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Office 365 for consumers will cost less than $6 per month: analysts

Gregg Keizer | July 27, 2012
Microsoft must aggressively price its Office 365 subscription plans, perhaps as low as $2 a month, to convince consumers that it's better to rent software than to buy it.

Microsoft must aggressively price its Office 365 subscription plans, perhaps as low as $2 a month, to convince consumers that it's better to rent software than to buy it, analysts said today.

When CEO Steve Ballmer and other executives unveiled Office 2013 and new Office 365 subscription plans two weeks ago, they left out some important details. Price was at the top of the list.

"They just have not been forthcoming with pricing," observed Michael Osterman, president of Osterman Research.

Microsoft has laid out four new Office 365 subscriptions that include the right to download and install the upcoming Office 2013 for Windows or Office for Mac 2011 on as many as five devices -- desktop or notebook PCs or Macs, as well as Microsoft-powered tablets -- per user.

All editions offer Access, Excel, OneNote, Outlook, PowerPoint, Publisher and Word from Office 2013 (or Excel, Outlook, PowerPoint and Word from Office for Mac 2011). The consumer-oriented Office 365 Home Premium will also include an additional 20GB of storage space on SkyDrive and 60 Skype calling minutes.

The for-business editions, called ProPlus, Small Business Premium and Enterprise, add InfoPath and Lync, and access to hosted copies of server-side software including Exchange, Lync and SharePoint.

Without hints from Microsoft, analysts struggled to place their bets on the company's new strategy that will try to convince everyone to "lease" Office rather than buy a perpetual license.

In lieu of direct comparisons, they used what yardsticks were at hand: Google Apps' pricing and that of the current Office 365 crop, which target only businesses.

"They're competing directly with Google Apps," said Osterman. "[Google Apps for Business] costs $5 per user per month. Google is the nemesis of Microsoft. So Microsoft's [pricing] has to be comparable to that. They need to compete."

Patrick Moorhead, principal analyst at Moor Insights & Strategy, agreed.

"They need to be competitive with Google Apps for Business," said Moorhead in an email reply to questions Thursday. "For those businesses and users not married to Office, Google's offering can be very, very compelling, particularly to users with Android phones and those who grew up on Web tools."

Others relied on Microsoft's Office 365 subscription plans, even though the comparisons were apples-to-oranges.

Unlike the current Office 365 plans, the new ones will target consumers, too. In fact, that's one of the most intriguing concepts to come out of the Office 2013 preview announcement. But today's Office 365 programs include services unsuitable to consumers, and most do not give users the right to install Office on their computers.

Only the highest priced "E3" and "E4" plans provide five installs of Office 2010 on the desktop, but their $20 and $22 per user per month fees were quickly discounted by the experts as unreasonable for Office 365 Home Premium. At the bottom of the scale, the "P1" program, while only $6 per user per month, offers the cloud-based Office Web apps for Excel, OneNote, PowerPoint and Word, not Office on the desktop.


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