UPDATED 20:06 EDT / AUGUST 19 2021

CLOUD

Microsoft to hike Office 365 business subscription fees next year

Microsoft Corp. said today it’s bumping up the price of some of its commercial subscriptions for Microsoft 365 and Office 365 bundles, which include popular productivity apps such as Word and Excel.

The price hikes were announced by Microsoft 365 Corporate Vice President Jared Spataro, who said they’re “the first substantive pricing update” since the company launched Office 365 over a decade ago.

Microsoft 365 is a more expansive suite that bundles some Office tool with Windows, Enterprise Mobility and Security. Over the years, it has expanded to include products such as the Teams communication platform, the Power Platform application development tools and the Whiteboard collaboration app.

“This updated pricing reflects the increased value we have delivered to our customers over the past 10 years,” Spataro said.

Given that Microsoft’s Office tools remain its top product in terms of sales, and that most Office revenue comes from subscriptions tied to business users, it seems likely the increased prices will deliver a decent boost to Microsoft’s overall revenue and profit.

Spataro said the price hikes will come into effect on March 1, 2022. The following products will be affected:

  • Microsoft 365 Business Basic (from $5 to $6 per user)
  • Microsoft 365 Business Premium (from $20 to $22)
  • Office 365 E1 (from $8 to $10)
  • Office 365 E3 (from $20 to $23)
  • Office 365 E5 (from $35 to $38)
  • Microsoft 365 E3 (from $32 to $36)

The price increases will apply across all markets, with local adjustments made for certain regions, Spataro said. The prices for Microsoft 365’s education and consumer products will remain unchanged, he added.

Spataro talked a little about the success of Microsoft 365, saying that its creation has helped Microsoft to sell more Office subscriptions to front-line users such as cashiers who don’t necessarily sit in front of a computer screen all day. That has led to significant growth in the Office user base, with more than 300 million commercial Office 365 paid seats, Spataro revealed.

Analyst Charles King of Pund-IT Inc. told SiliconANGLE the price hikes are justified as Office 365 and Microsoft 365 have both been terrific bargains for years for anyone who needs essential productivity tools. “Not only are they simpler to install and upgrade than the traditional boxed software applications but Microsoft has continued to add valuable new features and functions,” he said. “The price bumps barely qualify as inflation adjustments.”

King said there’s likely to be a few individuals and companies that complain about the increased costs. Luckily for them, they have plenty of alternative productivity applications to choose from that have also improved greatly over the past decade. “That said, I doubt many will actually follow through and abandon Microsoft’s solutions,” he said.

The price of some Office subscriptions, such as Microsoft 365 E5, which costs $57 per user per month, and Microsoft 365 F3, priced at $8 per user per month, will remain unchanged.

Image: Microsoft

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