Microsoft 365 prices are going up again on July 1, 2026. E3 jumps to $39/user/month, E5 to $60, and frontline SKUs take the steepest hit with F1 climbing 33% to $3/user/month. This is the third increase in four years.
If your organization runs on M365 – and most do – the question is no longer whether costs will keep rising. The question is which workloads you can realistically move off the platform to control spend, and which ones you should leave alone.
This is a practical playbook for that conversation.
The pattern is clear
Here is the pricing history for M365 E3 alone:
- March 2022: First increase in a decade. E3 effectively moved from $32 to $36/user/month.
- April 2025: E3 rose to $38.50/user/month.
- July 2026: E3 rises to $39/user/month, announced December 4, 2025.
Each increase comes with a different justification. Inflation. AI features. Security capabilities. Microsoft is now bundling Copilot Chat and additional security tooling into existing SKUs to frame the increase as added value.
For organizations on Enterprise Agreements, the math gets worse. EA discount reductions are stacking with the price increase, pushing some Level D customers past 40% effective increases on frontline SKUs.
The trajectory is clear. Plan accordingly.
What $3/user/month actually costs
A $3/user/month increase sounds modest. It is not.
For a 500-person organization on E3, that is $18,000 per year in new spend. For 2,000 people, it is $72,000 per year. This is not optional, and it is not negotiable. Microsoft sets the price; you pay it or you leave.
Multiply this across three increases in four years and the cumulative impact is significant. An organization that was paying $32/user/month in 2021 is now paying $39 – a 22% increase that arrived in small increments.
One note: if your renewal falls before July 1, you can lock in current pricing until your next renewal cycle. Worth checking with your Microsoft partner if you need time to plan.
The decoupling framework
Not all M365 workloads carry the same lock-in. Some are straightforward to move. Others are deeply embedded in how your organization operates. Rank them honestly before making any decisions.
Easy to decouple (do these first)
File sharing (SharePoint/OneDrive). Your files are just files. Word documents, spreadsheets, PDFs, images. They use standard formats regardless of where they are stored. SharePoint wraps them in a proprietary collaboration layer, but the data itself moves cleanly via WebDAV or S3-compatible protocols. No format conversion needed, no data loss.
Cloud infrastructure (Azure). If you are running VMs, object storage, or networking on Azure alongside M365, this is the most portable layer. OpenStack-based platforms accept standard images and APIs. The workloads themselves do not care where they run.
Moderate to decouple
Identity (Entra ID). This one requires planning. You can federate Entra ID to an external identity provider like Keycloak or Okta using OIDC, giving you a path to manage identity outside Microsoft. But you will still need Entra for M365 authentication itself, so this is a partial decouple. The goal is to stop Entra from being the identity chokepoint for everything else in your environment.
Endpoint management. Intune alternatives exist, but the migration carries real operational risk. Evaluate carefully.
Hard to decouple (do these last, if ever)
Email (Exchange Online). Technically possible, but the migration complexity and user disruption are high. Most organizations should leave email on M365 unless there is a compelling regulatory or cost reason to move.
Real-time collaboration (Teams). Deeply embedded in workflows. Alternatives exist, but switching costs are steep.
Office desktop apps. If your users live in Excel and PowerPoint, there is no drop-in replacement at parity. Be honest about this.
File sharing: the best first move
Of everything in the M365 stack, file sharing offers the best combination of low migration risk and high cost impact. Here is why:
Standard protocols. SharePoint and OneDrive files can be accessed and migrated via WebDAV, which is supported natively by every major operating system. S3-compatible object storage provides another well-documented path. You are not reverse-engineering a proprietary system.
No format lock-in on the data. A Word document stored on SharePoint is the same Word document stored anywhere else. Unlike email (which involves complex mailbox migrations) or identity (which touches every application), file sharing is fundamentally about storing and retrieving standard file formats.
Identity stays connected. You do not need to rip out Entra ID to move file sharing. Federate Entra to your new platform via OIDC, and users authenticate with the same credentials they already use. Single sign-on works across both environments.
Measurable ROI. SharePoint Online storage costs add up quickly at scale, especially for organizations with large media libraries or compliance archives. Moving to an OpenStack-based object storage platform with predictable pricing removes a variable cost line item.
We wrote a detailed comparison of SharePoint vs. Managed OpenCloud for enterprise file sharing that covers the technical migration path.
The hybrid approach
This does not have to be all-or-nothing. Many organizations keep M365 for what it does best – email, Teams, Office desktop apps – and move file sharing and cloud infrastructure to a dedicated platform.
This hybrid model reduces your per-user M365 cost exposure by moving the workloads that are easiest to decouple, while preserving the tools your users depend on daily. You are not replacing Microsoft. You are reducing your surface area with them to the workloads where they genuinely have no equivalent.
What not to do
Do not try to replace everything at once. This is how M365 migration projects fail. Pick the highest-ROI, lowest-risk workload first, prove it works, then expand.
Do not migrate email first. Email feels like the obvious target, but it carries the highest disruption risk and the most complex migration path. Save it for later, or skip it entirely.
Do not ignore your renewal date. If your EA or subscription renewal falls before July 1, 2026, you can lock in current pricing for another cycle. That buys you 12 months to plan and execute a decoupling strategy without paying the new rates.
Do not frame this as anti-Microsoft. M365 is genuinely good software. The issue is not quality – it is cost trajectory and vendor concentration. Your finance team and board will respond better to a diversification argument than a replacement argument.
Next steps
The July 2026 increase is coming regardless of what you do. The organizations that manage it well will be the ones that started planning before renewal season.
If you want to evaluate what a partial M365 decouple looks like for your environment – specifically file sharing and cloud infrastructure – schedule a consultation with our team. We will walk through your current M365 footprint, identify the workloads with the best decoupling ROI, and give you a realistic timeline.
No commitment required. Just a practical conversation about options.