Upcoming Office licensing overhaul requires cloud subscription model

Microsoft is about to place all of its Office and Office 365 applications under one umbrella in an effort to push a single license, cloud-based subscription model.

Microsoft will place all of its server-based Office desktop and cloud-based Office 365 applications under one umbrella...

in an effort to push a cloud-based subscription model.

While Microsoft will continue to make the existing on-premises versions of Office and Office 365 available, those versions will not be as "fully featured" as upcoming cloud-based versions. The company hopes this new, single license strategy will serve as incentive to users to migrate their data and applications to the cloud. An announcement could come as early as this week.

"Whether you are a consumer or the largest IT shop, (Microsoft) wants everyone to buy the cloud services versions," said one source familiar with the company's plans, who requested anonymity. "If you don't want those versions, they will still offer the on-premises versions but they won't be quite as good."

"They're going to turn their legacy desktop customers into a new pipeline of "cloud" users and make them think it's their own idea"

Carl Brooks, analyst, 451 Group.

One analyst agreed, noting the growing disparity in price points between the on-premises and cloud-based versions of the same product.

"Moving as much of their customer base into the cloud as possible is in Microsoft's best interest," said Wes Miller, an analyst with Directions On Microsoft, an independent firm based in Kirkland, Wash. "It's hard to not look at price lists and not understand that people are being punished for staying on-premises products. You don't have to worry about CALs for Office 365."

The "new" Office family now extends from the Student and Home Editions for the desktop all the way to high end server applications bundled in Office 365 which includes Exchange Server and SharePoint.

"Every product with 365 in its name means it is delivered over the Web and is a service," said one source familiar with the company's plans.

What does the Microsoft Office 365 strategy achieve?

A more seamless family of server and client-based Office products accomplishes a couple of things over the longer term: it offers users better access to data that can be more easily shared across mission critical enterprise projects; it improves Microsoft's competitive position against companies whose business is based purely on cloud-based offerings; and it helps decrease Microsoft's still heavy reliance on its on-premises products, which will remain available so users can transition over when they are ready.

One analyst said Microsoft over the recent past has been taking the right approach to helping manage customers' transition from on-premises applications to their cloud-based counterparts. 

"I think it's a little brilliant," said Carl Brooks, an IT analyst with The 451 Group. "They're going to turn their legacy desktop customers into a new pipeline of "cloud" users and make them think it's their own idea."

Another industry observer thinks any move by Microsoft that encourages users to move more of their applications from on-premises to the cloud is not just smart but necessary, particularly its PC-based Office products.

"Unless Microsoft comes up with an answer to address this shift away from the PC, they are looking at this (desktop versions of Office) being a declining business." said Paul DeGroot, principal consultant at Pica Communications, specialists in Microsoft licensing strategies. "Microsoft is pretty late to this game."

New Office licensing: Dream come true or total nightmare?

The ability to manage multiple Office desktop and server products under a single license could simplify the complex nature of Microsoft's licensing terms and conditions -- something both small and large IT shops have long complained about.

The single licensing approach may prove easier for smaller shops to adopt with less legacy overhead, although more difficult for larger shops with a more diverse technology landscape with existing Enterprise Agreements (EAs) and Software Assurance plans.

"If you [are] starting from scratch and you had 20 people in your shop, you can get all 20 up and running on Office, Exchange, SharePoint, Lync, Word, Excel and even Skype under one license," according to one source familiar with the company's plans.

While it could be a "bit of a nightmare" for larger shops to adopt the new approach to licensing at first, some believe it eventually it will be easier for them because they won't have to track multiple products sets under multiple licenses.

One analyst noted that Microsoft recently has "done a lot of work" to modify its EAs to accommodate those customers with on-premises versions of SharePoint and Exchange who want to switch over to an Office 365 and use a subscription plan.

"These EAs are hugely important to Microsoft so they can't have a barrier for people wanting to move to the cloud," DeGroot said. "They are putting systems in place for doing that."

The company is readying a half-dozen "enterprise-oriented" bundles of Office and Office 365, sources said, with another one aimed at mid-market shops and two others designed for small shops, according to sources.

