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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