What CIOs need to know about Office 365 and Office for iPad

What CIOs need to know about Office 365 and Office for iPad

Summary: What happens when Apple's App Store restrictions meet Microsoft's confusing Office licensing rules? Chaos, confusion, and potential compliance headaches for businesses, that's what. Here's how CIOs can avoid potentially costly licensing hassles with Office 365 subscriptions.


Microsoft’s Office for the iPad is an unqualified hit, based on Apple's sales charts. The three new iPad apps—Word, Excel, and PowerPoint—have been firmly entrenched in the top three slots among best-selling free apps since its release. (OneNote for iPad was released in 2011, with a major update in September of 2013.)

More surprisingly, Word has been near the top of the Top Grossing list, with Excel and PowerPoint also high on the list.


The new Office for iPad apps earned their place on the Top Grossing charts thanks to in-app purchases by customers who downloaded the new apps and unlocked the full editing capabilities using the in-app purchase mechanism in the app. Each such purchase costs $99.99, with Apple getting 30 percent of the proceeds and Microsoft getting the remainder.

But if you or your employees paid that hundred bucks with the expectation of unlocking the app's capabilities for business use, you're treading on thin ice. The only subscription currently available for purchase through the app is for Office 365 Home Premium, which specifically prohibits commercial use. (Business subscriptions for Office 365 are set up through an organizational portal. There's no practical way to sell those subscriptions via in-app purchase.)

The Office for iPad license agreement is available from each app's listing in the App Store. For existing subscribers, the rights are simply an extension of the Office 365 license agreement:

If you are an EXISTING Microsoft Office 365 subscriber with mobile device rights, you may view, create, edit or save documents subject to the following terms:

Refer to your existing license terms for Microsoft Office 365 with mobile device rights (the service) to identify the entity licensing the application to you and for support information. The terms and conditions for the service apply to your use of the application. [...] You may use and install copies of the application on iPad devices you own or control subject to the service terms and conditions so long as you have a valid subscription license to the service that includes mobile device rights. If there is a conflict between the service terms and conditions and the above, these application terms apply. By using the application, you accept these terms. If you do not accept them, do not use the application.

For new subscribers, a different set of terms applies:

If you are NOT CURRENTLY a Microsoft Office 365 subscriber AND you want to create, edit or save documents (in addition to viewing):

You may not use the application unless you first obtain a Microsoft Office 365 subscription license with mobile device rights (in which case Section A above applies), or you purchase a consumer subscription to Office 365 (the service), as available within the application, in which case the following terms and conditions apply:

You may use and install copies of the application on an unlimited number of iPad devices you own or control subject to the service terms and conditions at http://office.microsoft.com/office-365/FX103453735.aspx so long as you have a valid subscription license to the service. [emphasis added]

Note the section I highlighted above. That in-app purchase is a consumer subscription. It's identical to the Office 365 Home Premium subscription you can purchase online or as a retail key card for the same annual price. (College students and faculty or staff members can buy an Office 365 University subscription at a substantial discount: $79.99 USD for a four-year subscription. It includes the right to install on a single PC or Mac and a single tablet.)

The Home Premium release gives subscribers the right to install the full desktop version of Office on up to five PCs or Macs and to unlock editing capabilities for the iOS apps on an unlimited number of iPads. Although you need an Internet connection to install the Office programs, you don't have to be online to use them.

Office on the iPad is limited to three apps today, but the desktop package includes Word, Excel, Outlook, OneNote, PowerPoint, Publisher, and Access, along with 20GB of extra SkyDrive storage for the primary account holder and 60 minutes of Skype minutes per month. The subscription is good for one year. (Note that the Home Premium edition is soon to be renamed Office 365 Home, with a less-expensive Office 365 Personal addition available when that happens.)

The addition of Office for the iPad makes it even more likely that Office 365 consumer editions are going to show up in your business on consumer devices: Your employees are likely to be using it on their own laptops and tablets, and they’ll probably be connecting to your company network from their home PCs and from iPads they purchased with personal funds.

The trouble is, the license for Office 365 consumer subscriptions specifically exclude those uses. Here’s the relevant portion of the license agreement:

Only one person at a time may use the software on each licensed computer or licensed device.  The service/software may not be used for commercial, non-profit, or revenue-generating activities.

