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More Office 365 subscription plans, pricing changes ahead

Diana Hwang

Office 365 subscription plans and pricing changes for small and medium-sized businesses are scheduled for the fall, marking the second round of pricing changes disclosed in as many weeks.

Microsoft will replace existing Office 365 plans for small and medium-sized businesses (SMBs) on Oct. 1, while cutting the per-user monthly price for midsize businesses and raising the small business plans' subscriber caps from 25 to 300 users.

The new pricing follows news last week that Microsoft intends to institute a 15% price hike for Office 365 enterprise customers without a Software Assurance agreement, beginning in August.

New Office 365 subscription plans

I like the nomenclature as it simplifies things.

Jamison West,
CEO and founder, Arterian

The new plans include Office 365 Business, Office 365 Essentials and Office 365 Business Premium.

Office 365 Business Essentials replaces Office 365 Small Business, which includes the basic cloud-based Office Online, email, calendaring, instant messaging, video conferencing, 1 terabyte (TB) of OneDrive storage and online meetings. It will also include Yammer and Active Directory integration. The plan costs $5 per user, per month, the same price as the existing Office 365 Small Business version.

Office 365 Business includes the Essentials plan but adds the full suite of desktop Office applications -- versus just Office online -- along with 1 TB of OneDrive data storage and the ability to create, edit and share documents across PCs, Macs and iOS tablets and smartphones. Pricing is $8.25 per user, per month. It replaces Office 365 Small Business Premium, which costs $12.50 per user, per month, with a 20% discount or $15 per user, per month without a discount.

Office 365 Business Premium includes features from the Office 365 Business and Essentials plan and replaces the Office 365 Midsize Business plan for $12.50 per user, per month.

Some IT pros view the changes in a positive light.

"I like the nomenclature as it simplifies things," said Jamison West, CEO and founder of Arterian, an IT consulting and support organization based in Seattle.

The 300-user cap also makes it clear as to whether organizations should subscribe to the new plans or sign up for an Enterprise plan.

Microsoft will begin migrating existing Office 365 Small Business and Premium Business subscribers to the new plan by raising the user cap to 300 users on Oct. 1. Current Office 365 Midsize Business plan subscribers whose cap is already at 300 users will get a price reduction upon renewal. New midsize business subscribers will pay $12.50 per user, per month beginning Aug. 1 instead of the previous $15 per user, per month fee.

However, changes to customer's core subscriptions will not require businesses to take action until their renewal after Oct. 1, 2015. Microsoft's policy is to provide businesses a 12-month notice for major changes to its plans.

Rebranding happens

Microsoft rebrands its products every three years, and the new plan names are part of its typical cycle, analysts said.

It suggests that Microsoft is incapable of developing programs that survive over the long term, but the rebranding for these services is pretty good, according to Paul DeGroot, principal analyst at Pica Communications in Camano Island, Washington.

Removing the small and medium-sized business labels sets aside confusion as to what constitutes a small or midsize organization.

"Every organization has a definition of what a small business is," DeGroot said. "[Even] the Small Business Administration has its own definition. ... using names like 'small,' 'medium' and 'large' [businesses] may not reflect a particular buyer's perception of themselves."

Observers reacted positively to the new plans' price reduction but with a caveat. The price reductions for these products could mean lower revenue for the partners, DeGroot said. It could be offset if more subscriptions are sold, he added.

However, Arterian's West did not seem concerned and said the move could signify a shift in how businesses view cloud services in the future.

"Pricing on this type of [service] is becoming commoditized," he said. "It is inevitable and is in the best interest of the clients."

"If Microsoft doesn't compete on pricing, then partners are going to lose in the long run anyway," West said. "It is about the services you wrap around it [with] migration and ongoing support that add value for the clients and revenue for the partners."


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