Comparing Office 2013 and Office 365 pricing, packages

Stuart J. Johnston, Senior News Writer

Before Microsoft Office, people bought programs, such as word processors, as individual products. Microsoft introduced a bundle of applications called "Office" in 1989. (By the way, that first version was for the Macintosh. Windows did not become an important operating environment until 1990.) That is how it started and how it became a massive hit with users.

Later, Microsoft came up with a BackOffice suite of server applications that worked with the Office desktop applications. These included Exchange email, Windows Server (Windows NT Server at the time) and SQL Server relational database. Over the years, Microsoft added other back-end components, such as SharePoint Server, for collaboration between users and groups, and Lync Server, for unified communications.

That was a useful and intuitive model, and it was generally easy for IT and licensing professionals to understand.

How did we get from a fairly simple set of offerings -- bundles of desktop productivity software designed to work with bundles of server software -- to the confusing array that Microsoft offers today?

Cloud computing is transforming how a myriad of computing services are delivered to users. It also creates a conundrum for Microsoft, in terms of how to package and market the front-end and back-end features that users want at a price they're willing to pay on a on a subscription basis. To help make the shift, Microsoft needs to try to serve the needs of IT pros who do not trust moving their critical data and applications to the cloud.

The company offers both classic on-premises Office packages and three editions that are provided on a subscription basis. Two of these are designed for the small-business, home-business markets, but the third, Office Professional Plus 2013, is built for enterprise use.

One of the benefits of the subscription model is that users run the latest code, which is automatically installed, whereas local, on-premises deployments require periodic manual updates.

“Microsoft Office has faced competition from inexpensive or even free desktop applications, such as Google Docs and IBM SmartCloud Docs, that run inside a browser.”So, beginning with Office 2010, Microsoft provided a streamlined set of browser-based productivity applications. The Office Web Apps are not full-featured products like Microsoft Office, though they are gradually moving in that direction.

What are the details of Office 365 features, and how is Microsoft Office priced?

With the arrival of managed hosting, Microsoft initially offered back-end server services under the name Business Productivity Online Suite (BPOS). BPOS would allow Microsoft to sell hosted server software services on a subscription basis.

That changed again with Office 365, in 2011. Office 365 is the follow-on to BPOS.

Despite the Office moniker, most editions of Office 365 do not actually include Office 2013 productivity applications.

With Office 365 Small Business Premium, subscribers are entitled to locally install and use Word, Excel, PowerPoint, OneNote, Outlook, Access and Publisher. These apps can be streamed to a different device if the user's normal PC is unavailable. This version of Microsoft Office includes Lync unified communications on multiple PCs or Macs, but without support for SharePoint, SQL Server and Exchange. The small business package costs $12.50 per user per month or $149.99 annually.

Meanwhile, Office 365 Midsize Business and Enterprise Plan E3 lets IT shops run Office Professional Plus 2013 as a subscription that includes the desktop productivity suite and cloud-based server applications such as Exchange, SharePoint Server and Lync unified communications.

However, that edition costs $20 per user per month for the cloud services, plus the cost of an Office Professional Plus 2013 subscription. A license for an on-premises installation of Office Professional Plus 2013 starts at $508, which allows the user to install it on up to five devices, according to Microsoft's volume pricing lists for December obtained by TechTarget.

Microsoft has not yet revealed all of its pricing and packages for Office 2013. More information is expected to be revealed when Office 2013 reaches general availability. Office Professional 2010 -- the previous version -- costs $399.99 for a single PC.

View the next item in this Essential Guide: Why you should be excited about Office 365 or view the full guide: The essential Office 365 migration guide

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