Change is rippling through the world of enterprise technology, and it’s coming fast. Microsoft, a company long at the heart of business software, is shaking up the rules for both how organizations adopt artificial intelligence (AI) and how they pay for the cloud services that power it. Two major developments—one focused on the rise of so-called "Frontier Firms" and another on the end of longstanding licensing discounts—are set to reshape the landscape for thousands of companies as they modernize their digital foundations and rethink their relationship with the tech giant.
According to Microsoft’s 2025 Work Trend Index, a new breed of "Frontier Firms" is emerging. These organizations are doing much more than dabbling in AI; they’re rearchitecting their operations around it, creating teams where humans and AI agents work side by side, and leveraging modern cloud infrastructure to scale innovation at breakneck speed. The Index, published August 18, 2025, paints a clear picture: 81% of business leaders expect AI agents to be deeply woven into their workflows within the next 12 to 18 months, and 82% say 2025 is a pivotal year to rethink how their organizations operate.
But there’s a catch. While many leaders see the future in AI and cloud, only a fraction have actually modernized the infrastructure needed to support this shift. The result? A widening gap between digital leaders—those racing ahead with cloud-native architectures—and digital laggards, who are stuck trying to run AI on outdated, siloed systems. As Microsoft puts it, "AI is the defining force of this era—but it can’t thrive on legacy systems." The companies that will lead tomorrow are the ones modernizing their digital core today, with the cloud and AI forming the backbone of their business models.
The numbers tell a compelling story. Organizations that have modernized with Microsoft Azure report a 78% improvement in the speed of executing business changes, according to research by IDC. This agility means they can respond to market shifts, regulatory changes, and customer demands far more quickly than their competitors. IT teams in these organizations gain 69% more time to focus on innovation rather than maintenance, freeing them to build new capabilities and experiment with AI-driven transformation. And when it comes to getting new products and services to market, modernized firms are 43% faster, a crucial advantage in today’s hyper-competitive environment.
Resilience is another key benefit. IDC found that organizations modernizing on Azure experienced a staggering 90% reduction in unplanned downtime—a lifesaver in sectors where every minute of outage can mean lost revenue or reputational harm. The financial impact is equally impressive: a 344% three-year return on investment (ROI) and a 14-month payback period, with annual benefits of $902,700 per migrated and modernized application.
"Modernization is a growth engine. The data proves it, and the leaders are already moving," Microsoft’s report asserts. Companies making the leap see a 47% improvement in IT agility, allowing them to pivot strategies and innovate at a pace that leaves competitors in the dust. The message is clear: the sooner you modernize, the sooner you unlock the full value of AI.
Yet, as businesses rush to retool for the AI era, Microsoft itself is changing the rules of engagement—especially when it comes to how customers pay for its services. On August 19, 2025, CRN reported that Microsoft will eliminate longstanding volume-licensing discounts for online services such as Microsoft 365, effective November 1. This is being described by industry insiders as the biggest change in 22 years to Microsoft’s Enterprise Agreement (EA) licensing program.
Under the new policy, online services purchased through volume licensing programs will now have a single price, matching the publicly available pricing on Microsoft’s website. The company says the move is about greater transparency and alignment across all purchasing channels. "This update builds on the consistent pricing model already in place for services like Azure and reflects our ongoing commitment to greater transparency and alignment across all purchasing channels," Microsoft stated in an online post. The company added that the change is part of ongoing efforts to simplify licensing and improve pricing clarity for customers.
For many, the implications are significant. Lane Shelton, vice president of licensing consulting at SHI, a major Microsoft partner, told CRN that cutting these discounts "changes the dynamic of the relationship between the customer and Microsoft." He explained that customers may be encouraged to renew agreements early—before the November 1 deadline—to avoid price increases. According to Microsoft documentation, the elimination of so-called “waterfall discounts” under EA and the Microsoft Products and Services Agreement (MPSA) will impact organizations at different tiers: level B customers (2,400–5,999 users) could see prices rise by about 6%, level C (6,000–14,999 users) by about 9%, and level D (15,000+ users) by about 12%.
The changes apply at the customer’s next agreement renewal or when new online services are purchased, not already listed on their price sheet. On-premises software pricing, U.S. government price lists, and worldwide education price lists are excluded. Shelton noted that while the earliest customers will be affected starting November 1, there is still time to plan. "This is a great time to sit down and look at where you are at with your agreement and plan accordingly," he advised. SHI, for its part, is prioritizing outreach to its largest customers who stand to be hit hardest.
Microsoft’s move away from volume-licensing discounts isn’t entirely new. The company has been steadily shifting its focus toward cloud consumption and subscription models for years. Azure waterfall discounts disappeared in 2017, and the AI tool Copilot is sold at a flat $30 per user per month, regardless of user count—no discounts for scale. Back in January, Microsoft also eliminated EAs for customers with fewer than 2,400 users, pushing them toward the Cloud Solution Provider (CSP) program or the Microsoft Customer Agreement for Enterprise (MCA-E). Additional changes this year, such as three-year subscription terms for Microsoft 365 E3 licenses and new channel transfer tools, have further eased the transition from EA to CSP.
For some partners, the writing has been on the wall for a while. Kelly Yeh, president of Phalanx Technology Group, told CRN that his company moved away from volume licenses years ago in favor of cloud-based deals. "We’ve been pushing cloud, so this doesn’t affect our clients." As Yeh sees it, the real value now lies in how deeply customers commit to the Microsoft ecosystem and how they leverage its capabilities, not in the size of their licensing deals.
Ultimately, these twin developments—a surge in AI-powered modernization and a fundamental shift in licensing strategy—underscore a new reality for enterprise IT. The leaders of tomorrow will be those who can not only adopt cutting-edge technology but also adapt to new business models, pricing structures, and ways of working. The future, it seems, belongs to those willing to modernize boldly, invest in resilience and agility, and rethink their relationship with technology providers like Microsoft. For organizations still clinging to legacy systems or old licensing paradigms, the message couldn’t be clearer: it’s time to move, or risk falling behind.
