Cloud Insight

Is Microsoft Office 365 Taking You For A Ride?

8 May

Microsoft Office has been the desktop publishing, word processing, presentation, and spreadsheet tool for most people for a long, long time. Anyone who grew up in the 80’s and 90’s remembers the original Microsoft Word and its predecessors. Of course, who can forget their first foray with Microsoft PowerPoint? A magical beast that transformed your words & images into captivating animated presentations.

Now, fast forward nearly two decades and Microsoft Office still dons the laptops and desktops of almost every user. This is certainly not by mistake, of course. The popular PC makers of the time including Dell, IBM, Gateway, and more struck deals with Microsoft to install their software by default. This meant that almost anyone who purchased a PC would have Microsoft Office for their word processing or presentation needs; among other things. Of course, the Macintosh or Apple products were still several years away from regaining popularity, and even then, they knew it would be impossible to block a Microsoft Office version for their machines, no matter how hard they tried.

If we remember the old methods of installing software, you know, before this thing called the Internet became such a popular tool, we remember dropping a compact disc (CD) into a disc drive. Some may even remember installing software from a floppy disk (gasp!). Well of course, as time has passed technology has made our lives simpler in this regard. No more floppy disks, no more CD’s, just an Internet connection and endless possibilities. Throw in cloud technology and you’ve got yourself a party!

Speaking of the cloud, Microsoft recently began offering a cloud-based subscription service known as Office 365. Ah, Microsoft Office all year ‘round, as if we didn’t already use it almost all the time anyways. All kidding aside, Office 365 was a unique product when it was announced by Microsoft. The diva of office PC’s was moving its business to the cloud.

Of course, the most talked about benefits of Office 365 are its accessibility – being able to access from anywhere, from any computer – and its price. Wait…its price? I mean, Office 365 would have to be cheaper right? Not so fast. In fact, in a recent meeting with Wall Street, Microsoft’s CFO, Amy Hood, explained the difference between the old model and the new.

The old model, of course, was basically a one-time purchase – at least until the updated product was released and your current version was no longer supported. The new model, a subscription based online service allows Microsoft to offer many products on an ongoing basis. Hood explained this in more vague terms, “…the increased reach, the increased frequency in this example, as well as some yield, adding some incremental services, results in a 1.8 times lifetime value of that user…”.

So, what does this mean exactly? This means, that as far as Microsoft is concerned, the user who switches to Office 365 is worth up to 1.8 times what that user was worth before, using the old method. Even when it came to Enterprise clients, who often were required to sign up their Software Assurance program as well, those clients are now worth nearly 1.4 times what they were before.

But, how is this possible? I mean, isn’t one of the selling points that Office 365 is a better investment? That it costs less over time? Perhaps it does, in some cases. However, the main selling point behind Office 365 is convenience. In the past, it was difficult for organizations to stay up to date with new Office versions. Consider a company with 500 employees, each of whom has a company laptop with Office. Getting all those people to bring their computers in for an update is not easy, nor quick. With Office 365, there is no need to worry about updating.

Ultimately, we pay a higher price for convenience. This is certainly not lost among American social or business culture – especially in a growing technological world where convenience and ease reigns.

But, are we really paying more than we were before? If we take a look at this chart below from Microsoft you would think to yourself, “Yes, we are”. However, you have to consider a few factors such as what version of Office were customers using before, and what type of license did they have?

Chart showing different kinds of Microsoft Office 365 customers

While you probably will pay a little more with Office 365 than you did with a traditional Office license, it’s a fair deal because you are also getting more enhanced service and a better user experience. The automatic updates are enough to warrant the cost considering you could make that money back by utilizing your IT resources elsewhere.

So, Microsoft Office 365 isn’t a bad deal in the grand scheme, and while some may think it’s just a plot to get their hands deeper in our pockets it really does provide some benefit when it comes to the bottom line.