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Analysts Predict Competitive Pricing for New Office 365 Subscriptions

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August 02, 2012

Analysts Predict Competitive Pricing for New Office 365 Subscriptions

By Kayvon Ghoreshi, TMCnet Contributing Writer

Microsoft (News - Alert) is slowly building some momentum with its software. Windows 8 has had some nice showings and is users are continuing to get excited over its upcoming October release, and just two weeks ago the company revealed Office 2013 and the new subscription plans for Office 365. However, a very big factor was left out of the unveiling. As observed by Michael Osterman, president of Osterman Research, "They just have not been forthcoming with pricing.”

All of the subscription plans will allow for the download of Office 2013 for Windows or Office for Mac 2011 on up to 5 devices. They will also all include Access, Excel, OneNote, Outlook, PowerPoint, Publisher and Word from Office 2013 (or Excel, Outlook, PowerPoint and Word from Office for Mac 2011).The subscription plans then divulge into one geared towards consumers and the other three towards business.

The Office 365 Home Premium subscription will add in an extra 20GB of storage space on SkyDrive and 60 calling minutes on Skype (News - Alert). The business editions on the other hand, referred to as ProPlus, Small Business Premium and Enterprise, will throw in InfoPath and Lync, as well as access to hosted copies of server-side software such as Exchange, Lync and SharePoint.

And with these new subscription plans, analysts are already foreseeing Microsoft shifting towards a business model where the consumer rents their software as opposed to purchasing it.

"They're competing directly with Google (News - Alert) Apps," added 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, concurred with Osterman."They need to be competitive with Google Apps for Business," said Moorhead in an e-mail reply. "For those businesses and users not married to Office, Google's offering can be very, very compelling, particularly to users with Android (News - Alert) phones and those who grew up on Web tools."

 And in order to be competitive, analysts seem to have come to a consensus that the plan would need to be lower than $6 a month. With that price, five year’s worth of five allowed copies would come out to $360. That comes out to $14.40 per license per year. However, three perpetual licenses cost around $150, which over the same five year period would come out to $8.33 per license per year.

In order for it to be financially logical for consumers, Microsoft would need to lower the price to the $2-$4 range. While that may likely be what ends up happening, it is still a major question mark until the tech giant reveals more details.

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Edited by Jamie Epstein

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