If that prohibition sounds familiar, it’s because the same issue arose when Microsoft released its Surface device, which includes a similar prohibition in the Office 2013 RT license agreement. That issue was eventually resolved with a change to the terms of Microsoft’s Volume Licensing program. All Office licenses acquired through Volume Licensing (Office Professional Plus 2013 and Office Standard 2013) now include Commercial Use Rights for Office Home & Student 2013 RT for the primary user of the licensed device. You can also acquire a “commercial use license” by subscribing to one of the business editions of Office 365.

But there’s no such exemption for Office 365 Home Premium. The latest Microsoft Online Services Use Rights document says that "users who access the online service or related software" must have commercial use rights, which are included with Office 365 Small Business Premium and any Midsize or Enterprise plan that includes the Office 365 ProPlus desktop software. (Office 365 plans that include only Exchange and SharePoint online services don't qualify.)

And that should be a red flag for any business that is concerned about avoiding potentially costly licensing audits. Wes Miller, a Microsoft licensing expert at Directions on Microsoft, says CIOs need to be acutely aware of how each device that accesses their organization is licensed.

If your organization is part of Microsoft’s Software Assurance program (an option in Office volume licensing), your agreement includes commercial use rights for the Office desktop apps. Those rights probably extend to Office for the iPad as well, but there's a Catch-22: without an Office 365 subscription license and corresponding credentials, there's no legal way for users to activate the iPad apps.

The Home Use Program is also fraught with potential licensing problems. That option allows employees and students to download Office Professional Plus 2013 (or Office Home and Business 2011 for the Mac) for 10 bucks, but it doesn't include commercial use rights, nor does it include an Office 365 subscription license that will work with the Office apps on an iPad.


If you anticipate that a significant portion of your workforce will want to use Office on an iPad, your only safe alternative is to purchase a qualifying Office 365 plan for your organization. The least expensive option is the Office 365 ProPlus license, which is available at a cost of $12 per user license per month. That's not cheap, of course, but then neither is the prospect of coming out on the losing end of a software licensing audit.

As cloud services become more powerful and more widely available, these sorts of headaches will become more common. The sooner Microsoft addresses this issue, the better off businesses will be.

Note: This article was originally published in January 2013. It was updated significantly and republished in March 2014, following the launch of Office for the iPad.

See also:

Topics: CXO, Enterprise Software, Microsoft

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • office

    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.
    • Break even

      the break even point for the new subscription model is 2.5 years... along with having multiple download rights, software assurance built in, cloud license mgmt, and the 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.
      • Most businesses that use computers for document preparation plan to replace

        the hardware and software every four to five years. Thus their long term funding is usually set to have the money available at that point, not on an annual basis.

        Mind you, if your business wants a pre-ribbon style office package they can save a lot more money by using Libre Office which looks and works like MS Office 2003, and it's FREE.
        Deadly Ernest
        • Those same folks are generally volumne licensees so ...

          ... their lifecycle replacement remains unaffected. The models Ed talks about for small business are just that. For small business.
          M Wagner
          • Actually, even small and medium businesses work to the same

            time frame due to accounting reasons. Although the smaller businesses will readily extend the time of life of their computers and keep them on hand longer.

            I just checked the prices of the MSO DVD at one of the Aussie on-line stores, and they also sell the O365 annual licenses. The Home and Business DVD is A$235 and the annul Home Premium sub is A$109 - so a 4 year turnover is $436 plus increases in the subs as against $235 for the DVD - sub costs too much for small business. Also, the sub is NOT for business, so the full business sub is likely to be more again. And the information on the on-line retailer (checked with the Microsoft site) the O365 Home Premium can NOT be used for a business at all and the business models on the web site have monthly billing cycles at $13.50 per month or A$162 per annum or higher.
            Deadly Ernest
        • Here's are a few problems with your comment.

