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Microsoft slashes SMB Office 365 prices by up to 31%

Gregg Keizer | July 11, 2014
Microsoft's price cuts for some Office 365 plans was an attempt to keep momentum on its software-by-subscription push, an analyst said.

Microsoft's announcement yesterday of lower prices for some Office 365 plans was an attempt to maintain momentum on its software-by-subscription push, according to one analyst.

"Usually, you drop prices to get the ball moving, or to keep it moving," said Wes Miller of Directions on Microsoft. "They've probably had good growth in small business, but the easy fruit has been picked. So they needed to make pricing more attractive."

On Wednesday, Microsoft announced three new commercial Office 365 plans — Business Essentials, Business and Business Premium — that will eventually replace another trio, the current Office 365 Small Business, Small Business Premium and Midsize Business.

The new plans will launch in October, and as Miller pointed out, be less expensive in some cases.

Office 365 Business, for instance, will cost $8.25 per user per month, and as a pseudo-replacement for the current Office 365 ProPlus, save customers about 31% per user annually.

Like ProPlus, Business will come with Excel, Outlook, OneNote, PowerPoint, Publisher and Word, but will eschew the Access and Lync clients. It will also be the least cloud-friendly SKU of the new packages, since it will omit off-premises Exchange, Lync and SharePoint. It will come with 1TB of free storage space per user, however.

Office 365 Business Premium — a replacement for both Small Business Premium and Midsize Business — will be priced at $12.50 per user per month, a savings of 17% for companies that now rely on Office 365 Midsize Business. (The $12.50 per user per month, or $150 annually, is the current price of Small Business Premium, which Business Premium also supplants.)

The new plan will include the full Office suite for installation locally on up to five Windows PCs or Macs — as well as on smartphones and tablets — and will come with cloud-hosted Exchange Online, Lync Online and SharePoint Online. Features have been added to make the offering more tempting to customers, particularly Yammer Enterprise and on-premises integration with Active Directory.

It's difficult to gauge the progress Microsoft has made in convincing customers, whether enterprise, mid-sized firms or small businesses, to adopt the "rent-not-own" software subscription model that is at the heart of Office 365. The company has only disclosed subscription numbers for its consumer products — Office 365 Home and Office 365 Personal — but has consistently been vague about success on the commercial front.

Without more information from Microsoft, Miller said, it was impossible to know what really drove the price reductions. On one hand, Microsoft has been adding more features — and value — to Office 365 in general to make the subscription service more attractive, Miller pointed out. This may be part of that trend.


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