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What do you think of the new Office cloud subscription model?
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It may be inevitable, but many people still wish to work on a local computer which isn’t tied to a network. Forcing everyone to the cloud is not a good idea.
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May be good for MS, but have they considered regulated verticals and addressed their need with ISO certifications?
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Causes client to store data on a remote server. Leaving a client vulnerable to security issues.
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price does not work out!
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It might be a good strategy from Microsoft’s point of view, but not most customers who need less than three licenses. The SkyDrive and Skype benefits don’t really justify the extra long-term cost.
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For users in environments where net access is less well developed in terms of reliability such as places in Africa this willmake the choice of Microsoft a non starter. I work in Niger as an application consultant and at least 3 days per week I do not have access to the internet. Does this mean that I don't work those days?
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This penalizes those of us who are unable to move to clouds due to regulatory compliance requirements
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For local government it is going to cause all kinds of issues from data security to laws that will need to be changed and or prohibit users from accessing the cloud. I can see some entities embracing and others refusing to allow their entities access as we are as a whole usually 5 to 10 years behind the latest technology due to learning curves and statutes concerning information management. Not to mention those programs written specifically for government that aren't up to speed.
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loosing a license model for unlimited time usage is a big disadvantage for microsoft clients. the clients will depend on price and productavalibality as microsoft will in the future. companys can not drive there own IT strategy und will pay rent forever.
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When you force some one into something so you can make more money & lock them into something, thats called a Monopaly and thats not good for anyone. Go open office!!!
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The ability to simplify updates, simplify licensing, and possibly running on the web completely one day make sense for customers. However, I think that a hybrid approach for the near term is a better strategy for most companies.
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As more products move to the cloud, more talk is heard about ISPs charging for data used. Move to the cloud...and pay more in the end? Nah
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I do not have a high internet pipe and I pay by the mb so why would I want all of my documents stored in the cloud were anyone could get a hold of them.
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More benefits to Microsoft than end users.
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You can't customize cloud versions of products like SharePoint, or at least not without very expensive dedicated server licensing. It also threatens my long-term job prospects by making me obsolete.
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Being forced down this route makes it clear as to who the long term winner is here, and its not the end user. Does anyone recall the cheap pricing for electricity when it first came out to entice people away from their candles and wood/coal fires? Now we rely on the electricity see how much they charge? Same principle being shown here from Microsoft and other cloud advocates. As mentioned by someone previously - bring on Open Office!
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Cloud-based Office 365 allows for the latest updates for the customer and simplifies the licensing process for customers.
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As a small office, we like keeping this in-house rather than in a cloud-based environment and do not appreciate the stipon on cost because of this decision.
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Once we can consume 365 from any platform (linux, osx, ios, android, win, ...), Microsoft will have a winner. Until then, it is a marginal improvement in licensing with little direct value for very large corporations.
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LOVE the new option and going per use!
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Clients that are rightfully nervous about putting their data outside their own controlled environment. They will be forced to either select an inferior Microsoft product or move to another vendors application such as Open Office.
My vote given the inability of security on any networked device will be to recommend my clients move away from Microsoft to Open Office.
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Not sure I like the reliance on internet based computing
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I have no intention of moving to cloud services for Office and object to being forced down this route against my will.
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We want control over our own software.
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I've been IT Pro for over 20 years. I've fully supported MS (I even like Win8) over all those years.
It appears to me MS is FORCING us to go to a cloud solution -- & that's crossing the line for me.
If MS continues along this line ... my recommendation to my employer will be to move away from MS ASAP.
I will not be forced by MS to live with a controlled environment of their choosing simply because it's best for them; it's NOT best for my enterprise environment.
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I think that there will still be plenty of companies that require custom plug-ins for office or don't want to migrate their company data to a datacenter not under their control no matter what assurances MS gives them.
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They are assuming that Everyone lives in the big city and that theres Internet Connection Everywhere! Us Rural folk would like to keep our data with us under our own control, please.
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One. I support prison workstations that are not allowed to connect to the Internet.
Two. My laptop is often used without a connection to the Internet.
Three. If my ISP connection goes off-line my staff would not be able to create and edit documents.
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Another cool product by Microsoft. Rich in touch-enabled features, streamlined business work flows, and enhanced cloud connectivity, this new version of Office is the most ambitious revamping ever for Microsoft, and will be strengthened by the emerging market of tablets entering the workplace.

