Office 365: Bait-and-switch for free Office Live Small Business customers?

To Microsoft, it's simply an evolution of their existing services to something better. Offering more value for customers, so they say. Recall the launch of Microsoft Office Live way back in late 2006, right about when Vista was being readied for the masses. Upon its launch, it promised a no-frills service for small business to take advantage of for free. Office Live Basics offered a company domain name, a site with 500 MB of storage, 25 company email accounts, company instant messaging, and tools to create and promote their site. All for free. Great news for businesses running on limited budgets - and besides, they could use all the help they can get.

The service had two major components to it. There was Office Live Workspace, and Office Live Small Business. The former allowed documents to be stored in what we would now deem as "in the cloud," although you had to open documents in Microsoft Office to edit them. Live Workspace was not restricted to just small businesses - individuals were free to take advantage of the 5 GB of storage offered.

Since then, Live Workspace was closed last year in December, and Microsoft moved over all documents to their consumer-oriented collection of Windows Live services, placing them on SkyDrive. It was a notable upgrade, as Microsoft now offered an editing solution built into web browsers, instead of solely relying on users to have Office installed. The move came as Google Apps became known for offering a collaborative office solution popular amongst businesses, individuals, and students.

What about the latter component, Office Live Small Business? You might recognize some of the same services being offered in the recently launched Office 365 beta. Not surprising though, as Microsoft has made it clear on the Office Live site that Office Live Small Business will cease to exist this coming October. Not a bad move, right?

Unfortunately, not so if you were one of those businesses counting on the free services to continue. There is no free equivalent in Office 365. Businesses are given three months of free service if they elect to switch to Office 365, but beyond that, it's standard pricing. Office 365 offers more than its predecessor, but at a cost of $6 per user. Say there are up to 25 employees, one for each email account offered for Office Live Basics. 25, by the way, is also the maximum number allowed under Office 365 for small businesses. They are now looking at up to $150 per month. Consider that Office Live Premium was $39.95 per month at one point. It then became free in February 2008, with the option of purchasing additional services at a business's discretion, or additional domains that were $14.95 per year. Either way, it's extra costs all around.

What about Microsoft's chief competition, Google? Small businesses could get basic collaboration and messaging services for up to 50 users for free. Even if they choose to step up to Google's premium offerings for businesses, the $50 per user per year still works out to be $12 less than Office 365. This may be the solution to expatriates of Office Live Basics, except with a major problem. Migration of their current data. Obviously there won't be an easy path to move over data on a company domain to another hosted by a major competitor. For some businesses, the only solution may be to deal with Office 365 and pay for features they did not need.

Microsoft may be providing better tools for small businesses in a more cohesive and attractive offering. But for some people, pricing is king. The competition has won on that end. And for Microsoft, they may have unintentionally created a bait-and-switch situation for small businesses who were perfectly content with a free basic service. But who knows - just as they did in 2008, Microsoft may release a free subset down the road once they see the error of their ways.

Thanks to Simon- for the small tip on the forums

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