Got SA? If not, expect Office 365 pricing increase

Microsoft will institute a 15% price hike for Office 365 enterprise volume subscribers without a Software Assurance plan.

There's no summer sale for Office 365 pricing.

Microsoft will raise the price of Office 365 Enterprise versions by 15% in August for customers without a Software Assurance (SA) agreement for Microsoft products. An SA subscription enables customers to upgrade software for three years. An estimated Open License price for SA for Office Professional Plus 2013 is $295.

"Overall, I'm surprised by the price increase," said Paul DeGroot, principal consultant at Pica Communications in Camano Island, Washington. "I think Microsoft may be responding to the fact that many customers are not renewing Office."

There is little incentive for customers who have deployed an on-premises version of Office 2010 to upgrade to Office 2013 or migrate to Office 365 because of Office's perpetual license.

The argument is weird. If you buy SA, then you won't have this 15% price increase.

Paul DeGroot,
principal analyst, Pica Communications

"If you buy Office 365 and have an [Enterprise 3 or Enterprise 4 subscription] today, you get the same version of Office you already own with Office 2013," DeGroot said. "[Since] you already have a license, [it's like saying] 'OK, I paid off the mortgage on the house, then I'm going to … pay [the bank] rent.'"

Currently, Office 365 Enterprise 1, Enterprise 3 and Enterprise 4 (E1, E3 and E4) subscribers pay $8 per user, per month, $20 per user, per month and $22 per user, per month, respectively. A 15% price increase for E1, E3 and E4 subscribers brings fees to $9.20 per user, per month, $23 per user, per month and $25.30 per user, per month, respectively. E1 subscribers do not have a desktop option, nor is there editing capability for Office for Mobile.

"Microsoft is likely increasing the cost of Office 365 to keep the product priced appropriately relative to the value of the service," according to Chris Hertz, CEO and founder of New Signature, an IT systems integrator in Washington, D.C. "[I] will be interested to see how the pricing changes not only on the Office 365 suite, but also relative to the individual components."

Microsoft claims that the majority of its customers will not see an increase in the cost of Office 365. All existing Office 365 Enterprise Agreement (EA) customers are guaranteed prices will not change for the duration of their agreements. New Office 365 EA customers that don't have a previous investment in Microsoft products will see an increase to align pricing with Microsoft's other channels, a company spokesperson said.

Some see Microsoft's strategy as a sales tactic to drum up more SA contracts.

"The argument is weird. If you buy SA, then you won't have this 15% price increase," DeGroot said. "'If you pay us more money right now, you won't have to pay us more money later.' Most people think the economics is actually better to pay more later."

DeGroot said he believes pricing is not balanced. There is a 15% price hike, but SA on Office products is 29% of the license per year, while an SA on other server products like Exchange and Lync is 25% per year, he said, pointing out that Microsoft is offering a 15% break if customers pay them 25% to 29% per year.

Hertz agreed that Microsoft wants customers to add SA to their contracts, but he noted that it also enables them to take advantage of always being current.

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