaign price isn’t necessarily going to alleviate the concerns customers have for the long term costs of licensing Power Platform premium features. Therefore I think Microsoft is looking to provide a clear signal that they’re targeting a very wide scale adoption of these low-code tools – not just for large business critical apps for specific audiences.
Licensing implementation details
Due to how the licensing contracts and MS price lists work, the new Power Apps license prices aren’t yet reflected in the public pricing site, as they’ll only come into effect on October 1st 2021. Any contracts made after that will get the new prices. Same for contracts that are renewed after October 1st. For any ongoing subscriptions the new price points are not applied automatically, because for good & bad, the prices for a customer are locked via these contracts. Keep that in mind when counting the near term costs of Power Apps for your users.
The SKU (stock keeping unit) of the per user plan won’t change, the list price will just come down to $20. For the per app plan we’ll see the old SKU become discontinued and a brand new SKU launched on October 1st. This is because there is more to the changes than just a new figure on the price tag in the per app model.
There’s been this peculiar twist in the original entitlement that allowed a single Power Apps per app pass to run 2 apps & 1 portal within a single environment. While the reasons for allowing both Canvas and Model-driven apps to be used in a single business scenario probably made sense in theory, this has been in practice very difficult for customers to comprehend. It must have also been a huge headache for MS to incorporate into their license reporting and technical enforcement within the platform. Changing the new per app license to cover a single app is therefore a very logical & welcome update. If you really need 2 apps, then just buy 2 per app passes for $10 – the total price is not increasing here, after all.
These changes announced today are specific to Power Apps, which means that the Power Automate price points for per user and per flow remain untouched. This isn’t very surprising, since I believe Microsoft would rather see customers adopt both the app side and the automation side – not just run “invisible” flows behind the scenes. The Power Apps per user plan now gives you these for a small additional cost compared to Power Automate per user plan ($20 vs. $15). As for the other plans, the use cases for per flow process automation or the RPA capabilities are very distinct, in my opinion, so not much pressure should arise from this Power Apps pricing change for those.
What about Dynamics?
Two years ago when the per app plan was launched at $10, there was a lot of discussion on how this might cannibalize the Dynamics 365 products. Paying $95 for an Enterprise Sales license seemed pretty steep in comparison when you could build your own CRM on top of the same Power Platform tools and run it for a fraction of the cost. Well, it looks like the tribes of low-code cannibals didn’t take over the world and Dynamics 365 business has been growing nicely regardless of this move. There certainly is a growing number of “DIY CRM” type of solutions being used now via Power Apps, but one could argue that these customers and their scenarios might not have landed on MS cloud (or stayed there) if the lower priced option didn’t exist.
During the past 1.5 years, after founding a company focused 100% on Power Platform and taking some distance from my prior Dynamics related work, it’s been eye-opening to talk with customers without wearing a CRM hat. Low-code application platforms are a discussion that concerns everyone, regardless of what systems they are using for managing their sales, marketing, service processes. You don’t really need to mention the word “Dynamics” at all in these discussions – unless the customer happens to be running them already. Whatever their CRM or ERP systems are, the Power Platform story is equally compelling when viewed from the broader Microsoft cloud perspective.
When Ryan Cunningham, Power Apps product lead at MSFT, introduces the new pricing model announcement with the title “apps for everyone” – that should give you an idea of where the goals are set. You can’t sell Dynamics 365 to everyone, hence the higher pricing of these products. As for Power Apps, there aren’t many valid reasons why someone could not be target customer for them.
The price will never be “right”
Even with this 50% price reduction, I’m not expecting all customers (or even MS partners, strangely enough) to be happy with the licensing model for Power Apps premium features. As long as everything isn’t free, someone will always complain how the low-code platform pricing model of charging by app usage is “wrong” (instead of paying money for app development work and infrastructure operations).
I don’t think we should expect that the full premium feature set of Power Apps would ever become a free bundle within Microsoft 365. More and more of these high value features like Dataverse for Teams are already “free” for existing customers. They help build up the scale of app usage (see the Teams as a platform story), but there has to be an upsell story to paid Power Platform services somewhere down the line. If there wasn’t, we wouldn’t see such huge investments into low-code capabilities from Microsoft.
Platform licensing is the end game, not per app. Once customer organizations unlock the possibility for all their employees to run & build unlimited apps on the platform, that’s when the real transformation begins. There’s undeniable business value waiting behind that door, and that’s why it needs to have a price tag.
Read more about Microsoft Business Applications licensing