Here's another interesting article. Read to learn what's new in this Office 2013:

http://www.enpointe.com/microsoft/office2013
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If you [are] starting from scratch and you had 20 people in your shop, you can get all 20 up and running on Office, Exchange, SharePoint, Lync, Word, Excel and even Skype under one license, - this not correct, it says one license but it should say one plan I am an O365 subscriber and the small business plain that the 20 people would fall under would be 6$ a month fee per person not 6$ for 20 people, this is a misleading fact in my opinion as 120 a month for 20 users is a lot different that 6$ a month for one user
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"For local government it is going to cause all kinds of issues from data security to laws that will need to be changed and or prohibit users from accessing the cloud. I can see some entities embracing and others refusing to allow their entities access as we are as a whole usually 5 to 10 years behind the latest technology due to learning curves and statutes concerning information management. Not to mention those programs written specifically for government that aren't up to speed."

One more point on this is that a lot of governments are investing in private clouds, and charge back models for each entity, I don't see governments that have invested in this infrastructure suddenly switching as the ROI, would not be there!
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Not everyone feels comfortable with moving their "personal" data to the cloud. In terms of corporations, the potential of intellectual property theft as a result of, say, competing companies within a given field having their information in the cloud by one given company gives pause and may make CIOs nervous, wondering about the potential of a security breach of one company in the interest of the competition.

A similar concern could be raised by government agencies, not so much by IP concerns, but by access to classified information from, say, enemy countries.

With respect to the consumer market, some may benefit, while others will not feel comfortable with the SaaS concept, having to deal with a periodic up-front payment to Microsoft for the use of software (a yearly subscription in the case of Office 365).

SUMMARY: The days of timesharing from the 1960s are back!
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makes customization more difficult. not very flexible for small business - monthly fee vs. one time purchase. many would prefer a one time purchase, but the lack of advanced features might make that a non-starter. May have to look at openoffice or orther platforms that are not as restrictive.
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I do a lot of work that requires a stand-alone computer (computer forensics). I also prefer to perform a lot of work, while on travel, where a connection to the Internet, for long periods of times, sometimes weeks at a time, makes "the cloud" a non-starter.

