New offer for Power Apps licensing volume discount

Microsoft has launched a campaign that offers the Power Apps Per App and Per User licenses at a considerable 70% discount for all new purchases that meet certain volume and channel criteria:

The Per App promotional offer is available via both CSP and volume licensing (not web direct purchases), whereas the Per User offer is applicable to Enterprise Agreement customers only. The latter is of course understandable considering the minimum purchase requirement of 5k licenses.

To understand the background and implications of these promotional prices, let’s analyze the licensing of Microsoft software and low-code application platforms a bit deeper.

Citizen developer tools vs. enterprise software licensing

It’s no secret that large customers with Enterprise Agreements and thousands of potential users have always been able to get significant discounts from the list price of the various cloud services from Microsoft. That’s how the world of enterprise software works, since it isn’t really a case of the simple “insert credit card & select number of users” purchase model familiar from consumer and SMB SaaS apps. Even in the cloud era, centralized procurement processes for organizations that operate globally tend to still favour contracts that are negotiated fairly similar to how on-prem software has been traditionally bought.

These customers seek to lock the pricing of their software assets and commit to multi-year agreements in exchange for receiving sizeable discounts. Microsoft sales organization in turn can secure their quota much more easily via getting bigger contracts signed at one. Different products may get bundled into these deals based on internal math and KPIs determined deep within the secret chambers of Redmond. The end result is that no organization with 5000+ users would have ever had to pay the $40 for Power Apps Per User licenses even before this new promotional offer. It’s all just been hidden inside that EA negotiation process, adding its own secrecy and friction into the licensing game.

The low-code application movement is challenging the classic top-down IT system implementation model with its bottom-up approach for empowering the end users to take the initiative on app development. Regardless of this, there is still a very concrete need for getting these citizen developer solutions sanctioned by those who control access to A) data and B) money. Microsoft’s Power Platform is especially competitive in its tight integration with the existing core MS stack deployed at most organizations, offering a very familiar admin experience for the IT departments. This addresses A, but how about B?

Tools like Power Apps and Power Automate that would be needed for agile low-code initiatives tend to get bundled into the big software bill governed by the customer’s EA agreement with Microsoft. The call for IT budget stability and predictability can be directly at odds with the needs for rapidly inventing new digital processes when the day-to-day business gets disrupted by unforeseen events like COVID-19. (You can read more about how our team has helped customers adapt to the new normal via Power Apps.)

A year ago Microsoft caused quite a stir in this model by announcing they were going to enable the self-service purchase option for Power Platform products. The intentions of this initiative are described in the feature documentation as follows:

“Self-service purchase gives users a chance to try out new technologies and develop solutions that ultimately benefit their larger organizations. Central procurement and IT teams have visibility to all users who buy and deploy self-service purchase solutions through the Microsoft 365 admin center.”

This self-service model was met with a big outcry from the parties responsible for controlling access to enterprise IT systems as well as the IT budgets. It also higlighted a common misconception held by IT professionals working with Microsoft business software, whereby they falsely assumed that licensing had something to do with the security model around business data (read my blog post about why this is not the case). Eventually MS had to introduce admin controls for disabling these self-service purchases and allow customers to replace it with a license request model instead.

Enterprise capabilities require premium licenses

The biggest competitive advantage that tools like Power Apps and Power Automate have had in the low-code application platform race has without a doubt been their bundling into Office 365 plans. The potential audience of users who could build apps and automations on top of their existing software subscriptions, by using their existing Azure AD identity and connecting to existing business data sources like SharePoint is simple massive in size.

At the same time this has lead to confusion when people have assumed the full Power Platform tools to be included within Office licenses. The fact is that with Office 365 you only get the features applicable for extending the Office based solutions. Many of the requirements for more sophisticated business apps can’t be covered with the “free” versions of Power Apps. For instance, access to the built-in data platform of Power Apps (Dataverse, formerly known as CDS) that provides many of the enterprise level features (relational data, custom code extensions, APIs, detailed security models, application lifecycle management) is not included even in the most expensive Microsoft 365 plans.

