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Microsoft is raising prices from July. How to avoid the “AI tax” and save millions?

From 1 July 2026, Microsoft is raising Microsoft 365 cloud subscription prices by up to 33%, effectively introducing a new "AI tax" for over 400 million users worldwide. As business software budgets face this significant impact, companies are increasingly turning to cost-effective hybrid models as cheaper alternatives.

Nearly 4 million companies worldwide use Microsoft 365 cloud subscriptions, and they are now facing a significant impact on their budgets. From 1 July 2026, Microsoft is introducing a broad price increase that will affect more than 400 million employees who rely on Word, Excel, Outlook, PowerPoint or Teams in their daily work, effectively imposing a new “AI tax” on businesses. The price increase, which reaches up to 16% for standard business plans and in some cases as much as 33%, is further proof that integrating artificial intelligence into business software comes with considerable costs. At the same time, cheaper alternatives exist in the form of hybrid models.

The massive deployment of artificial intelligence features and new security elements are the main drivers of the price changes across Microsoft’s product portfolio. Although modern AI assistants may be beneficial for certain teams, the vast majority of employees only need basic spreadsheets in Excel, a text editor in Word, an email inbox in Outlook, or PowerPoint for creating presentations and MS Teams for online communication. Yet, due to the integration of artificial intelligence in the form of Copilot, everyone will have to pay significantly more from the summer.

What are the specific price impacts?

For customers with existing contracts, the new prices will automatically be reflected in their invoices at the next renewal date. Microsoft’s published price lists show that customers will pay more for practically all commonly used subscription options. By how much? Below are three typical situations involving the most widely used products, plus one situation with an extreme price increase:

  1. Basic cloud services (Microsoft 365 Business Basic)

This basic package, especially for smaller companies, provides professional email, company chat and shared storage. Employees have Word or Excel included, but they can only use them through an internet browser, not as classic desktop programs installed on a computer. This key online version will increase from USD 6 to USD 7 per user per month from July, representing a 16% increase. In a model situation where a company operates 100 subscriptions, this means an additional USD 1,200 per year, or approximately CZK 28,000.

  1. Classic programs in a subscription (Microsoft 365 Business Standard)

The most common choice for small and medium-sized businesses for everyday office work combines online services with the option to install classic Word, Excel, Outlook or PowerPoint directly on a computer or laptop. This popular plan will rise from USD 12.50 to USD 14, representing a 12% increase. With 100 subscriptions, the company will have to spend an additional USD 1,800 per year, or about CZK 42,000 more.

  1. Large enterprise packages and premium licences (Office 365 E3)

This plan is chosen by larger companies with hundreds of employees. In addition to standard applications such as Word and Excel, it also includes advanced tools for securing corporate data, access management and unlimited email archiving. This comprehensive version, popular mainly among large corporations, will increase from USD 23 to USD 26, representing a 13% increase. For every 100 subscriptions, the company will have to pay USD 3,600 more per year, or about CZK 85,000 more than before.

  1. Field and production workers (Microsoft 365 F1)

Paradoxically, the largest percentage increase applies to the cheapest versions for operational workers, known as frontline plans, intended mainly for employees in production, field work, retail stores and similar roles. Although the current prices are minimal, the jump from USD 2.25 to USD 3 represents a full 33% increase, even though these employees are among the least likely to benefit from the new AI features. Costs for 100 subscriptions will therefore increase by USD 900 per year, or CZK 21,000.

An artificial tax on artificial intelligence

This broad price increase clearly illustrates the main drawback of cloud subscriptions: the customer effectively only rents the software, loses control over its price and becomes dependent on the vendor’s decisions. At the same time, for a large part of corporate work, subscribing to the latest features is an unnecessary waste of resources. The trend in which a vendor integrates artificial intelligence into the background has already started to be referred to in the market as an “AI tax”.

Globally, 4 million companies now rely on subscriptions, and although Microsoft does not publish detailed information on sales of individual products, according to earlier information and current estimates, the number of business users of online “Office 365” products may now be around half a billion people.This is therefore not just a price increase for “some software”; Microsoft is increasing operating costs directly linked to hundreds of millions of jobs, creating a huge “tax” imposed on global business.

The solution is a hybrid model

A way to break free from the AI tax and rising cloud subscription costs is a carefully designed hybrid model that combines the best of both worlds: perpetual licences and regularly subscribed services. The hybrid model works in three steps:

  1. Targeted purchase of perpetual licences: Instead of an expensive subscription requiring regular renewal, the company purchases a one-time perpetual licence for most employees. If it also chooses secondary software, meaning previously used and legally clean licences, familiar programs such as Word, Excel and others can be obtained for a fraction of the original price. Long-term use is then possible without further fees.

  2. Minimum necessary cloud: In addition to the permanently purchased Office package, the company then buys only the cheapest cloud plan, for example solely for operating email inboxes and the Teams application.

  3. Expensive subscriptions only where necessary: The company pays for full-featured plans with numerous advanced functions and regular subscription renewals only for a narrow group of analysts or senior managers who will actually use them actively.

For smaller companies, such a solution can be based, for example, on a combination of Microsoft 365 Business Basic and a perpetual Office licence. For larger organisations, the same logic is fulfilled by combining Office 365 E1 with Office LTSC Professional Plus 2024. While Office 365 E1 provides email, cloud storage and online services at an acceptable cost, a package of older perpetual Office LTSC Professional Plus 2024 licences complements it with Word, Excel, Outlook or PowerPoint applications installed traditionally directly on the computer.

And in this specific case, the cost savings are truly significant. If a larger company switches to a typical full subscription in the form of Office 365 E3, it will pay EUR 194,000 for every 100 licences over a three-year period, which is about CZK 4.8 million. However, if it chooses the described hybrid option consisting of perpetual Office LTSC Professional Plus 2024 licences and simple Office 365 E1 cloud services, it will pay only EUR 132,000, or CZK 3.3 million. The saving over three years therefore reaches an impressive CZK 4.6 million for every 100 users.

With a hybrid approach, a company can preserve a familiar and fully functional working environment for its employees while gaining significantly better control over long-term software costs.

Jiří Trampota

Microsoft Product Specialist