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Microsoft raises Office 2013 prices to push new Office 365 sub plans

Gregg Keizer | Sept. 20, 2012
Microsoft this week raised prices of its Office suite by as much as 17% and eliminated multi-license packs, all part of a plan to push consumers and small businesses toward new subscription programs, analysts said.

And Microsoft knows how effective -- and lucrative -- subscriptions can be. Most of its Office revenue comes from that model in the form of enterprise agreements.

Wes Miller of Directions on Microsoft saw the pricing shifts the same way: They are part of what he called a "meticulous plan" to position the Office 365 subscription packages as better deals.

"Microsoft has just put the perpetual license on the higher shelf," said Miller. "You can still reach for it if you want, but they're guiding customers toward the subscriptions."

Those new subscription plans have been priced at $100 per year for Office 365 Home Premium and $150 annually for Small Business Premium. Customers of each receive a full complement of applications, including Word, Excel, PowerPoint, Outlook, OneNote, Access and Publisher -- with Lync only available in Small Business Premium -- as well as extras, notably cloud-based storage space.

The selling point of the subscriptions, however, is their multi-license nature.

Home Premium can be installed on up to five Windows PCs, Macs and Windows tablets in a household, while Small Business Premium, although limited to one user, also offers five device licenses.

At first blush the new Office 365 plans look like a deal. Five licenses for $100 annually versus $140 for one copy? It seems like more a steal than a deal.

And that's Microsoft's strategy.

"The packaged products have much larger upfront fees," said Miller, talking about the single-license perpetual licenses such as Office Home & Student 2013. "And only one install."

If customers do the math, the subscriptions appear even more attractive: The $100 Office 365 Home Premium breaks down to $8.33 per month -- again, for five licenses -- while Small Business Premium translates to $12.50 each month.

"If you think about it, if you're willing to pay $100 for Office now, per year, it's always patched, it's always up to date, and you can put it on five machines," said Miller. "That's not a bad deal."

According to Computerworld's calculations, however, Office 365 may, in fact, be a bad deal.

The most important variables in comparing the new subscription plans with traditional "sold" software are first, the number of licenses a customer actually uses -- or needs, which may not be the same -- while the second is the time between upgrading a traditional, perpetual license-based edition of Office.

The Office upgrade, on average, say analysts, is five years: Customers have historically skipped an edition to, say, purchase Office 2007 but not Office 2010, and instead waited for the next upgrade, in this example, Office 2013.

Consumers do it, corporations do it, the former because of expense, the latter because even though they may have paid for the right to upgrade with Software Assurance, they're leery of change and the requisite retraining of workers.

 

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