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Microsoft's Office 365 Add-ons muddy licensing and make customers pay twice

Gregg Keizer | Aug. 13, 2013
Perhaps useful for dipping toes in subscription waters, say experts, but it means customers pay twice for Office.

Office 365, while giving employees locally-installed copies of Office, offers cloud-based and off-premise email, storage and other services.

Add-ons let companies dip a toe into Office 365, said Blake Gollnick, director of Microsoft licensing at SHI, a New Jersey-based reseller.

"Add-ons are a great way for companies to get involved with Office 365," said Gollnick. "They're not ready to commit to the cloud long-term, they're not transitioning to Office 365 and dropping on-premise licenses, but they can add any number of users they want [to Office 365]. It's a much simpler sales process."

Simpler than moving licenses from perpetual to subscription, anyway.

DeGroot agreed with that. "There's one clearly positive benefit here: There's no minimum purchase requirement, so you can add additional capabilities for just some of your employees, which can be difficult to do in an EA, where by default you license the same capabilities for everyone," he said. "That means that in a regular EA, if you want every capability for some people you have to give them to everyone, even those who don't need it, unless you can negotiate some concessions from Microsoft."

But both DeGroot and Silver wondered why companies would, in effect, pay twice for Office.

"It appears that you can add products, but you don't subtract any on the other side, so you pay twice — once for the perpetual licenses you have in your regular EA and again for the non-perpetual, subscription licenses in the Add-ons," said DeGroot.

Even Gollnick acknowledged the double payments, although he noted that Microsoft provides partial discounts for Office 365 Add-ons. "But customers are still going to pay above and beyond the on-premises [fees]," he said.

Microsoft doesn't publicly reveal the discounts, saying in its promotional materials only that, "[Office 365 Add-ons] pricing recognizes your existing investments in Office and CAL Suites." It also promised that the biggest customers would get the largest discounts.

DeGroot laid out one scenario where add-ons might prove useful. A company could sign an EA for every worker that included only the bare bones, then use the Office 365 Add-ons to acquire more advanced rights for those that really needed them.

"You can add Office 365 E3, which includes those Enterprise capabilities, to a subset of employees who need them, rather than buying them for everyone," said DeGroot. "But Microsoft isn't willing to let customers choose Office selectively, using Office 365 Add-ons."

DeGroot also speculated that Microsoft was thinking as much of its salespeople as its customers when it created the Office 365 Add-ons. "Overall, I'd say that Microsoft has removed a few bumps on the way to Office 365 for some customers," DeGroot said. "It has also made it easier for its own sales teams to add Office 365 to agreements, which they desperately need, since it's impossible for many sales reps to get a bonus at Microsoft these days unless they can show Office 365 traction."


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