          Libre "looks" and works "like" Office 2003. So for free you can use an inferior product that lacks the new features found in Office 2013 and it only functions "like" a product released 11 years ago. C'mon people $99 per year is nothing, most you spend that on Netflix for a year. Heck some of you even spend that on a pair of shoes that will never receive updates and last 5-6 months through normal wear and tear.
          • Tob, name one new function in MS Word 2013 that is not in Word 2003

            and is used by the average user preparing a document each day. I've used MS Word from Word for DOS up to MS Word 2010 - Word 2013 and the Word in MSO 365 are the only ones I've not used. And since MS Word for Windows 2a there has NOT been an added functionality within MS Word that the average user would use on a daily basis, or a weekly basis. Sure MS slip in the odd extra advanced function, but they are so rarely used it's not funny.

            For many people the big thing is to use software that they are familiar with, that they can sit down to use and already know 85% or more of what it does that they use. That is NOT the case between MS Office 2003 and MS Office 2007 or later - the ribbon is such a big change that many people just can't use it. Also, the ribbon often requires extra mouse and key strokes to do things than the old style menus did.

            One place I worked we had no choice but to use MSO 2010 and it's ribbon. I got out my old MS Word for Windows keyboard short cut list and found using that by flicking the pages to find the right keys was usually quicker than using the ribbon got anything that wasn't right there on the first ribbon.

            And before you go on about amending what's on the ribbon and where it is, the average user should NOT have to learn such advanced features to get access to stuff that used to be 'just right there' for them.

            Having Libre Office present the same look and feel and functionality as MS Office 2003 is a huge advantage for many people. It does have a lot of other advanced features that I didn't go into, and one I use a lot is the one click toolbar icon to create a PDF file from the document I'm working on. Another is the native ability to open and work with any of the seven MS Word document formats - something that no version of MS Word can do without additional add-in downloaded and installed.

            The word and spreadsheet presentation and preparation in Libre Office is the same as in all versions of MS Office up to Office 2003 and is far superior to the capabilities of the current versions of MS Office.

            Another point, for me to use MS Office 365 for actually cost me nearer $2,000 per year per seat as we do NOT have free data download here, so every single byte of data uploaded and downloaded from the MS servers has to be paid for. However, even $99 per year is more than $0 per year, and I see no reason to Microsoft that when I can get the same functionality for free. If I really want to use a MS product I can always boot up one of my old computers and use any one of the old copies of MS Office, Word, or Excel I have sitting around.
            Deadly Ernest
          • oops sorry, the first word should be Rob - hit the next key in error

            and didn't notice until after I hit send.
            Deadly Ernest
          • Word is not the most changing product

            but all the latest product offer better cloud syncing just on the surface
            Excel has alot more features, better memory usage, VSTO integration, Analysis cube browsing.. etc When you actually try to use Libre office in any real way it falls flat and fast.
          • A lot depends on what you mean by 'a real way.'

            First, the Cloud syncing only becomes useful if you have a need to constantly have people amending the same document or documents while out and about. Most people with work requirements to be mobile need the documents for reference or print while out - thus the syncing doesn't do much for most people. Also, the great majority of corporate people using office software are sitting in an office doing average document work in a word processor or spreadsheet - again Cloud usage is only an added cost.

            I use Libre Office to write books, prepare documents, and do spreadsheet work all the time and for all of the operations an average or light power user needs it for (ie about 98% of users) is is faster and easier to use than MSO 2003 and ten times faster than MSO 2010 - unless you're using a small screen touch device.

            I no longer to high power spreadsheet work, and haven't for a few years, so I can't comment on that. But the people who need that level of usage are about one tenth of one percent of spreadsheet users. Also, back in 2011 I tried to open an older Excel 4 spreadsheet that was very extensive with lots of formulae and macros in it on a system with MSO 2010 - not only didn't the file open, but MSO corrupted the copy I was opening (the copy was good as it opened perfectly on an older Win 2000 system with Excel 4 that morning. That night I opened the backup copy in Libre Office with no problems - and it ran perfectly. The latest Libre Office opens old MS Word and Excel files with no problems, and natively - something you can't say for MSO.
            Deadly Ernest
          • Yes, true. Also

            a car from 2003 has wheels, stearing, seats, windows and probably a lot of equipment, but new and new cars ar bought and driven daily.

            From an old car perspective - name one thing, new cars have that that 2003 doesn't and is used by average user...

            oh... ESP, DSTC, MP3/iPod connection, lower fuel consumption, more power, better safety ETC.

