Microsoft Office 2013

"More and more companies are switching to subscription-based software models and, not surprisingly, profit is at the heart of it."

A few days ago, Microsoft revealed its newest iteration of its Office suite. While the usual suspects were there -- better Word features, Windows 8 tie-ins, etc. -- one thing jumped out at me: the new subscription pricing model. While you can still get Office 2013 as a stand-alone disk installer, it really is meant to be used as a streamed service that lets users enjoy the synch-y goodness of an office in the sky. That sounds great, but wait until you hear the catch.

More and more companies are switching to subscription-based software models, and, not surprisingly, profit is at the heart of it. I recently reviewed Photoshop CS6, and you can get a very expensive retail version or pay $20 monthly for the subscription version, dubbed the Creative Cloud. It’s eerily similar to Microsoft’s Office 2013: Pay a monthly fee and access the software at a reduced cost. In predictable Microsoft fashion, there are many tiered options for Office 365 -- Home Premium, Small Business Premium, ProPlus, Enterprise -- but the principle is the same. You rent your software, you don’t own it, and you can’t resell it.

Microsoft’s motivation for using this business model was the same as Adobe’s. It is the solution to a dilemma: How do you get people to upgrade their software when all they do is write or make spreadsheets? The English language may get another verb occasionally -- I’m looking at you, “sexting” -- but it’s fair to say that your productivity isn’t going to shoot through the sky with a new spell check feature. In this economy, upgrading isn’t much of an option for many. So Microsoft needed to reinvent -- or catch up, if you use Google Docs or Dropbox -- word processing to get you to depend on it as a service, not a piece of software that’s “just fine.” And it will offer you SkyDrive storage as a bonus.

But, wait, didn’t you say the price is lower? It seems paradoxical to say Microsoft would let you have the Office 365 suite for a fraction of the cost of a boxed copy, give you cloud storage and make more money doing it. Lowering the barrier of entry to Office makes sense because the biggest growth is in developing markets like China, India and Brazil, where the average income is far lower than in North America. Piracy is rampant in those markets, so lower pricing is aimed at someone who might want legit software but who’s broke compared to Joe 24-pack.

Games are next. It’s already becoming clear from Sony’s Playstation Store and Xbox Live that this is where games are headed. More and more publishers are shipping boxed copies of games with one-time activation serial numbers so you’ll be steered toward the online copy that can’t be resold. But, unlike Adobe and Microsoft, Sony, EA and their ilk are being greedy by milking you for full retail price for download-only copies. That just can’t last. While no pricing has been announced for Office 2013 subscriptions, I’m confident from Windows 8’s upgrade price tag that Microsoft won’t make the same mistake. Whether or not Office 365 will succeed at drawing people to Windows 8 tablets is anyone's guess.

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