Microsoft Office Adopts a Subscription Model, Starting at $99/Year

Big news in the SaaS world — Microsoft is pushing a subscription model for its forthcoming Office 2013. For $99/year, the Office 365 Home

Big news in the SaaS world — Microsoft is pushing a subscription model for its forthcoming Office 2013.

For $99/year, the Office 365 Home Premium offers subscribers Word, Excel, PowerPoint, OneNote, Outlook, Publisher, and Access, plus 20 GB of SkyDrive storage (in addition to the 7 GB that you get for free), and 60 minutes of Skype calls per month. One “account” can be shared by up to five users across any mixture of five PCs and Macs.

While the PC/Mac compatibility is a particularly nice perk, it’s unclear whether users will actually opt for the subscription-based model versus the perpetual license, which is still being offered and priced at $149.99 (but for three computers and not including Publisher and Access). For most single-account users, the subscription model ends up being more expensive. The software is particularly problematic for home users since, if a subscription lapses, they can read, print, copy and download their documents, but not edit them. Is a thesis-writing student or novel-writing Mom willing to commit to a subscription plan for her life’s work?

However, the small business and enterprise models, starting at $149.99/year, may be an easier sell, particularly for companies already subscribing to Office’s Exchange and Sharepoint SaaS. But surprisingly, Microsoft is also sabotaging its own efforts with its “Home Use Program,” where, for 9.95 per license, anyone entitled to use Office at work can also use that same edition of Office at home. Even if companies pass the fee down to employees, many consumers may opt for that instead of their own version of Office.

Thus, even though subscription-based software and online tools can be exceptionally profitable, Microsoft will have a hard time converting the world to a whole new way of payment, mainly because they’ve forgotten to incorporate the most important part of profitably SaaS models — the “lite” and free version that gets people hooked.

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