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Demystifying Microsoft Office & Office 365 Pricing

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So, you want to buy an office suite. This bread-and-butter category is rife with options, and while many of them are both capable and competitive, the fact is that Microsoft’s well-known Office suite remains the de facto standard, and is a requirement in many workplaces.

The only problem with being this ubiquitous is that there are a ton of options for getting a Microsoft Office license. This tutorial will help you choose the best for your needs and will give you a better understanding of how Microsoft has structured its most popular software offering's pricing.

Buying vs. Renting

Chances are you’re familiar with the recent trend in software sales of offering products for a monthly payment rather than a single license fee. This system is a natural reaction to the developing tech world, but it has been controversial for consumers, mainly because it disrupts the status quo of licensing and is a confusing paradigm shift for those used to the traditional model of software “ownership”.

Microsoft was among the first on this bandwagon, with Office 365 being unveiled as a subscription-based offering of the familiar suite as early as 2010. Instead of paying a one-time fee for a permanent license to use the software, users were asked to look at Office as a service, one that commanded a monthly or yearly fee for ongoing access, updates, and enhancements.

Today, Microsoft has managed to establish Office 365 as the default option for buying their productivity suite, and they have created a diverse portfolio of plan options to cater to nearly every possible use case. Nevertheless—in keeping with their dedication to backward compatibility—Microsoft have continued to make traditional licenses available for purchase as well.

Best of all, in an effort to compete with iWork and Google Docs, Microsoft have made a surprisingly robust version of Office available for free. It’s called Office Online and it’s the first stop on our Office pricing tour.

Free for All: Using Office Online

Although web versions of Word, Excel, PowerPoint, and OneNote have been available for a while, Microsoft only recently drew attention to them as a dedicated product tier known as Office Online.

You can read all about Office Online’s capabilities in our handy run-down, so for now I want to focus on the core of this tier and what it represents because, for the majority of users, it will be the only version of Office they need.

As you’ve already gleaned from the name, Office Online requires an internet connection and runs entirely in your browser—no standalone apps. This is both a strength and its only major weakness: without an internet connection your office shuts down. This is becoming less of an issue in most modern office environments, but it’s still an important consideration for those whose use cases are less ordinary.

Office Online
Office Online's portal page allows quick access to the apps right from www.office.com.

Office Online includes Word, Excel, PowerPoint, and OneNote, and is tied to your Microsoft account (if you ever had a Hotmail address, or you use Skype, you have a Microsoft account). This integration allows documents to automatically remain saved on OneDrive by default, facilitating access from any device.

The apps themselves are surprisingly full-featured, missing only advanced functionality like scripting, macros, and other sophisticated options. Many people won’t even know what that functionality refers to, so its absence isn’t missed. The apps even work perfectly on touch screens, so you can use them on your iPad or Android tablet—again, for free.

Perhaps the most powerful feature of Office Online is its robust sharing and real-time co-authoring. With no hassle at all, you have a collaborative workspace that you can share with others. Together, you can view and edit documents, all the while remaining confident that there are no formatting inconsistencies or compatibility issues—Office Online works with standard Office file formats and everything you work on can be saved locally and shared outside of OneDrive however you please.

Office Online also allows you to create shareable links to any document, viewable by anyone (even without a Microsoft account), and it supports advanced embed codes that allow you to include spreadsheets and other documents right into a webpage.

Share from Excel Online
Sharing options allow individual access, public/private links, and embed codes for websites.

All in all, it represents an incredible value—for no money at all you have access to the functionality of Office that covers the needs of most students, home users, and casual business efforts.

Of course, if you need to work offline or use the full power of the apps, then you’ll need to buy a license. Let’s have a look at the options for doing so.

The Old-Fashioned Way: Buying Office With a One-Time Purchase

Your natural instinct may be to reach for the standard pricing option. It’s a predictable, one-time purchase, and you get simple access to the apps you need. For those who are disinterested in the extensive additional features offered with the Office 365 service, this is perfect.

Purchasing Office traditionally can be done either by buying the apps you need individually, or by opting for one of the suite bundles.

Buying Individual Apps

The various Office applications (Word, Excel, Powerpoint, Outlook, Publisher, and Access) can be purchased separately at a cost of $109.99 each. The exception is OneNote, which is available for free.

Buy Individual Office Apps
The core apps are all available individually, though this rarely offers the best value.

Advanced businesses may also be interested in Microsoft Project and Microsoft Visio, each of which offers both Standard and Professional variants. Project is priced at $929 ($1,560 for Professional), and a Visio license costs $420 ($880 for Professional).

This method grants you access to the given application for a single installation on one computer. It does not include access to extra installs, tablet apps, Office on Demand, or any of the additional options that are made available via Office 365.

