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Microsoft raises Office 2013 prices to push new Office 365 sub plans

Gregg Keizer | Sept. 20, 2012
Microsoft this week raised prices of its Office suite by as much as 17% and eliminated multi-license packs, all part of a plan to push consumers and small businesses toward new subscription programs, analysts said.

Miller gave Office 365 Small Business Premium a better shot at success, even though, like its consumer cousin, that subscription allows five installs of Office. "The [Office 365] Small Business sounds palatable, and I think many small businesses will adjust to the subscription concept, but for the consumer I'm not quite as convinced," said Miller. "I'm not necessarily convinced that consumers would actually use Office enough to justify the five licenses."

Consumers have also been historically uneasy about software-by-subscription, Miller said.

"Will users grow accustomed to subscriptions?" asked Hilwa of IDC. He wasn't sure.

There's something to their thinking. In mid-2008, Microsoft trotted out Equipt, a subscription bundle of Office Home and Student 2007, Microsoft's now-defunct OneCare antivirus product, and several then-for-free online services, including Hotmail. Microsoft priced an annual Equipt subscription at $70, or about $5.83 per month. Customers were allowed to install Office 2007 on as many as three PCs for that fee, resulting in a per-license, per-year cost over five years of between $23.33 (for all three licenses used) to $70 (for just one license activated).

Microsoft pulled the Equipt plug in April 2009, just nine months after launching the offer.

In July, Rob Helm, a colleague of Miller's at Directions on Microsoft, noted the obvious, that Microsoft failed three years ago at an annual cost 30% less than Office 365 Home Premium.

In fact, Microsoft's now-published prices for Office 365 are higher, 39% higher for Home Premium, 108% higher for Small Business Premium, than a quartet of analysts -- including Helm and Osterman -- said two months ago. Those analysts said the pricing would have to have the must-meet yardstick of just $6 per month if the subscription idea was going to fly.

That was one reason why, even with Microsoft's pricing scheme, which gave a first-glance advantage to Office 365, the experts wondered whether this shift from perpetual licenses to rent-a-suite would work.

Hilwa called it a "blended approach," this mix of old and new. "In the end, Microsoft doesn't care which way people go," he said, as long as they buy into the newest Office.

Only one thing seemed certain. "This is a big gamble," Osterman said. Cloud-based competition, like Google Apps, will only get fiercer. "They're very concerned about losing that premium application business. But Microsoft is still stuck in the old mentality, and trying to defend that turf."



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