Office 365 subscription price needs relook

Merry new year of the snake! The Chinese believe 2013 is the year of the water snake and depending on which fengshui advice you choose to observe, this year could bring you good tidings--or not--in terms of health and wealth. According to one, very thorough attention to detail is required before any documents are signed...hmmm.

And perhaps Microsoft should have paid a little more attention to the pricing model of its latest Office 365 Home Premium. 

Office 365 Home premium is available to Singapore consumers at S$129.99 per year or S$12 per month, and can be downloaded on up to five devices. Consumers who do not want to be on a yearly subscription model will have to fork out S$179.99 in a one-time purchase for Office Home and Student 2013, but this version is downloadable on only one PC and does not include several features which the subscription model offers including Outlook, Access and SkyDrive.

To someone who has been a long-time Microsoft Office user, I think these prices are way too steep and really wouldn't make much sense for most consumers.

I had been using Office 2003 before purchasing Office 2010 for about S$200 in 2011, so my upgrade cycle for the productivity suite is about five to seven years. I see office productivity suites as an indispensable tool, but not something which offers such compelling new features and functions that I feel the need to fork out $200 each time to upgrade to a new release. Based on my current upgrade cycle, using the yearly subscription model, I would need to pay S$649.95 to S$909.93 in total to continue using Office for the next five to seven years, compared to the one-time $200 I paid for Office 2010.

Okay, let's say that's too long an upgrade cycle and let's assume consumers would rush to the store each time Microsoft launches a new release. Looking at the software vendor's release history over the past couple of decades, on average, a new Office version was unveiled every three years...Office 95, 97, 2000, XP, 2002, 2003, 2007, 2010 and 2013. Using the yearly subscription model, that means I would have paid S$389.97 before a new release is likely due, compared to when I would previously pay a one-time S$200 to own and use the software as long as I wanted. 

The sums just don't make sense. And not just to me, it also doesn't make sense to other consumers. ZDNet reader "dnationsr" said: "I think the price is outrageous. why a yearly subscription? It has always been a one-time cost for the life of the software...I think they are getting pretty greedy."

Another reader "Matt Fahrner" noted the yearly subscription fees would seem reasonable if the consumer was one who upgraded regularly. "If you don't however--not so great. Companies wouldn't be moving to this licensing model if they didn't expect to make more money.  It works for me being stably employed, but it makes life harder for anyone who gets laid off. You literally have to continue to pay 'rent' to have access to tools you may well need to pursue a job."

So, what happens if you let your Office subscription lapse? Your Office apps will be a "read-only reduced functionality mode" which means you can continue to view or print your documents, but you won't be able to create new ones or edit existing documents. To regain full access and functionalities without renewing your subscription, you'll have to use previous versions of Office or opt for Microsoft's free Office Web Apps on Skydrive to access basic editing features.

Microsoft believes consumers will be drawn to the cloud-based subscription model as well as the ability to now use Office 365 on up to five devices including tablets and Macs. But, even with my current Office 2010 which allows usage on up to three devices, I've only used two--one each on my PC and my parents'. Five seem a little excessive to me. The S$179.99 one-time purchase for Office Home and Student 2013 wouldn't fit my family's needs either since I need at least two device installations. 

I do like the idea of a subscription model, though. The industry, afterall, is moving toward a cloud computing and pay-per-use era. 

As ZDNet reader "CharlesDrengberg" noted: "The breakeven point for the new subscription model is 2.5 years...along with having multiple download rights, software assurance built in, cloud license management, and the [SkyDrive] cloud storage included...I'd say you're getting a good deal. The cloud will force us to look at how we consume software differently."

But, Microsoft needs to relook its pricing model and tweak it so it makes more sense for the average consumer. Also, I'd like to know if the vendor will now release new Office versions more regularly than its current two- three-year upgrade cycle, especially since it's asking its customers to pay a premium yearly subscription just to use the product.

More importantly, I'd like to know whether consumers will have the right to receive daily refunds if access problems continue to persist. Office 365 users earlier this month reported experiencing outages and were unable to access their Exchange mail, among other issues. Cloud-based delivery models bring with them connection and access challenges, and this is something Microsoft will probably have to start learning to deal with now that it has Office 365. 

So what's the sweetspot for a yearly Office subscription? For me, S$50 sounds just about right.