            And yes, you can get by without all this or you can go and buy adapters for MP3/iPod, USB power and most other stuff.
          • steering... my bad

          • Yes, they have some newer and fancier bells and whistles

            but that doesn't mean they do the job better or are safer. I recently passed a multi vehicle accident where a speeder hit the back of one car and shoved it into two others. The least damaged vehicle was the late 1970s sedan made out of good steel frame and body, while the other cars, only a year or two old, were very badly damaged. The 1970s car was the first struck and was also the only one in good enough condition to drive away. Thus the car analogy you're using fails here. but as to the bells and whistles, they can be added on if wanted. My last vehicle was made before CDs, yet I easily fitted a CD changer to it. My current one doesn't have a MP3 player, but a pocket one can be plugged into it to play through it.

            My current car is a 2003 model small SUV and it has more power than the current version of the same model - same sized motor, but the new one has less power. Don't know why. And I get better consumption as well for some reason.

            However, it comes down to what you want the car or software to do. Taking the car analogy further, why by the latest Jaguar when the driver is never going to make it go that fast. A more accurate point would be to discuss why you want to pay the extra money for the something that just looks different, as that's what it comes down to. Libre Office has all the real functionality of MS Office, just looks like the pre-ribbon MS Office. The easy menu driven system is much quicker and easier to use than the ribbon if you're not using a touch screen - which is the case for most business staff.
            Deadly Ernest
        • Capital spend and depreciation

          Buying software outright involves capital spend against your financials and then depreciation. Subscriptions allow you to expensive outside of capital and for companies that ebb and flow their workforce, it allows flexibility for cancellations. Companies are also coupling this with corporate OneDrive space and management along with Lync collaboration tools.

          Our enterprise researched going to either cloud or open source Office products and there simply was no ROI as employees were less productive. Heck, even I was due to lack of enhanced copy/paste formatting functionality.

          Then there is the 3rd party enterprise apps and plug-ins designed for Office. Some of these are line of business and critical applications. Work arounds would be messy.
          Rann Xeroxx
          • If you have mission critical software that works well only with one

            particular product, then you have to stay with that product. No argument there at all. But for most people that is not the case in regards to standard office software like you have in MSO.

            As to the cost factors, a subscription cost is a monthly expenditure that must be paid each month; thus you need to ensure you have the funds available each month. A capital expenditure is done usually done from specially reserved funds of during times of peak income. In short, you can have a higher regular monthly cost or a higher longer term periodic cost. Some accounting systems allow for software to be expended in the year of purchase, but the usual accounting process is to have the software bought at the time the computer is bought and roll the cost into the capital. This allows you to vary the depreciation expenditure by varying the depreciation time frame if you need to. It also means if you extend the usage past the intended time frame there is no additional cost in doing so - just a higher profit ration.

            Looking at the costs for a medium sized business here in Australia, the MSO Retail Business Pack with DVD is $429 per seat; for O365 business there are 2 rates 1-25 seats at $13.50 per month, 1-300 seats at $16.50 a month (this includes OneNote). Thus a year for the lower business rate is $162 a year. An O365 business sub for 32 months is a little over the cost of the retail DVD per seat; over 4 years the sub will cost $648 per seat as against $429 per seat for the DVD - extend to 5 years and there's another $162 saving to go with the DVD.

            Now, if you expect your business to fold or be sold in 24 to 30 months, you can save by a sub - but long term, it costs more to have a sub.
            Deadly Ernest
        • Outlook?

          Deadly Ernest - I have strongly considered moving our small company's users to Libre Office, but the one thing that holds me back is Outlook. Whether you use Exchange Online or host Exchange yourself - there doesn't appear to be anything as good as Outlook for mail/contacts/calendar. Just did a demo of the web interface for Exchange Online and it's slow and less intuitive than Outlook2010. Any suggestions for our little shop?
    • Works out the same, I think

      Whether you pay the multi-hundred upgrade that Office normally goes for every few years, or $99 a year. I've got a preference for the latter, but I go for monthly insurance renewals as well. SMooths out the cost.
      • Re: Works out the same, I think

        It seems a reasonable deal if you upgrade 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 imployed, 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.
        Matt Fahrner
        • Imployed?

          "employed" dangit!
          Matt Fahrner
          • Who was spellcheck?

            Title says it all