Big changes in Office 2013 and Office 365 test Microsoft customers' loyalty

Big changes in Office 2013 and Office 365 test Microsoft customers' loyalty

Summary: Microsoft's new license terms for retail editions of Office 2013 have received intense scrutiny this week. But those changes are just part of a much larger story. Look closely at Office 2013 and you see Microsoft's radical new business model in action.


If you’re surprised by the revelation that the retail editions of Office 2013 will cost more than their predecessors and come with more severe license restrictions, you haven’t been paying attention.

The retail editions of Office 2013 contain fundamental changes that go well beyond simple changes in the license agreement. They fundamentally alter the way we think of desktop software.

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Microsoft is in the process of a dramatic transition in its core business, one that I first noted last summer. “Services are the cornerstone of Microsoft’s strategy,” I noted at the time.

Microsoft has thrown massive amounts of resources at the task of integrating cloud-based services into its flagship products. SkyDrive is a core part of Windows 8. Office 365 services are fundamental to Office 2013. Azure is moving entire server farms into the cloud.

The subscription-based offerings of Office 365 are just a hint of what’s to come.

The biggest change of all?

You can no longer buy Office, Microsoft’s flagship product, on removable media. You can’t even download offline installer files for the three retail editions of Office: Home and Student, Home and Business, and Professional.

If you purchase a single-user copy of Office 2013 from an online reseller (including the Microsoft Store) you get a product key code. If you buy a boxed copy of Office 2013 from a retailer, you get a product key on a card. In either case, you have to go to, where you’ll see this prompt:


That kicks off the online installer, which streams the setup files to your PC using a process called Click-to-Run. The Office programs you end up with—Word, Excel, Outlook, and so on—look and act just like conventional Windows desktop programs, but they’re actually running in a virtualized environment, allowing them to be updated automatically, without requiring that you use Windows Update. The underlying technology is the same enterprise-grade code that powers application virtualization (App-V) on corporate networks.

If you buy a new PC with a trial version of Office 2013 preinstalled and enter a product key, you get a similar result.


But Microsoft really doesn’t want to sell you that perpetual license. As I pointed out when I did the math on Office subscriptions last September, “Sticking with ‘traditional’ software will cost you dearly.”

That’s more true than ever with Office 2013. Here’s a list of the stark difference between perpetual-license editions of the Office 2013 and the equivalent products sold through subscription:

  • You get much less software compared with the subscription editions. Office Home and Student, at a cost of $140 for a single license, gives you Word, Excel, PowerPoint, and OneNote. With an Office 365 Home Premium subscription, you get those programs and Outlook, Publisher, and Access.
  • You have to pay for future versions. The subscription version always entitles you to the most recent version. With a perpetual license, you pay once but have to pay all over again for new versions.
  • Multi-PC editions are no longer available. In some editions of previous Office releases, Microsoft included the right to install the software on two or three PCs. With Office 2013, the retail editions are for one PC, no exceptions.
  • Your perpetual license is locked to one PC. The new license agreement contains identical language for all three retail editions: “Can I transfer the software to another computer or user? You may not transfer the software to another computer or user. You may transfer the software directly to a third party only as installed on the licensed computer, with the Certificate of Authenticity label and this agreement.” That’s a change from the license terms of previous Office retail versions, which entitled you to reassign licenses between devices you own, as long as you do so no more than every 90 days.

Update: As my ZDNet UK colleague Mary Branscombe points out, some versions of Office 2010 include a comparable restriction. The license agreements for the retail editions of Office 2010 (Home & Student, Home & Business, and Professional) include three separate sets of terms. The Retail License Terms, which apply to boxed (aka "Full Package Product") software, include the ability to transfer licenses. The terms for OEM and Product Key Card copies, however, include this language:

One Copy per Device. The software license is permanently assigned to the device on which the software is initially activated. That device is the “licensed device.”  

That's similar to the way Windows licensing has historically worked. OEM copies are sold at a substantial discount and are locked to the device they're sold with. The Product Key Card for Office 2010 is a way of quickly activating the trial version of Office 2010 that comes with many new PCs. Essentially, it's an OEM copy by another name. What's new in Office 2013 is the elimination of the Product Key Card terms and the removal in the Retail License Terms of the ability to reassign the license rights for retail copies.

That last restriction is the one that has Office users howling the most. And Microsoft’s answer is simple: If you want to move Office licenses between PCs, buy one of the subscription editions, which makes the process practically painless. From a web-based administration page, you can deactivate a license on one device and install a new copy of Office on another, without ever having to enter a product key.