The Power Platform as a Microsoft business unit is not part of Office 365 nor Dynamics 365 – even though both of them rely more & more on that specific platform as a technology that connects different cloud apps and business processes. Considering how much the competing low-code platform vendors charge for their products, it’s clear that Microsoft has no reason to just give away this intellectual property for free. Especially in a hot market where the growth is “in the triple digits”.

One fundamental challenge with low-code is that it’s not a single specific system like CRM. You could create a hundred CRM-like apps with it that potentially deliver far greater business value than a single monolithic application ever could. The speed at which you can build these apps when compared to developing bespoke software solutions via custom code is another huge source of measurable business value. It’s hard to see how organizations could ever digitally transform their operations without such tools – yet we still aren’t entirely sure how to articulate the detailed business case for them. Apps are more specific and easier to talk about, whereas platforms are an abstract concept. How do you put the price tag on a mere “capability”?

Building the path to a common business platform

Most organizations that rely on Microsoft 365 as their information workers’ daily toolkit have not yet made the leap to the next level where the MS cloud is also the foundation of their unique business processes and structured data. Some have already adopted the enterprise wide systems of record like CRM and ERP that run on the Dynamics 365 cloud services. The territory in between these common productivity tools and the top-down process management systems still remains uncharted for many companies.

By introducing the new Dataverse for Teams, Microsoft has taken a big step towards bringing the more business process oriented low-code tools within the reach of any information worker. Allowing the use of true relational data models in apps running inside Microsoft Teams with no extra license cost knocks down another barrier for organizations to digitalize and automate their processes at scale. You can build pretty advanced Power Apps, flows and bots for your team without hitting any paywall for taking the solutions into production use.

At some point the business critical apps will likely need to grow up to run on the full Dataverse platform. As you upgrade the Teams based environment, the question of how to license the usage of these apps will come up. Individual apps for specific teams may not yet trigger the complete platform licensing for all the organization’s users, which is why the Power Apps Per App plan is a logical next step on this low-code journey.

With the new promotional pricing of $3 per user per month, the license cost of taking an app built by & validated by the business users and turning it into a formally supported part of the IT portfolio shouldn’t be a showstopper anymore. This innovation process that may have started from a single app maker’s experiment within Microsoft Teams could actually lead to very a cost effective mechanism to deliver new apps for the wider organization.

Doing the math on Power Apps licensing cost

Looking at the promotional pricing that Microsoft has launched in their new campaign, the emphasis is clearly on the $3 Per App price, due to the considerably lower minimum purchase requirement than for Per User. With 200 licenses, the minimum annual cost is $7,200. It’s important to remember that this isn’t necessarily the minimum user count, as the Per App passes are not assigned to a user directly. So, even smaller organizations can take advantage of this offer when acuiring licenses via the CSP channel.

Let’s say you have 50 potential users for Power Apps based solutions. At the list price your annual cost for a single Per App license per user would be $6,000. Access to unlimited number of apps via the Per User license would cost $24,000 per year.

With the 200 Per App license promotional offer you could get 4 passes per each user, making a maximum of 8 premium feature Power Apps available to them (as each pass unlocks 2 apps within the same environment). That’s a mighty big pile of business apps already, so most of the smaller customers below 5k seats will be financially incentivized to opt for the $3 Per App passes rather than the full platform SKU of Per User.

Ultimately this Per App promotional price defers the need for organizations to make a platform level commitment with Power Apps premium capabilities. It favors the gradual enablement of more advanced Power Platform features in their real-life business applications, allowing everyone to validate the value of low-code tools in the Microsoft cloud.

Compared to custom software development, a $7,200 investment wouldn’t get you very far yet. If spending the same money in low-code application platform licenses and encouraging internal app makers to try & use it for solving their problems will result in new working tools for day-to-day processes, then the business case will be quite clear.

For the enterprise customers, the $12 price point of the Per User plan in this promotion gives a signal of what they could expect to see as the actual cost of licensing Power Platform via EA agreements in high volume deals. The example annual license cost of $720k for a 5,000 user platform running (in theory) an unlimited number of current and future business apps, with native integration to Office, Dynamics and Azure, should be a highly interesting value proposition to explore for large organizations.

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