Another important caveat is that these individual app purchases only cover the PC versions of the software—Mac users can only purchase Office as a suite.

Buying Office Suites

In the likely event that you use more than just one of the applications, a suite offers much better value. There are three options available to you, depending on which applications you need.

Office Pricing for Suites
For those who don't want to subscribe to Office 365, the suite bundles are the way to go.

Office Home & Student includes Word, Excel, Powerpoint, and OneNote and is available for $139.99Office Home & Business adds Outlook into the mix and retails for $219.99Office Professional includes all of the above plus Publisher and Access and costs $399.99.

If you’re a Mac user, your only options as far as buying a traditional license are Office for Mac Home & Student, and Office for Mac Home & Business, which are equivalent to their PC counterparts as far as apps and pricing.

Regardless of which suite you buy, remember that this type of license only allows installation on a single machine at a time for a single user. You can transfer your copy of Office to another computer

Welcome to the Future: Buying an Office 365 Subscription

Assuming you plan on updating within the next few years, or you need to install Office on multiple computers, or you want to use the mobile apps, your best bet is to consider one of the Office 365 subscription options.

Microsoft has made the Office 365 service available in two broad categories: one for home use, and one for business/enterprise users. These differ mainly through the inclusion of Exchange and SharePoint in the business tiers, providing top-tier managed email and intranet services.

Office 365 for Home Users

All Office 365 plans for home users share the following features:

  • Access to the full suite of applications (Word, Excel, PowerPoint, Outlook, OneNote, Publisher, and Access) for PC and Mac
  • Use the Office on Demand option to temporarily stream an installation of any Office app to any PC—useful for working on a library machine, or at a hotel for example
  • Access to the native mobile apps, available for Android, Windows Phone, and iOS devices including the brand-new Office for iPad.
  • 20GB of additional storage for your OneDrive account (per user) to hold all your documents and data
  • 60 world minutes per month for Skype calling
  • Access to the latest software updates (installation is optional)

These features can add a tremendous additional value, making it easier to justify the ongoing cost, and in many cases offering better pricing for users who upgrade often or make use of Office on many different devices.

The main tier of Office 365 service is Home Premium, which costs $9.99/month or $99.99/year. This tier allows for usage on up to 5 PCs and Macs, and encourages sharing the service between up to four family members, each of which receives the full benefits listed above.

Office 365 Home Premium
Microsoft's most popular Office 365 tier is the versatile Home Premium, which offers terrific value.

If you’re keeping score, offering your family the same experience without a subscription would cost you $1,600 just for the Office applications—without any of the additional benefits. That’s enough to buy 16 years worth of Home Premium service. Even if you drop Publisher and Access from the mix, you’d still be forking over nearly $900 for the suite applications alone, all the while missing out on updates, storage, sharing, Office on Demand, cross-platform support, and mobile app usage.

Microsoft recently added Office 365 Personal, which mirrors Home Premium in all respects except for the number of users; it is designed for individuals and allows installation on just one PC/Mac, one tablet (including the new iPad apps) and one smartphone. Office 365 Personal cost $6.99/month or $69.99/year

One of the best things Microsoft did to promote Office 365 was to create the University tier. This subscription is designed for students and offers exceptional value. Office 365 University costs just $79.99 for four years of service—potentially covering an entire undergraduate degree. The only restriction is that you can only install the apps on two computers.

Office University
If you're a student, Office 365 University is a no-brainer.

Let’s recap! Office 365 for home users offers three tiers of service: Personal, Home Premium, and University. They all offer the same benefits, and differ only in the number of installations allowed. Personal allows for just one, Home Premium allows for 5, and University allows students to install on up to two machines—and each of them let you use the apps on your smartphones and tablets.

What if you’re a business user though?

Office 365 for Business and Enterprise

Because business needs vary so much, Microsoft has created quite a spread of options here: eight in total. They can be split into three basic categories: small business, midsize business, and enterprise.

The two small business tiers, Small Business and Small Business Premium, are available for up to 25 users. Both include hosted Exchange email service, SharePoint intranet, 25GB/user of OneDrive for Business storage, a website (including hosting), and access to Office Online.

The major difference is that Small Business Premium also includes access to the desktop suite of Office applications, including Microsoft’s business communications tool, Lync.

Office 365 Small Business costs $5.00/user/month (if you choose an annual billing cycle). Office 365 Small Business Premium costs $12.50/user/month, billed annually.

Midsize Business is the next tier, available for up to 300 users. Like Small Business Premium, it includes the Office suite, but it also adds support for Active Directory and Business Intelligence features in Excel (Power Query, Power Pivot, Power View, and Power Map).

Office 365 Midsize Business costs $15.00/user/month, billed annually.

Office 365 Business
The small and midsize options give you a number of choices for equipping your business.

