4 Oct.

Office 365 Home Premium Subscription–The End Of Retail Product?

While this seems to be a post title that is designed to generate traffic, the reality is that some of the details of the new subscriptions have made people sit up and take notice, and ask the question about why consumers or small businesses would look at purchasing a single PC license in the future. While retail boxed software’s death has been predicted for a long time, this move from Microsoft is going to be one of the most impactful. I’m focusing on the consumer subscription purely because subscription offerings for commercial entities have been in existence for a while now.

Is This A Case Of Déjà Vu?

In Australia and a couple of other markets, Microsoft offered a subscription version of Office XP back in 2001-2002, which was initially a successful program because it presented a lower cost way of purchasing Office XP through retail outlets, costing roughly a third of the price of the regular product. There were some downsides though , in that the concept of a subscription wasn’t necessarily fully understood by those who purchased the product. The end result was that customers who had purchased the subscription version were issued with a full retail copy of the product, which resulted in them getting a bargain!

Ten years on, both software vendors and their customers have more experience with numerous types of subscriptions, which will definitely make this Office subscription a bigger success.

But What Exactly Is A Subscription?

Where much of the confusion came from was that a subscription means different things depending on the scenario. Some people perceived a subscription to be like a magazine subscription. You don’t have to renew your subscription, and you will always have the ability to flick through the issues you received.  You would have also saved a substantial amount over the retail price of buying all of those issues, with annual subscriptions usually providing large discounts.

One of the pieces of feedback that came back to Microsoft was that despite all of the information that was presented on the packaging and in promotional material, many customers didn’t realise that at the end of the year the product went into a reduced functionality mode if the subscription wasn’t renewed. While the customer’s data wasn’t compromised, many thought that they should have been able to maintain the functionality that they already had, knowing that they wouldn’t be entitled to future versions.

Trying to compare a software subscription to a magazine subscription is obviously faulty, but even trying to compare it to something like a cable television subscription that comes with a DVR still doesn’t really apply, as in that case you lose all the content, as well as the device that can play it.

Even another software comparison,  antivirus subscriptions, a model that many customers know already, doesn’t align particularly well either, as you can’t really compare keeping the last updates of virus signatures to the last updates of documents, even though you end up with two mostly non-functioning solutions in the end.

What’s Better This Time Round?

First of all, it’s getting harder to find a customer who doesn’t have at least one online subscription. They may have an Office 365 or Windows Intune subscription for their business, they potentially have a Xbox Live subscription for their family. They may even subscribe to a music service such as Zune. Each of these subscriptions have similarities and differences, but the important thing is that a non-renewed subscription will end up with some data or service becoming inaccessible.

There is also a new generation of organisations in the channel who focus on subscription models, reducing capital expenditure and instead targeting operating expenditure, a model that works well for many businesses. With Microsoft’s pricing of $US99.99 per year for a household for Office 365 Home Premium, and the ability for those users to access it across five different PCs, as well as temporary access from other PCs, they are making Office much more affordable, as well as available than it previously has been.

If you compare the pricing of the online offering to the retail products, you won’t find an exact apples to apples comparison of the included applications, but the table below gives you some idea. I’ve also kept the focus on the Home Premium subscription, rather than the Small Business subscription which adds a great deal more capability via Office 365’s software as a service capabilities.

Office 365 Home
Premium Subscription

Home & Student

Home & Business

Professional

Microsoft Word, Excel, PowerPoint, OneNote

Microsoft Outlook

Microsoft Publisher, Access

Install on up to 5 PCs, Macs and mobile devices

Number of installs

5 PCs or Macs

1 PC or Mac

1 PC or Mac

1 PC

Licensing model

Household

Device

Device

Device

MSRP (USD)

$99.99
Per Year

$139.99

$219.99

$399.99

Even if you don’t take advantage of installing on all five devices, the subscription approach starts making financial sense, and that’s before you take things like convenience, 20GB additional SkyDrive storage, as well as Skype minutes. If you take into account the number of devices that are becoming commonplace, such as a desktop PC at home, a laptop, a tablet, as well as smartphones, it really doesn’t take long to fill those five device slots.

If you then consider the business oriented offering, Office 365 Small Business Premium, at $149.99 per user per year, which also includes Office 365 access, which can also be used across five devices, you can see that it is also a very attractive option, in many ways I would say that it is the more attractive option, even for some home users.

One of the shortcomings of the original subscription from a decade ago was that customers couldn’t do much with their documents on their PC if they didn’t renew the subscription. Now thanks to Office Web Apps, available for free as part of Microsoft’s SkyDrive cloud storage solution, customers can continue to continue using much of the functionality of Office, rather than just in a read only mode.

Where Does This Leave Those Who Resell Boxed Office?

If Microsoft provides their channel the ability to easily obtain partner of record fees for online sales, or the ability for resellers to provide their customers with Office 365 subscription cards, much like Xbox Live, then it’s not necessarily a major change for the channel. It may be more of a signal of the end of physical media rather than a demise of the retail offerings, but we will need to wait and see what happens.

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