Midterm upgrades for Microsoft 365 subscriptions
Microsoft has introduced new options that allow you to upgrade eligible 1-year subscriptions to 3-year term midterm or at renewal in the Cloud Solution Provider (CSP) program.
This change applies to Microsoft 365 E3, Microsoft 365 E5, Microsoft Teams Enterprise, Microsoft 365 E5 Security and Microsoft 365 E5 Compliance.
This means, if you currently have a 1-year subscription, you can now upgrade to a 3-year subscription of Microsoft 365 E3 or E5 at any point during the term. This also includes subscriptions for end-of-sale (EOS) products that include Teams.
Term flexibility for EOS with conversion SKUs
Starting May 1, 2025, Microsoft will allow subscription term changes for End of Sale (EOS) Stock Keeping Units (SKU)—these are Microsoft 365 and Office 365 Enterprise suites that include Teams. You can change from monthly to annual or from annual to triennial terms midterm, while retaining your Teams entitlement. However, downgrading from annual to monthly midterm is not permitted.
Promotion Eligibility and Limitations
Microsoft is offering two promotional options for new customers:
- A 15% discount on annual term subscriptions of Microsoft 365 E3 or E5.
- A 10% discount on 3-year term subscriptions of Microsoft 365 E3 or E5.
However, these promotions are only available to customers who are new to the respective product. For example, if you already have a Microsoft 365 E3 subscription, you cannot qualify for the E3 promotion—even if you switch to a 3-year term, no matter the original buying program (e.g., when switching from EA to CSP). The same applies to Microsoft 365 E5.
If you are upgrading from E3 to E5 and are new to E5, you may qualify for the 3-year E5 promotion.
If you already have a promotional price on your annual subscription (for example, the 15% discount on Microsoft 365 E3 or E5 annual term), and want to switch to an equivalent 3-year term, you should not change midterm. Instead, wait until the renewal date and schedule the term change at that time. This way, you retain your current promotional pricing for the annual term until it ends, and then move to the 3-year term. The 3-year term will be at standard pricing as the 3-year promo does not apply.
If, instead, you already have a promotional price on your annual subscription and want to upgrade from E3 to E5 while switching from a 1-year to a 3-year term, the upgrade date should be as close as possible to December 31, 2025 (the end of the 3-year term subscription promotion). This way you make use of the 15% discount on your annual term of Microsoft 365 E3 as a long as possible before switching to the 10% discount on your triennial subscriptions of Microsoft 365 E5.
Upgrade & Transition Scenarios for Microsoft 365 E3/E5 3-year term subscriptions
| Scenario | Allowed? | Eligible for 3-Year Promo? | Notes |
| Upgrade from Microsoft 365 Business Premium to 3-year Microsoft 365 E3/E5 | ✅ Yes | ✅ Yes | Promo eligible if customer is new to E3/E5 |
| Upgrade from Office 365 E3/E5 to 3-year Microsoft 365 E3/E5 | ✅ Yes | ✅ Yes | Promo eligible if customer is new to E3/E5 |
| Upgrade from Microsoft 365 E3 to 3-year Microsoft 365 E5 (new to E5) | ✅ Yes | ✅ Yes | Must be new to E5; also promo eligible if upgrading mid-term; you can upgrade all eligible licenses (full upgrade) or some licenses (partial upgrade) to E5 |
| Switch term from Microsoft 365 E3/E5 with Teams (1-year EOS SKU) to equivalent 3-year with Teams | ✅ Yes | ❌ No | Counts as equivalent product |
| Switch term from Microsoft 365 E3/E5 with Teams (1-year EOS SKU) to equivalent 3-year without Teams | ✅ Yes | ❌ No | Counts as equivalent product |
| Midterm switch from annual to 3-year term (same SKU) | ✅ Yes | ❌ No | No promo for same SKU term change |
| EA to CSP transition to equivalent Microsoft 365 E3/E5 with/without Teams SKU | ✅ Yes | ❌ No | Not considered new customer/upgrade; Teams entitlement retained for prior “with Teams” licenses |
| EA to CSP transition to upgraded Microsoft 365 E3/E5 with/without Teams SKU | ✅ Yes | ✅ Yes (only if new to E3/E5) | Promo eligible for upgrades; Teams entitlement retained for prior “with Teams” licenses |
| Purchase of 3-year E3/E5 with Teams by customer without Teams history | ❌ No | ❌ No | Only available to existing Teams customers |