You also don’t have to worry about installing the original version and then applying a service pack and any subsequent updates. The Click-to-Run installer always includes the most up-to-date version.

And if you don't feel like paying for an upgrade, or paying at all, earlier Office versions will continue to work. You will still be able to buy Office 2010 perpetual licenses with their more generous terms for at least another year, maybe two. And the Office Web Apps, which have become quite rich and full-featured, are free for anyone, with a 7 GB SkyDrive allowance included.

The biggest losers in this product transition are software pirates, who have grown fat and rich buying multiple product keys from Microsoft services like TechNet and MSDN and then reselling them to unsuspecting customers. The new retail editions aren’t available through those IT-focused channels.

For PC traditionalists, the sticker shock that comes with trying to buy a conventional perpetual license for Office is sure to cause some anger. From what I can see, Microsoft is fully prepared for that reaction and plans to stick to its guns. It sees perpetual licenses as a dying business, one that it can’t wait to drop.

This sudden shift in strategy is emblematic of the new Microsoft, which isn’t afraid to make big changes that would never have been tolerated at staid old Microsoft. In fact, what Microsoft is doing with Office 2013 and Office 365 is disrupting its own business, before someone else does it to them.

Topics: Enterprise Software, Microsoft, Software

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  • My gripe

    Isn't with the licensing or the price, but the software itself? Microsoft keeps changing the Office UI so dramatically each time, users have to re-learn what they already knew to do the exact same thing.
    This latest minimalist blue/white flat scheme is just plain ugly and confusing.
    • If you're only updating your software every three years....

      Your UI is bound to change. The Office service packs were always about security, bug fixes, and new features, and new releases where big changes in UI, format, and capabilities. With the new subscription model, they can release a slow and steady stream of thought out changes to the UI and work with their users more to make it friendly.

      Also, I like minimalist UI, though I wish there was a darker theme than the grey contrast that's packaged with office like VS's dark theme for those of us who don't like staring at a bright white UI. Also, the new UI is a piece of cake to navigate. You might have issues if you dead set in old work flows though.
      • Change for change's sake

        There was nothing so fundamentally wrong with the old UI that warrants a change. The only reason to change is to reinforce the impression of an upgrade. After all, the really useful features were implemented years ago. As time goes on, all they can do is add increasingly useless features and change the UI.

        They have clearly run out of ideas for useful features to add. They need to keep their revenue stream alive, so changing the UI and moving to a subscription model is all that is left.

        Changing the UI in each version is akin to changing the keyboard layout on each generation of PCs. Sure, QWERTY is not ideal and has its roos in the mechanics of typewriters, but people are so accustomed to the layout that attempts to change the key order have failed. UIs are similar. It is easy to make a change that reduces useability.
        • I kind of agree

          Not I've just argued that change is bound to happen, but at the same time I do think that MS didn't really know where to go next. Office was so successful, that no real competition existed for years and being that much in front means you have no where else to look for inspiration. Not saying that's a good excuse for
          • Sorry

            I think I was done though. Just strike the last word of my previous comment.
          • not exactly

            There are still dozens of features from 1-2-3 and Quattro Pro which Excel still lacks, some for close to 3 decades. Excel 2013 just added a FORMULATEXT function which brings to Excel a feature 1-2-3's @CELL had in 1989. Progress!

            And it only took MSFT until Excel 2010 to include a MOD function which actually managed 64-bit IEEE real numbers.

            Many other things would be nice, but adding actual features lacks the ROI that adding eye wash does.
          • That's why I still use 1-2-3 on DOS, hrlngrv

            So far, no one, not even Lotus in later flavors, has beaten the functionality of 2.x version of Lotus 1-2-3 for DOS. Can't do proper commutations functions, without it. Back in 1985 I wrote my first DB and DC pension administration programs in Lotus 1-2-3, and am still using them today. Was a bit of a hassle to reprogram them for Pension Protection Act, but it works. So now when I do a case, the 5500 data, Schedule SB, and all the other needed stuff get calculated the moment I finish inputting census and assets. The only way I can get that to work in Excel is if I IMPORT the 1-2-3 worksheet.

            Funk Utilities made a spreadsheet auditing program to go with DOS 2.x 1-2-3. Nothing today beats it, either.
        • I disagree.

          The UI change in Office (Drop downs to the Ribbon) was warranted. The Ribbon presents options in a much more visual and appealing way than the archaic drop down.
          The one and only, Cylon Centurion
          • I disagree, disagree

            The Ribbons made all of the simple tasks more readily available at the expense of all the deeper more complex tasks being perminantly more difficult to access. If they had done that right it would have had the Ribbons but allowed the ability to change back to the "Microsoft dictated format every other software designer was supposed to follow to get Microsoft Windows certification". Since that is only a graphical interface it would have been quite easy to provide options for changing that out.

