Office 365 subscription price needs relook

Office 365 subscription price needs relook

Summary: Would you pay S$389.97 in subscription fees before a new release is likely due, compared to a one-time S$200 to own and use the software as long as you wanted? Will Microsoft now release new versions more regularly since it's asking its customers to pay a premium yearly subscription to use the product?

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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.

office2010price_pcshow2010
An old brochure from a 2010 tradeshow in Singapore.

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. 

Topics: Software, Cloud, Microsoft

About

Eileen Yu began covering the IT industry when Asynchronous Transfer Mode was still hip and e-commerce was the new buzzword. Currently based in Singapore, she has over 16 years of industry experience with various publications including ZDNet, IDG, and Singapore Press Holdings.

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26 comments
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  • The whole point of ...

    The whole point of the subscription model is to "suck" more money out of the consumer, than they would've got, if the consumer had just bought the product outright.
    lehnerus2000
    • Constant income...

      another reason companies like the subscription model is that they have a constant income. It doesn't jump to huge pluses when a new version is released, then trail off to a trickle until the next version is released.

      With the subscription model, they don't have to worry about where the money is coming from, it is there every month - it will fluctuate, but not as wildly as the perpetual licence model.

      Yes, for many users, it can work out more expensive - although you have to look at the complete package, the "Home and Student" version is missing several products included in the rental model, such as Access and Outlook. Then you have the additional SkyDrive space and Skype minutes.

      If these aren't useful to you and you don't need/want the latest version when it is released and you don't want the bonus features promised in the rental version, then buy a licence and use it for 10 years between upgrades.

      It gives the user flexibility as well.
      wright_is
  • Perpetual license all the way

    I personally do not need to have the latest version of Office on all my PC's. I will just upgrade one to 2013. I have 2007 on this machine I am running, 2013 on my laptop and 2010 on my workstation PC which I rarely use. I use Microsoft Word a lot but the Cloud is not really a selling point for me since a lot of my work in Office does not require it. My use of Excel is limited to creating weekly print reports and my personal monthly expenses. There are the rare occasions I do use PowerPoint when I need to train colleagues on some new technology. Microsoft Access is pretty much non-existent. I do use Publisher though for flyers, Library member cards, brochures for conferences we might have. The thing with Microsoft Office, it has become so good enough. Every machine I encounter has at least a capable version of Office installed, 2007 or later. Where I work the bulk of all installs are 2007 and everybody seems to be working fine with it.

    The other day, I request a Performa Invoice from a local entertainer and when received the Word doc, I discovered the document was done in Word 2002 based on the icon style. The fact that persons can still be getting work done with even older versions Office that date back to 2001 shows Microsoft is up against a tough competitor. The name of that competitor is Microsoft Office.
    adacosta38
    • If you go a little further..

      If you go even further you might notice that many people can do their work just fine with free tools and may not need MS Office at all.
      chaosfire
  • I think the model makes sense

    1. 5 installations make sense for a household with a few gadgets. I have my fiancé's laptop, my desktop, and my surface. Inevitably when they release office for the iPad my fiancé's iPad will now also be licensed for office.

    2. It includes 60 Skype minutes a month. While for some people this may be useless, for me it saves on some international toll on my cell phone.

    3. It comes with increased Skydrive storage

    4. The 2013 SKU for Home & Student is for a single PC, no more 3 license installation.
    ManuNarayan
    • Also products

      The rental version also includes additional products, which are not in the Home & Student version, you would need to buy the Professional version, which is much more expensive, in order to get the same functionality.

      Obviously, that isn't something that everybody will want. For me, the rental model makes a lot of sense and I'd save money as I regularly upgrade and have several machines.

      For somebody who upgrades 1 or 2 machines every 10 years and doesn't want the latest version, buying the perpetual licences makes more sense.
      wright_is
    • quick questions

      Thank for your post. I simply would like to get your opinion about 2 aspects:

      1) bundle? Commercial law limits bundle sales and cross-selling tactics are trying to be witty. What is one only wants 1 device license on a monthly fee without any other service? On a similar price point, it would be like being forced to have 5 credit cards at the same fee of one with a free happy meal per week. Nice but rather divide the price by 5 and save the happy meal for charities. No?

      2) 5 devices limit. Why any limit actually? When you buy a DVD, should you be limited to play it on 5 registered DVD player? You acquire the right to watch it yourself (kindly your family too) as often as you wish. I see the power Microsoft has to restrict IP rights as it suits them but it seems it does so by power more than a healthy sense of business . What do you think?

      Kind regards
      A.M.
      Agnès Meyer
      • Your core mistake, Agnes

        You're talking as if Microsoft cares about software freedom, EFF style. They couldn't care less, they just want to make as much of your money their money as they can get away with, pushing back on Adam Smith's hand as hard as possible to keep people from realizing that except for their market lock-in, their software products are commodities, nothing more.
        daboochmeister
  • the author didn't get it

    It's NOT about earning more money !!!
    It's about making the income for MS more steadily flow. This way it is a lot easier to predict revenues year after year.
    Theoretically if all Office and Windows customers would run on a monthly payment basis MS could easily predict revenues and therefore make better predictions regarding the future.

    Wallstreet would love this.

    For the consumer though this is a very dangerous way to go because many would loose their oversight about their spendings.
    EnticingHavoc
  • why is this an article?

