Microsoft has announced price increases for their main Business and Enterprise plans ranging from 9% to 25%.
Of course, Microsoft hasn’t stated the price rises in such stark terms. They give the increases as monthly prices even though most pay yearly. A few minutes in Excel shows the revenue boost to MSFT from the rises:
There are no prices changes to Education or Consumer plans … at this time.
Spoken and unspoken reasons
As always with a Microsoft price increase, there are two reasons for the change. The stated reasons and the real but unspoken ones. Let’s look at the official reasons first, they have some factual basis, but there’s a clue to the real reason in the ‘% increase’ column above.
More available in the Business plans
Microsoft makes a good case that there’s been no price increase in the Business plans for a decade. But the plans have a lot more functionality and options now than when the prices were set back in 2011.
The core Office 365 apps (Word, Excel, PowerPoint, Outlook) have considerable changes and improvements over that time. The real-time collaboration and sharing options have improved out of sight during the last ten years. So have the mobile apps for iPhone, iPad and Android.
The Microsoft 365 services now have things like Teams, To-Do, Planner, Forms, OneDrive and more. Teams especially is a major boost to the power available in each plan.
There are now better data loss prevention features, sensitivity labels and some encryption improvements (though not enough in our view). For larger organizations there’s Content Search, eDiscovery and Litigation Hold options to keep the legal department happy (well, happier).
What Microsoft calls ‘AI’ has enhanced Word, Excel, PowerPoint and Outlook plus there’s better translation and transcription services available. The downside of these cloud services is the loss of privacy and greater reliance on Microsoft’s centralized services.
The real reason for the Microsoft price increase
Microsoft always has one main reason behind a price increase – it’s because they can.
Not only has Microsoft increased dominance in office software and server related technologies. More and more of those services require cloud services that only Microsoft can provide.
Modern Office apps don’t work alone on a computer, they rely on links to Microsoft servers to do their work. Word’s Editor, Excel’s Linked Data Types and PowerPoint Designer are just three examples of Office features that can’t work without ‘talking’ to Microsoft data centers.
Customers using Microsoft 365/Office 365 plans will find it hard to switch away from those ‘subscriptions’ because no other company can afford to offer a similar range of services. We’re ‘locked in’ to Microsoft technology.
Charge what the market will bear
Like any company with a captive audience of customers, Microsoft sees an opportunity to raise prices. Balanced against that is the need to get more customers into some plans, that might explain the varying price increases.
The incremental costs to Microsoft of each new customer or plan signup is minimal. There are no shipping costs or retailers margins.
For each plan it’s not so much a matter of cost to Microsoft as charging what the market can bear.
The cheaper plans (Business Basic and E1) have higher percentage increases (20%+) than more expensive plans (9-15%). That serves as encouragement for customers to join or upgrade to the more profitable plans.
In some locations, notably the USA, the prices do not include all taxes. In the USA, state taxes must be added to the advertised price. That means the actual increased cost will be even higher than stated.
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