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Starting Oct. 1, Microsoft will raise the prices of the upcoming Office 2019 suite for enterprise customers by 10 percent, after eight years of unchanged prices since the company introduced Office 2010.
In a July 25 post on the Microsoft Partner Network blog, the company said the coming price hike is part of a series of price increases for a myriad of its on-premises and cloud products.
“Office 2019 commercial prices will increase 10 percent over current on-premises pricing,” the post states, while pricing changes and adjustments will also occur in a variety of existing volume discount plans and subscriptions.
Among those changes are plans to remove the programmatic volume discounts (Level A and Open Level C) in Enterprise Agreement subscriptions, while also making changes in Select/ Select Plus and Open program offerings. Changes will also come for on-premises and online services for government customers.
“These changes will highlight the benefits of our pricing for a cloud-first world, help us move from program-centric to a customer-centric pricing structure, and create more consistency and transparency across our purchasing channels,” the blog post states.
The price increase will also include the Office client, Enterprise Client Access Licenses (CAL), Core CAL licenses and server products.
So, what will the changes mean for enterprise customers?
Wes Miller, a research analyst with Directions on Microsoft, told eWEEK that while Microsoft has not yet discussed in detail why its changing Office 2019 price policies, he sees them as part of a strategy to realign enterprise customers with its product offerings as they evolve.
The price increases only involve Microsoft Office 2019 full version business licenses which are available to companies to use as long as they want to. The increases do not affect Office 365, which is purchased on an annual one-year subscription basis.
The removal of the Level A and C volume discounts will affect pricing mainly for smaller customers, said Miller, but larger enterprises will retain their existing volume discounts, according to the post.
A potential strategy is that Microsoft wants to move more customers to an annual subscription with Office 365, said Miller. “They are definitely trying to incentivize customers to look at Office 365 first” before buying full versions of Office 2019. What that would do, he said, is place large business customers on annual subscriptions that would provide a steady stream of revenue for Microsoft.
Microsoft has always had business customers who buy full versions of the Office suite and then keep using them for a decade or more, which adversely affects the company’s annual revenue model, said Miller.
The price changes mean that customers will have to pay more to continue to use on-premises full versions of Office or they will have to move to Office 365 whether they are ready or not, he added.
Another analyst, Dan Olds, principal of Gabriel Consulting Group, said that while customers may not be happy about the price hikes, they have also benefited from the eight years of unchanged pricing.
“The thing this really shows is how confident Microsoft is with their market power,” said Olds. “Back when [the open source] OpenOffice and Google Docs were a higher perceived threat in the marketplace, you certainly didn’t see Microsoft raising its prices on anything.”
But after recently reporting full-year 2018 revenue of $110 billion, “what we are seeing now is a very confident Microsoft,” said Olds.
“I don’t think this is a big enough price increase to prompt any defections, because where are users going to go?” said Olds. Google Docs and other alternatives are not close enough substitutes for Microsoft Office and their associated operating systems for enterprises, he added. “Some things, including that tight integration between Windows and Office, just can’t be replicated” by competitors.