Revenue from Office 365 Subscriptions Overtakes Traditional Office Software Licensing

Megalith

Megalith

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Moving software to a subscription model has been a success for many companies, and it’s no different for Microsoft: an executive has revealed that Office 365, which launched in 2011, now earns more money than traditional versions. This edition of the suite allows the use of Office apps on both Windows and macOS, alongside immediate updates and storage space on OneDrive. I wonder what Microsoft will make a subscription service next.

…strength in Microsoft's cloud business, including Office 365 and Windows Azure, was the key to the company's growth. Of note, Microsoft CFO Amy Hood told analysts that, for the first time, Microsoft got more revenue from Office 365 subscriptions than from traditional Office software licensing. Why it matters: Microsoft has shown an ability to grow its business even as the PC market has stalled, reflecting moves the company made in the cloud both since Satya Nadella took over as CEO as well as some that were in place before he took over the top spot.
 
They're making a hard push to move companies on EA agreements to O365 as well. It won't be long before they're doing the same for Windows.
 
I have to admit that 365 is pretty awesome. I wish they would go back to how they had OneDrive in the beginning but due to over abuse we can't have nice things :(
 
ManofGod said:
Pull those numbers out of your butt, have you? ;)
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Actually that is the price listed here: https://blogs.office.com/en-us/2017/07/10/introducing-microsoft-365/

And while that might seem like a lot of money consider the hundreds of hours annually a typical information worker spends using these kinds of tools. So it's a fraction of dollar per hour for people that are making many times that in salary to be able to do their jobs. That's why free office tools aren't nearly as compelling as some might think. In the end it's not a lot of money and the tools are critical to get work done.
 
So they make more money renting it than selling it.

Big win for the big corporation, but a loss for most consumers. No more buying stuff and using it for as long as possible.

We have a few systems in our marketing department with one of the adobe suites on them. We used to upgrade the software every couple versions, but not any more.
Management decided the subscription model was too expensive, so it's the older version or nothing.

I still have systems at home running outlook 2010. I would have spend several times as much if I had been forced to a monthly subscription model.
 
Eickst said:
They're making a hard push to move companies on EA agreements to O365 as well. It won't be long before they're doing the same for Windows.
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It's a much different market for operating systems. Large enterprises on volume licensing have long been on a subscription model. As for the consumer market, the OS just comes with the device. That market just won't bear a sub model.
 
To Funny... next is Windows.

Nu u that will nva happen.

Post the blog that says its happening. lol

Within the next few years MS will be moving everyone to subbed versions of windows. Enterprise first.

Next up will be non-pro users.

The future is so clear... PCs are going to start shipping with Windows 10 S only soon enough... with upgrade options including windows 360 account subs. That is where its heading folks.
 
I do see this backfiring pretty hard on MS when it comes to the enterprise though. Google is actually starting to move real numbers into that space. I'm not MS plan is going to go over as well as they assume.
 
nutzo said:
So they make more money renting it than selling it.

Big win for the big corporation, but a loss for most consumers. No more buying stuff and using it for as long as possible.

We have a few systems in our marketing department with one of the adobe suites on them. We used to upgrade the software every couple versions, but not any more.
Management decided the subscription model was too expensive, so it's the older version or nothing.

I still have systems at home running outlook 2010. I would have spend several times as much if I had been forced to a monthly subscription model.
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It's basically the difference between leasing a car versus buying a car. If you're always going to want or need a new car, leasing can make sense. If you're always going to be using Office then you don't really end up paying anymore to stay on the latest version the buying boxed copies.

Of course the problem is that at the end you don't have anything once you stop paying. It would be nice that after sometime you on the sub model to be able to switch over to a permanent copy.
 
heatlesssun said:
Actually that is the price listed here: https://blogs.office.com/en-us/2017/07/10/introducing-microsoft-365/

And while that might seem like a lot of money consider the hundreds of hours annually a typical information worker spends using these kinds of tools. So it's a fraction of dollar per hour for people that are making many times that in salary to be able to do their jobs. That's why free office tools aren't nearly as compelling as some might think. In the end it's not a lot of money and the tools are critical to get work done.
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Correct, it's amazing just how many people try to equate such figures to their own, home situation which is not comparable in the slightest. Our company loves Office 365.

One major point - money spent on 'rental' or lease-type agreements are very, very different from a taxation standpoint as opposed to purchased items/assets - not dissimilar to car leasing vs. purchasing, where leasing makes little sense financially for the private buyer, but plenty of sense for businesses.
 
heatlesssun said:
Not in the consumer market where the device comes with the OS. It's already been there for Windows in the enterprise space with VL.
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If you believe that I have a slightly used bridge for sale that I would love to find a good owner.