            They only got away with it because their competetion has long ago, been beaten down to bankrupcy or to being a minor low-cost or freeby software alternative. I can only hope that Sun or Corel puts some effort into their office software now. Perfect example of what happens when there is no competetion in a product area.
          • ribbon

            And yet now in Office 2013 the ribbon defaults to autocollapsed, making its heralded visibility no better than the drop-down menus of old, and inferring that MSFT finally recognizes the ribbon takes up too much vertical screen space.
      • Grey theme

        There is a grey and dark grey theme. Go to file->account and select the colour you want from the drop down menu.
    • Customers' gripe is as stated

      The current UI is bloatware and in the way. One out of 20 customers are positive about 2007/2010 due to the 'ribbon.'
      What MS is doing is alienating the family. Many families place the same version on their home PCs. Families do not have the money to make software their big purchase - they have other expenses called: kids, food, utilities, education, activities, mortgage, bills, LIFE.
      Sure - MS thinks that software should be the center of the family - however, that is not the way of life. A PC and its software is a TOOL.
      When MS bloats a system - it slows the system and disturbs efficiency.
      MS has forgotten its original path - make things easier for the enduser ( drivers, etc).
      • Subscription contains 5 licenses

        ...I believe the subscription model carries licenses for up to 5 PC's. I upgraded to Office 2010 just last month; I wish I had known about this new plan. sounds like a good deal.
        Old N' Cranky
        • If you upgraded last month to 2010

          You're probably eligible to upgrade for free to the equivalent 2013 version or a year of 365 Home Premium. If you go to you can figure out if you are or not and upgrade if you like.
          • not a free 'upgrade'

            The thing is, it's not "equivalent"! I had my friend wait to upgrade to 2010 from 2007.. she needs to move slowly, just so we could get the free 'upgrade' deal. But when I went to download, I was pretty shocked that her 3-license Office 2010 only got her a single (and now I know device-attached) license. Nothing equivalent about it!! If anything, I'm glad I got her the 2010 version before they stopped selling it.
            Dgr Rse
        • But how is that subscription plan going to affect people

          with satellite internet that have a 400MB download cap? That's going to be the big factor with going from hard copy to online sub. Not everyone has cable or DSL availability..

      • Said goodbye to Microsoft Office in the home 4 years ago

        ROFL... This isn't an issue for me (or anyone) as a home user. The only reason we needed to install Microsoft Office in our home was for a college required class my wife took for Microsoft Word. Thankfully we just extended the trial for the three months of her class, then uninstalled "that huge piece of crap" (as my wife called it) and went back to LibreOffice.

        LibreOffice is on most of my extended family's computers, and it's great for home use!

        Now in my corporate work, we're still stuck on Micorosft Office. But thankfully we upgraded to 2010 last year, which does exactly what everyone in the office needs it to do. Open the 2007 xlsx and docx files easily and flawlessly. So we'll likely be sticking with 2010 for another 3 years, since we bought a few extra licenses for new computers.

        Otherwise, we're working on moving off of Exchange and all it's craziness, and then hopefully I can get some people hooked on using shared Google Spreadsheets (it's so cool to see each others work online at the same time!)
        Technical John
        • Exchange

          Let me know when you find a full-featured replacement for Exchange.

          Exchange has it's flaws, but there aren't any viable alternatives. That's what really locks MSOffice in at the workplace.
      • Agree!

        I have to use MS Office 2007 and 2010 at work, and I absolutely HATE the ribbon. Instead of having all the buttons I want ready to hand in a toolbar, I now have to click on the relevant tab to get to the function I want. An unnecessary nuisance when I can remember WHICH particular tab I need, but a royal pain when I have to go flicking through several just to find what I want.

        "Sticking with ‘traditional’ software will cost you dearly."

        Why? I am happy with Office 2003 at home. No ribbon, nothing more to pay!
        Which, of course, is *precisely* why MS wants everyone to move to the subscription model.
        • You obviously haven't looked at the Quick Access Toolbar

          Bing it, and you will see that Office 2007/2010/etc., offers just what you claim you want: The very functions that you most want, in a completely accessible way. (In my case, open file, close file, save, save as, quick print, etc.)

          Or, it is possible that you are actually not a user of a version of Office that uses the ribbon, and are merely trying to downplay it. I have no way of knowing.
          Ian Easson