The Enterprise tiers all allow unlimited users, but they range dramatically in functionality. The most basic tier, Hosted Email, includes only hosted Exchange support and nothing else—an excellent way to leverage the power of Microsoft’s industry-leading Exchange architecture without any additional services.

Office 365 Hosted Email costs just $4.00/user/month, billed annually.

From there, you’ll find Enterprise E1, which adds OneDrive for Business storage, SharePoint, Yammer (Microsoft’s business social network), and Office Online.

Office 365 Enterprise E1 costs $8.00/user/month, billed annually.

The final two enterprise tiers are E3 and E4. Both add access to the desktop Office suite and mobile apps, and include powerful advanced email functionality like unlimited storage, Information Rights Management, archiving, and legal hold capabilities. Both tiers also add in hosted voicemail support and the eDiscovery Center, which contains tools pertaining to site-wide search, and compliance enforcement.

Office Enterprise
Large corporations with complex needs should turn their attention to the Enterprise options.

The only difference between the E3 and E4 tiers is that the latter provides Lync Server Plus.

  • Office 365 Enterprise E3 costs $20.00/user/month, billed annually.
  • Office 365 Enterprise E4 costs $22.00/user/month, billed annually.

The elusive eighth tier is an Office-only subscription for business users called Office 365 ProPlus (not to be confused with the volume licensed Professional Plus…) that offers access to the desktop and mobile Office suite with the addition of Lync. No IT services like hosted email are included, so the cost is just $12.00/user/month, billed annually.

Office Pro Plus
Office 365 ProPlus is a great way for businesses to give users access to the full Office suite without additional services.

Before we wrap up, there are a few additional fringe options worth mentioning.

More Options: Education, Government, Non-Profit

If you’re getting a bit dizzy with all these avenues, don’t worry—the last stop on our tour is a brief look at the more obscure pricing options available for specialized cases.

Microsoft offers three separate Office 365 plans for educational institutions, including a remarkable tier that gives schools the ability to provide the full power of Exchange email, SharePoint intranet, Office Online, and OneDrive storage (25GB worth per user) to their students and staff absolutely free.

Paid tiers exist for adding desktop Office installations and other features, at costs that remain a significantly less than the equivalent Enterprise options.

Government organizations also have a series of four tiers available to them, focused primarily on hosted email and SharePoint features at discounted rates.

Microsoft is also developing plans for accredited nonprofits, which are offered as donations on all but the most advanced tier, which is equivalent to the Enterprise E3 plan but at a fifth of the price.

Lastly, organizations buying one-time licenses for employees can take advantage of volume licensing options, available in Standard and Professional Plus offerings.

Choosing the Right Office

Now that you’ve taken a birds-eye look at the available options, you’re left with the task of choosing the right one for you.

If you’re a business, the choice is largely determined by the needs of your employees and by how much of your infrastructure you’re willing or able to transfer into Microsoft’s ecosystem. These kinds of questions are difficult to generalize an answer for, so it’s something you should brainstorm with the technical department of your organization,

As an individual, especially one who hasn’t bought Office in a while, the choices may be daunting and unfamiliar.

For starters, it’s important to ask yourself whether or not you require any of the functionality offered by the paid versions of Office. With the advent of Office Online, users whose needs are constrained to basic collaborative document creation in a connected environment may well find that they need nothing else.

If you only occasionally need to edit an Office document, or you’re not using advanced suite features and don’t need to work offline, then Office Online is the perfect option for you—and using it means you have access to the excellent OneDrive cloud storage solution as well as Microsoft’s modern Outlook.com email, calendar, and contacts.

If you do need to work offline, or you require access to the advanced functionality of the desktop versions of Office apps, then you can either choose to buy a traditional license or subscribe to an Office 365 service tier.

If you have very specific needs for Office apps and nothing else, then one of the suites is your best bet. Buying the apps individually is basically never worth it. Even if you just need Word at the time of purchasing, buying the Home & Student suite grants you access to Excel, PowerPoint, and OneNote as well for only $30 more.

When you look past the many myths about Office 365—that you need to be online to use it, that you are forced to upgrade, etc.—then you’ll realize that the service offers superior value vs. buying individual licenses in almost all use cases. Even if you’re not planning on upgrading Office for several years, the mobility and cross-platform compatibility alone makes it worth the cost. The additional OneDrive storage and Skype minutes are just icing on a very productive cake.

If you’re a student, the Office 365 University tier is an absolute no-brainer. For less than the cost of most textbooks, it will single-handedly equip you to tackle the majority of your assignments, notes, and collaboration throughout an entire four years of education.

Naturally, you could also turn to Google’s free Docs or Apple’s iWork suites, but there’s a reason they are always, inevitably compared to Microsoft Office.

Need some more guidance? Drop us a comment below!

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