Customer adoption of Microsoft's newly launched E7 365 software bundle may be limited by two factors: a proliferation of AI agents in their systems and their wallets.
The office productivity suite became generally available May 1. The package includes Copilot, a new Agent 365 AI governance tool, Entra identity and access capabilities and features from the old E5 tier. It’s priced at $99 per user annually, compared to $57 for E5, which is scheduled to bump up to $60 on July 1.
Clients are intrigued by the product but not rushing to it, Microsoft partners told Channel Dive. Businesses are reevaluating software spend, even for the less expensive Business Premium suite, and customers haven’t taken to Copilot en masse just yet.
“I think they really believed that Microsoft Copilot would be taking off faster than it has on mass adoption,” Ntiva Director of Product Management Ted Brown told Channel Dive
The company expected customers to buy hundreds of Copilot licenses at a time, according to Brown. Instead, numbers have stalled closer to five, he said.
Aa Copilot features improve, customers are warming to the chatbot, and organizations increasingly need a platform to combat shadow AI.
“I do think Agent 365 will be a thing, because at some point, when people get more sophisticated building their own agents, you're going to have agent sprawl all over the place,” Brown said.
The price point for E7 is steep for businesses wary of macroeconomic uncertainty as they deal with rising vendor bills. Microsoft partners that are used to optimizing licensing bundles rather than upselling them have expressed similar sentiments.
“I've gotten one email from a client since it's launched, about, 'Hey, what is this E7 thing?' Where I get more clients interested is the price discounting on the small to medium sized business Copilot licenses,” Brown said. “I get those all week long. I think people these days are trying to shrink the cost instead of expand the cost.”
A crawl-walk-run scenario may be more realistic for licensing upgrades. Approximately 70% of Opkalla’s clients are using a Business Premium bundle, according to the IT advisory firm’s Senior Microsoft Solutions Specialist Rachelle Berry. E7 is multiple steps away.
“A lot of people are talking to us about, is it time to go to E3? Very few are even talking about going to E5 if they're a Business [Premium license holder],” Opkalla Microsoft Practice Director John Fread said. “You're not even thinking about E7 right now. That's the Cadillac Ferrari version that most of them wouldn't need.”
Clients switching from Business Premium to an enterprise agreement are motivated by security features, not AI, Berry said.
The clients moving to E7 want to try it on a month-to-month subscription for select users in their organization, Berry said.
The only case where Opkalla recommends E7 is for a large organization with a massive licensing budget and a significant Copilot user base. Copilot improvements could drive up usage, which would put a brighter shine on E7.
“This may be six months from now the way usage is exploding for Copilot and all the AI tools. E7 may become much more on our radar, but right now it's really not for our clients,” Fread said.
The MSP angle
A delayed ramp up is even more likely in the SMB segment, where managed services providers typically operate. Sherweb Head of Sales Michael Slater said the top end of the MSP community — including some of the private equity-backed platforms — could see E7 as an opportunity,
“It's a good idea. I just don't think it's gonna fit like 80% of MSPs out there in their customer base,” Sherweb Head of Sales Michael Slater said.
Slater said MSPs tend to think differently about Microsoft licensing than firms with a reseller background. They see it as a cost of tooling rather than a profit center.
“Probably Copilot is the only thing I could think of where they actually go in there and maybe charge as a a separate line item,” Slater said. “But everything that's in a Business Premium or an E5 or even just one of the bundles attached Business Premium, be it Purview, be it Defender, is a cost of tooling for them to give their managed services or managed cybersecurity services to their clients.”
Rising appetite for Agent 365 and AI governance are also factors. Most MSPs, however, will want to consume agent governance as its own SKU — or as part of a Business Premium bundle.
“If I had a magic wand I could wave, I'd ask for the Business Premium version of it where they incorporate AI,” Slater said. “There is a Business Premium Plus Copilot SKU, but then we throw in the agentic AI stuff on top of it, including the agent management stuff.”
For SHI International, a member of Microsoft’s elite group of large licensing solution partners,the real E7 opportunity is in consulting and services. Customers are wrapping up AI pilots and fully deploying the technology, and they need help.
“A lot of enterprise-level — even mid market and small medium business — clients, [are] now getting even more into the weeds of taking advantage of AI in their environment safely, but in a consolidated procurement manner,” SHI VP of Microsoft Alliances and Programs Joe Bellian said.
SHI has taken on projects about agent deployments and governance over the last year, as clients show willingness to spend money for AI-related consulting. The margin doesn’t reside in the product SKU, Bellian said.
“We're selling them their licensing. We're helping them navigate which licensing they should take advantage of or purchase, and right-sizing their environment to help best support their business,” Bellian said. “So yes, we're selling them their licensing, but then we're coupling that and packaging offerings around these products to best support their environment.”
As of press time, Microsoft did not comment on Channel Dive’s questions about bundles but shared E7 promotional material.
