Analysts: Office 365 price cut to compete with Google Apps

Earlier this week, Microsoft announced that it was cutting the monthly prices for its cloud-based productivity software service Microsoft Office 365. The price reduction was as low as 20 percent in some cases. At the time, the company said that the price cuts was because it was adding more customers " ... the cost to run Office 365 becomes more efficient."

However, the real reason for the price reductions may have been more mercenary. PC World reports that analysts believe that Microsoft is trying to compete with the rise of Google Apps among large corporations. Gartner analyst Matthew Cain states:

The price cuts reflect Microsoft's fear of Google. Google Apps for Business has increasing momentum in the enterprise sector, and Microsoft is doing everything they can to prevent further incursions. In this case, Microsoft is pulling on the pricing lever to combat Google.

Microsoft has a variety of pricing plans for mid-size and large businesses for Office 365. After this week's price cut, they are now between $8 and $22 a month per user. Small businesses have a plan that costs $6 a month, per user, with a 50 user limit.

By contrast, Google Apps in its standard edition is free for up to 10 users. Google Apps for Business charges $50 a year per user which comes out to $4.16 per month if a customer pays annually. If they pay per month, it's $5 a month.

Microsoft also announced this week a plan to offer students, teachers and educational staff members a free version of Microsoft Office 365. That plan is supposed to launch this summer.

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The only concern I c with Office 365 is the cost, it's $6 per user per day.I think it won't make any sense for some1 to be in business with just single user, hence he must look for multiple user plan! I don't think MS Office 365 is of excellent value, I do agree it'll be easy to use but still, Cost is always a big concern for SMB's mainly start-ups. I would bank upon some freely available tools such as CollateBox http://www.collatebox.com/ or for that matter any tool with similar functions but which is freely available.

Weird...

Everyone said Office Online was launched to compete with Google Apps, even though variations of Office has been available via Sharepoint and a Web interface since 1999.

And now Office 365?

How can an intellectual disconnect like this happen and still seem plausible?

Office 365 was a project to directly sell the features of Microsoft server technologies so that people could take advantage of them without investing in a Server or a managed server.

It may 'compete' with Google Apps, in the way Windows on the desktop competes with Linux. They are technically competitors, but in terms of functionality or features, they are not even close. (Linux fanbois, don't even go there until Linux can schedule GPU threads with preemptive multi-tasking and GPU SMP capabilities. Which are not even on the drawing board for Linux.)

Hotmail and Office Online is more of a competition to Google Apps, as the features are closer, with even Office Online providing a more feature rich solution.

Google Apps and Google's hosted server solutions are not even 'close' to Microsoft's server technologies, which is what Office 365 offers directly to consumers.

Look at just a couple things like the email and collaboration. When you try to match Google App features to Microsoft Exchange that Office365 provides it is an vast difference in technology. Exchange provides mission critical features for data and performance, and also has 50x the features that Google offers.

Next compare Google Apps with Office365's version of Office, which includes both an Online version and a download option for the FULL version of Microsoft Office for the monthly fee.

Office provides 1000x the features that Google's Office products, and this isn't even hyperbole when you start adding up all the functionality of OneNote, Word, Excel, Powerpoint, and on and on...

Microsoft may be adjusting their pricing model as they have ramped up Azure and the supporting technologies and data centers so that they can support more users for low price rather than fewer users with a premium price.

The pricing being a 'reaction' to Google is a bit of a side effect at best.

thenetavenger said,
Weird...
How can an intellectual disconnect like this happen and still seem plausible?

If you knew anything about enterprise computing, it was obvious from the start that Office 365 was mainly about hosted Exchange and SharePoint (and Lync, etc.).

But the tech news media doesn't know a thing about enterprise. If it's called Office, then therefore it must be Microsoft's lame (and late) attempt to compete with Google's whiz-bang forward-thinking AJAX cloud word processor.

Regardless of what some analysts believe, the reason MS gives is a valid one. Cloud services like these cost quite a bit so it makes sense that tweaking the service/software can cut down the costs to run it and also adding enough customers to where they're able to cut prices to bring in more customers and get a snow ball effect going is valid.

Is Google Apps the target? Sure, but imo Office 365 has it beat from the start.

ray_bk said,
I'm still using Office 2003 to penalize the Ribbon introduced from Office 2007.

Omg, I guess you still use XP as well?

ray_bk said,
I'm still using Office 2003 to penalize the Ribbon introduced from Office 2007.

You can bring back the old toolbar to Office 2007.

ray_bk said,
I'm still using Office 2003 to penalize the Ribbon introduced from Office 2007.

Really punish it, use 1989 Lotus 123 that used the 'better' slash command menu.

As Excel was popular on the Mac and then gained popularity on Windows around 1991-1992, there were people that actually made this exact argument. Look it up, Excel for years (and may still) had an option to mimic the Lotus 123 slash options for accessing the menu features.

Progress is hard, as it take some exposure and realization before it catches on.

The 'talkies' in the movies took time, the electric candle, and the 'horseless' carriage also took a bit of time before people would give up the older technology too.

thenetavenger said,

As Excel was popular on the Mac and then gained popularity on Windows around 1991-1992, there were people that actually made this exact argument. Look it up, Excel for years (and may still) had an option to mimic the Lotus 123 slash options for accessing the menu features.

The 1-2-3 compatibility layer is still there in Excel 2010. For example, typing /ir will insert a row.

Alot of companies try out Google Apps but never make it out the door. My company was one of them. Fact is, price isn't everything and Google doesn't have half the features companies need. It works well for the average user though.

fenderMarky said,
What is an "analyst"? Why they talk after things already happened? Do we really need them?

We need an analyst to answer your questions.

fenderMarky said,
What is an "analyst"? Why they talk after things already happened? Do we really need them?

Those are all those people that tells you last 20 years that this will be again Linux year.

fenderMarky said,
What is an "analyst"? Why they talk after things already happened? Do we really need them?

You have successfully confused yourself by not knowing the difference between an analyst and forecaster.

Office 365 was launched to compete with Google Apps, of course the price cut is to have some more tools for competition with Google, what is wrong with it?

This is a cloud world war, and Microsoft is doing all it can to compete.
This is a real open competition, because Microsoft is dominating the client world and Google the web.

I think eventually it will be a tie....

raindrop said,
Office 365 was launched to compete with Google Apps, of course the price cut is to have some more tools for competition with Google, what is wrong with it?

This is a cloud world war, and Microsoft is doing all it can to compete.
This is a real open competition, because Microsoft is dominating the client world and Google the web.

I think eventually it will be a tie....

Google Apps are 'less' featured than the free Office Online and collaboration features, and is a far reach to consider it a competitor to Office 365.

Office 365 is about providing Microsoft server and Office technologies at a consumer level so that any user or small company can have the functionality without investing in a server or a managed server to get the functionality.