In the second half of 2021, Microsoft will release an Office update that will not require a Microsoft 365 subscription. Available for Windows and Mac, this version of Microsoft 365 has been developed specifically for customers who aren’t ready to move their software applications to the cloud or who have unique needs that may be better suited to such a product. The new software will be available as a one-time purchase, and it will include five years of support from Microsoft, similar to how Windows is priced and supported now.
“To fuel the work of the future, we need the power of the cloud. The cloud is where we invest, where we innovate, where we discover the solutions that help our customers empower everyone in their organization—even as we all adjust to a new world of work. But we also acknowledge that some of our customers need to enable a limited set of locked-in-time scenarios, and these updates reflect our commitment to helping them meet this need,” said Jared Spataro, corporate vice president for Microsoft 365.
Two versions of Office 2021
The new Office will be available in both commercial and consumer versions. The commercial version will be called Office Long Term Servicing Channel (LTSC). The LTSC version, which will be available for preview in April, will include enhanced accessibility features and improvements across Word, Excel and PowerPoint. LTSC is a specialty product created for specific business situations:
- Regulated devices that can’t accept regular feature updates
- Process control devices in manufacturing operations that aren’t connected to the internet
- Specialty systems that must stay locked in time and require a long-term servicing channel
Commercial customers will be able to deploy both versions of Microsoft 365.
“We expect that most customers who use Office LTSC won’t do it across their entire organization, but only in specific scenarios. The good news is that you can deploy both Office LTSC and the Microsoft 365 version of Office with the same deployment tools,” Spataro said.
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Because Office LTSC is not connected to the cloud, it will not have all the robust capabilities available in Microsoft 365 apps. For example, it will not include Skype for Business or Teams, which can be added for an additional cost later. The subscription-based Microsoft 365 will continue to get new features and updates that enhance collaboration and security.
Office 2021 for consumer and small business use
Consumers and small businesses will be able to buy Office 2021 as a one-time purchase too. Microsoft said they will provide more details and pricing closer to the product’s release date. Microsoft 365 had 47.5 million subscribers to their Microsoft 365 Consumer version at the end of their second quarter of fiscal year 2021. This represented an increase of 2.2 million subscribers over the prior quarter.
Continued focus on the cloud
Microsoft has developed this perpetual-software-license-based product to serve specific needs, but the company’s primary focus will remain on cloud-based products.
“At Microsoft, we believe that the cloud will power the work of the future. Overwhelmingly, our customers are choosing the cloud to empower their people—from frontline workers on the shop floor, to on-the-go sales teams, to remote employees connecting from home. We’ve seen incredible cloud adoption across every industry, and we will continue to invest and innovate in the cloud as we partner with organizations everywhere to build the best solutions for the new world of work,” Spataro said.
Microsoft’s cloud- and subscription-based products have driven revenue growth for the company. At the end of their second quarter of fiscal year 2021 (December 31, 2020), the company reported revenue of $43.1 billion, a 17% increase year-over-year with double-digit revenue increases in Productivity and Business Processes (13%), Intelligent Cloud (23%) and More Personal Computing (14%).
“It was a record quarter driven by our commercial cloud which surpassed $16 billion in revenue up 34% year-over-year. What we are witnessing is the dawn of a second wave of digital transformation sweeping every company and every industry. Digital capability is key to both resilience and growth. It’s no longer enough to just adopt technology. Businesses need to build their own technology to compete and grow. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform,” said Satya Nadella, Microsoft CEO, on a January 26, 2021 earnings call.
For the last several years, Microsoft’s growth has been fueled by its cloud- and subscription-based products. That makes this development particularly interesting. It shows that Microsoft recognizes that their products don’t suit every company or consumer. It gives the company the opportunity to woo customers to their tools without the recurring revenue, while also giving them a taste (e.g., Teams) of what they could get access to with a subscription. If Microsoft built it, there must be a need and customers will come.