    I would like to pay $50 for a new Bmw M5 too, but that is not an option. A company will price their product at what the market will pay not at the price you deem is fair. If you are not happy use another product or stick with your old office suite. I clicked on this article thinking I was going to read an insightful analysis, pros/cons instead of I get consumer entitlement drivel.
    chizits
  • Office 365 on up to five devices

    The cloud based model with consumption from the web (the web as a platform) is the Google model and strategy. So it is not surprising at all that MS will make such offers expensive and continue to drive its on premise model - Windows. Using it on only 5 devices makes no sense and is against the idea of a web appliance accessible from anywhere.
    I would not be surprised if MS starts to give away office for free if you just install Windows.
    chaosfire
  • Fewer product improvements with this model

    Monthly subscription makes the entry barrier lower.
    Once locked in a membership, Microsoft doesn't to convince consumers to upgrade (a substantially better product), they just have to remind that their only alternative is an even big lump sum to pay (perpetual license).

    Microsoft is again (like in B2B) moving into a licensing legal strategies to increase adoption and revenues when it fails to convince on a technology/feature-based value proposition.

    let's see if they can get away with it
    Agnès Meyer
  • It's crazy

    to pay $400 for an office suite. Even $200 is too much. Especially when you can get some really good ones for free.
    AnalogJoystick
  • No problem with 365 here

    I use most of the Office apps regularly, on 3 machines. I also use AV and cloud backup software for which I'm happy to pay an annual subscription. Going open source is not an option. So renting Office 365 makes perfect sense to me. Just don't be greedy.
    capeleopard
  • Not the Same Thing

    In that with Office365, you also get Exchange, which will allow you synchronization between your Outlook box on your machine, a web-based version, and your phone. That's a substantial difference, and I'm willing to pay a little extra for that (you get Lync and SharePoint, too, which are actually very useful tools, even in a small-business environment).

    Also, if I remember this right, Office 2002 is just another way of saying Office XP.
    WebSiteManager
  • It's all about your requirements....

    I have started a transition to Google Docs. I find that for 95% of my needs the spreadsheet and word processor are more than sufficient. I have also discovered som other web tools that integrate nicely with Google docs and are able to replace software such as Visio @ a much lower price point.

    While MS new offerings may make sense for some, particularly in the business sector, I think individuals are going to start looking for other alternatives. MS like other legacy companies (Oracle, Dell, etc.) is struggling with the changes that cloud computing is forcing upon their business models. Companies like Google and Amazon don't have the legacy baggage and thus can afford to innovate and offer new versions of the same old products (office suites, servers) at price points that completely undermine the traditional revenue models. Dell going private is an example of a legacy company attempting to get out in front of this so they can retool behind closed doors and reemerge ready to compete in the future.

    MS is not going anywhere, but their footprint is going to get smaller. It will be interesting to see if Apple decides to get in on the web based office productivity game. Their Mac only apps (pages, numbers, keynote, etc.) are very good and only cost $20. Also, let's not forget the cross platform and very capable Libre Office. Again, its about requirements. Unless you really need MS software there are many more affordable options available for office productivity.
    eblgb1@...
  • You're Comparing Apples to Oranges

    Comparing the pricing model for the Office 2013 Home & Student to Office 365 Home Premium isn't a fair comparison. Office 356 Home Premium contains two programs that I regularly use -- Outlook and Access (plus Publisher which I'm just now beginning to use), which aren't available in Office 2013 Home & Student. The fair comparison would have been to compare Office 365 Home Premium to Office Professional 2013 as the complement of components are the same (except with the lack of Skydrive in Office Professional 2013).

    Prior to this version of Office coming out, I was still using Office Professional 2007. I didn't upgrade to Office Professional 2010 because the cost just wasn't worth what the new version offered. At a price point of $99.99 per year, Microsoft would only have to come out with a new version every 4 years in order for the subscription model to still make sense to me. Considering that 1) newer versions will probably be released sooner than every 4 years, 2) that I will receive those new upgrades automatically, 3) I can install Office 365 Home Premium on up to 5 devices, and 4) I have access to Skydrive for document storage, I consider the subscription model to be a bargain.

    But that's just my opinion, I could be wrong.
    WayneW1956
  • I feel pretty much the same way about the American pricing ($100/year).

    I don't mind paying that much for the first year. But I'd like it to drop to $75 or even $50 for succeeding years.

    The customer should be rewarded for providing Microsoft with a steady income (for what would otherwise have been a single purchase) with a future discount.
    GrizzledGeezer
  • A La Carte

    My problem with this licensing model is the same problem I have with my satellite TV and cable models. I I am forced to pay for a lot of content I don't need or want, and I am forced to pay for upgrades which I don't considrer an improvement ( like Dodgers baseball for instance) I do want Outlook but don't need Skype or SkyDrive per se the idea of having to pay Microsoft 12 dollars every month for a product in perpetuity is galling it is only a matter of time before we are we seeing tablets and other computer devices available as lease only. when choice is ultimately taken away from me I will likely find my own solution via hacking.
    rmillersbs
  • The F is silent in lease

    For the most part leasing is a bum deal for the consumer. It more like a death by 1000 cuts; small payments do add up to one major bill and one doesn't t realize how much one is spending. Further more I cannot resell on the used market it to get back some of the money I spend for Office . Like others I have a very long upgrade cycle: Office 2003 on my laptop top and 2007 on my main widows 8 PC, I probably will not update, I can see still using 2003 for another 5 years or more. Then there a financial concern faced with subscriptions that one will not face with ownership. For example what happens if a person gets laid off and unable to afford a subscription, office is in read only mode and one cant write a new resume.

    leasing would work if I do not need all functionality . for example I use Word, Outlook, and Excel but not PowerPoint; I can see a one moth to rent PowerPoint for a rare presentation.
    Scatcatpdx