Also, Microsoft abandoned the Common User Access format for their Office product line. They have received numerous complaints from long-time OPffice Users, but they have literally, blown their customers off, with regards to their concerns.
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Internet outages, cloud outages, etc. make this a potential nightmare. The hidden costs and inconvenience associated with this are problematic.
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What if no internet?
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I feel it leaves businesses and individuals vulnerable especially if there are outages
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My present organisation is both conservative and security conscious. We don't like cloud, we don't want cloud, we don't need cloud – we won’t use cloud. Full Stop!
And if Microsoft try to push us in that direction we will resist by switching from regular upgrades to delaying upgrades as long as possible. In fact, for standard ‘office productivity’ capability (Word, Excel, PowerPoint, Outlook, etc) we may yet switch to open source alternatives, though that is not our preference.
What we would prefer is Microsoft stopped pushing cloud at the expense of customer requirements and preferences.
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It keeps your data hostage to continuing your subscription - great for Microsoft; bad for you.
I'll use OpenOffice, or just not move from existing versions
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It's all about controlling the end users this whole cloud model. And a insecure future for all those enterprise system administrators.
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The push to the cloud does not take into consideration the current MS Office users out there that have to deal with patient data and that are required to comply with federal regulations such as HIPAA. Those users will not be able to expose patient data to an environment where some third party has complete access to all of the user's content or where there is no guarantee of compliance of any regulation on their part.
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What about users with dodgy or slow internet such as country based users, in the past our office has been offline for up to two weeks while Telstra had parts replaced in the exchange? so are we now expected to go a business grade of internet just so our users can use office?
Data security? I still feel this has not been answered to everyones satisfaction, me I'm ok with my personal data in the cloud, but business data?....not yet.
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We are looking at moving around 1200 devices to 365 however as (in that environment) we tend to be a device based company (generic-ish users) the 365 subscription model doesn't seem to fit, or be able to adapt
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Welcome Big Brother, if I were a lawyer, the use of Office (cloud based) would violate the client-lawyer privilege.
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For an organisation with 80 staff using a single 3M bit/sec ADSL line (top speed available) this would be a problem. Our business would rather have less functionality than spend an extra $100 per month for a second connection.
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this is what the likes of IBM tried to do (big brother). I for 1 will move to other suppliers if i am forced into an old strategy which limits creativity (welcome apple or other!)
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Customers should be able to decide for themselves whether to put their applications in the cloud. I have experience with another cloud base supplier for Mail and Web security. We cannot wait for the contract to end to bring it back in house. When there are problems, they are are not 100% behind providing solutions.
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Coming are the days were one consumes data and related services like electricity, water & gas. Microsoft's taken this on board, and is structuring their business model accordingly. Its a mindshift to recognise that owning data, doesn't also mean having a server sitting in a backroom somewhere. It's my server, my data.
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In the financial industry, you don't what clinet information in the cloud - unless it is one that is owned by the entity.
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SECURITY is the issue -- do we trust Microsoft with our data? I don't!
For anybody in healthcare -- this would require a Business Associate Agreement with Microsoft binding them and all their subcontractors responsible for any data breach, including the necessity of MICROSOFT notifying all affected individuals of the breach and specifying that MICROSOFT could be subject to fines for each instance.
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A further thought -- it MIGHT be acceptable if there were a good way to get the application from the cloud, while guaranteeing that the data stayed protected locally.
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In many countries Internet rates are very high and unreliable, what will happen if my core Exce documents are in the cloud and I have no way to access them because lack of conection?
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Everyone will choose a better solution. Corel's Word Perfect Office Suite will be a better solution!!
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I don't trust Microsoft to leave my data untouched. They have proven in the past they will steal anyones idea. Why would I trust my data to them?
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forcing customers into one direction is never a good strategy especially when concerns over where data is stored is still unsolved with many regulatory bodies.
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Security and privacy are very important for a most of Office users. And it is common opinion that we can't trust Microsoft in any this fields.
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Who is this really going to be easier for. You say it is going to be easier for the customer but at the end of the article you list at least 9 "bundles" MS will be offering. I understand MS is a business and their business is to make as much money as possible, so MS does what is best for MS and to hell with the customer.
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It's a very far shot if MS thinks that people will trust them!! When internet is down who will pay for the time workers look at stupid error messages? It certainly will push hard users to go open.
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there should be equal oppturnity for the clients to choose between on premise and cloud because due to various reasons clients do need on premise products so providing inferior on premise product s will ruin Microsoft s reputation , not to mention the reputation of IT Consultants/shops
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Take out the headache of monitoring or understanding Microsoft Complex Licening struture
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costly, and offers reduced functionality and integration with 3rd party vendors/developers. Without those ancillary products to fix the gaps, Microsoft products will eventually lose to the lowest common denominator, i.e. Apple (hardware vendor) or Google (pure cloud vendor).
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This forces a link between the supplier of your software and the supplier of your storage. You might choose that option but you should not be forced to go down that path if you don't want to.
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I don't trust most politicians, lawyers, CPA's, or doctors. I work for too many of each of them. But, I'd feel as safe a babe in it's mothers arms with any of them compared to Micro$haft. I happily instruct all of my clients in alternatives. MS wants us locked into their world, but they have built in the tools to escape. Of course, Some clients have opted out of the pig race way back and are still using Office 95 and 97. A couple of layers are still using WP 5. Hilarious, I know. But it works
@ zero annual cost.
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MS sucks
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I want to be in charge of my companies I.T. and not be at the mercy of Microsoft's servers. My data stays on my server.
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