| Purchase of 3-year E3/E5 without Teams by customer with Teams history | ✅ Yes | ✅ Yes (only if new to E3/E5) | E.g. Microsoft 365 E3 with Teams -> Microsoft 365 E5 without Teams |
| Purchase of 3-year E3/E5 by customer with any E3/E5 history | ✅ Yes | ❌ No | Not eligible for promo |
| Purchase of 3-year E3/E5 by new customer (no prior E3/E5) | ✅ Yes | ✅ Yes | Must meet 100-seat minimum |
| Add seats during 3-year promo term | ✅ Yes | ✅ Yes | Up to 2,400 seats per SKU; can add more, but all additional seats (2401 – unlimited) have standard pricing |
| Reduce seats during 3-year promo term | ❌ No | ❌ No | Not allowed under MCA rules |
| Cancel subscription after 168 hours | ❌ No | ❌ No | Only allowed within 168-hour window |
| Co-term E5 Security/Compliance with 3-year E3/E5 | ✅ Yes | ❌ No | Co-terming allowed, but not part of promo |
Pros and Cons of Microsoft 365 3-Year Term Subscriptions
| Pros | Explanation |
| ✔ Long-term price protection | Locks pricing for 36 months, protecting of future price increases or currency fluctuations. Ideal for budgeting and financial planning. |
| ✔ Promotional discount (10%) | New-to-offer customers can lock a 10% discount on eligible 3-year SKUs until December 31, 2025. This protects the pricing for three years, compared to the 15% discount on annual subscription term licenses, which (if the promo is not extended) will only last for one year. |
| ✔ Flexible billing options | Choose between paying the full amount upfront (triennial/triennial) or spreading payments annually (triennial/annual). |
| ✔ Simplified license management | Reduces the frequency of renewals and administrative overhead compared to annual terms. |
| ✔ Seamless EA to CSP transition | Customers moving from Enterprise Agreements (EA) to CSP can retain Teams entitlements and benefit from price protection in CSP. |
| ✔ Co-terming supported | Align subscription end dates across multiple products (e.g., E5 Security, Compliance) and subscription terms (you can have one-year and three-year term subscriptions running in parallel) for easier management. |
| ✔ Seat expansion allowed | You can add seats at the promotional price during the term (up to 2,400 per SKU). |
| Cons | Explanation |
| ❌ 100-seat minimum per SKU | Each 3-Year SKU requires a minimum of 100 seats, which may not suit smaller organizations. |
| ❌ No seat reduction midterm | Once committed, you cannot reduce the number of licenses during the 3-year term (same as with annual subscriptions, but here, the term is longer). |
| ❌ No cancellation after 168 hours | After the 7-day cancellation window, the subscription is locked in for the full term (same as with annual subscriptions). |
| ❌ Not eligible if customer has prior purchase history | The 10% promo only applies to customers who have never purchased the same or equivalent SKU across any Microsoft channel. |
| ❌ Midterm upgrades don’t qualify for promo | Changing from a 1-year to a 3-year term midterm does not make the customer eligible for the promotional discount – only when upgrading. |
Summary
Transitioning from 1-year to 3-year Microsoft 365 subscriptions under the Cloud Solution Provider (CSP) program offers significant advantages—but also comes with important conditions. While you gain long-term price protection on promotional pricing (10% off), you must also consider the 100-seat minimum per SKU, strict eligibility rules for promotional pricing, and the long-term commitment to licenses.
To ensure a smooth transition and avoid losing existing discounts, it is essential to plan upgrades carefully—especially if you’re currently benefiting from a 1-year promotional offer.
Also, you can run 1-year and 3-year term subscriptions in parallel, if you want to run a diversified licensing strategy.
If you’re unsure whether your organization qualifies for the 3-year promotion or how to structure your Microsoft 365 licensing strategy, SCHNEIDER IT MANAGEMENT is here to help.
Get licensing consultancy from our experts
At SCHNEIDER IT MANAGEMENT, we specialize in helping organizations like yours navigate Microsoft licensing with confidence. Whether you’re planning a midterm upgrade, transitioning from an Enterprise Agreement (EA), or evaluating long-term cost strategies, our team is here to support you. Contact our Microsoft licensing experts to optimize your licensing today.