Seriously think about it MS is going to start shipping WIndows 10 S to OEMs for free.... and sell Win 360 home and pro soon enough.
 
ChadD said:
If you believe that I have a slightly used bridge for sale that I would love to find a good owner.

Seriously think about it MS is going to start shipping WIndows 10 S to OEMs for free.... and sell Win 360 home and pro soon enough.
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The consumer market is different. Consumers don't buy operating systems any more, they buy devices. Yes, the cost of Windows gets baked into the price of the device but I simply don't see how Microsoft starts attaching a new cost to Windows that's never been there before. If it was something they could get away with in the consumer market then sure, I get it, mo money. But this would be insanely unpopular and almost surely lead to fewer deployments of Windows in the consumer space.
 
heatlesssun said:
Actually that is the price listed here: https://blogs.office.com/en-us/2017/07/10/introducing-microsoft-365/

And while that might seem like a lot of money consider the hundreds of hours annually a typical information worker spends using these kinds of tools. So it's a fraction of dollar per hour for people that are making many times that in salary to be able to do their jobs. That's why free office tools aren't nearly as compelling as some might think. In the end it's not a lot of money and the tools are critical to get work done.
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Ah, I see, so basically something that helps integrate into one package, at probably a cheaper cost, with more features that those products separately, entirely for Enterprise and medium sized businesses. That said, there will be no monthly subscription fee or any sub for Windows on our devices and computers.
 
ChadD said:
If you believe that I have a slightly used bridge for sale that I would love to find a good owner.

Seriously think about it MS is going to start shipping WIndows 10 S to OEMs for free.... and sell Win 360 home and pro soon enough.
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Seriously dude, do you ever give up? FUD with absolutely no evidence to support what you are saying but hey, Microsoft........
 
ChadD said:
I do see this backfiring pretty hard on MS when it comes to the enterprise though. Google is actually starting to move real numbers into that space. I'm not MS plan is going to go over as well as they assume.
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With what? Their ad riddled OS that is highly limited to their apps only or what is only is the store on low end tablet hardware?
 
Subscriptions are great for companies. You have a constant cash flow and the “buyers” don’t actually own anything except for a license in this case. Even if the consumer gets a product, subscriptions are still better for the business.
 
i am happy with my office 365 sub. i get 5 licenses as well as 5 1tb one drive accounts. i spend more for lunch every day than i do for this each month. works for me.
 
Hallucinator said:
That is like renting an operating system!
12 months x $20 = $240 a YEAR.
No thanks - I'll pass...
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nutzo said:
So they make more money renting it than selling it.

Big win for the big corporation, but a loss for most consumers.
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It's not a consumer product. It's for small business (300 seats or less) and it probably makes sense for those that want Office, Windows 10 Enterprise and the mobility/security product.
If they don't want the mobility product, they can just by annual licenses for Enterprise and Office 365 (roughly 180/year)....or they can buy the s/w outright, but leasing is often desirable for tax purposes.
 
ChadD said:
To Funny... next is Windows.

Nu u that will nva happen.

Post the blog that says its happening. lol

Within the next few years MS will be moving everyone to subbed versions of windows. Enterprise first.

Next up will be non-pro users.

The future is so clear... PCs are going to start shipping with Windows 10 S only soon enough... with upgrade options including windows 360 account subs. That is where its heading folks.
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You are aware you can already get Windows 10 licencing in your MS portal, it is already happening..
 
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People been saying for years that MS will move to only subscriptions for office and they have yet to do it...

Now windows (that has yet to offer subscriptions on on the consumer) will automatically join that? Sheesh!
 
Trimlock said:
People been saying for years that MS will move to only subscriptions for office and they have yet to do it...

Now windows (that has yet to offer subscriptions on on the consumer) will automatically join that? Sheesh!
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That was before they gave their OS away for free.

Most of Microsoft's profits are based around cloud based solutions, they need to recoup money on their flagship product somehow after they gave it away. Whether that means limiting licences purely to the device the licence is installed on and dropping support of certain devices ~every 3 years forcing users to upgrade, thereby effectively purchasing a new licence, or whether that means moving to a subscription based model as soon as enough people have migrated to Windows 10 remains to be seen. I see more evidence pointing to Microsoft moving away from once off Windows purchases transferable between devices than evidence of Microsoft intending to keep their consumer based Windows licensing model the way it's been for years. The modern computing market just doesn't allow for the traditional model when technological development is slowing and people aren't interested in upgrading every two years anymore.

Anyone stating otherwise is detached from reality and in denial.
 
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heatlesssun said:
It's basically the difference between leasing a car versus buying a car. If you're always going to want or need a new car, leasing can make sense. If you're always going to be using Office then you don't really end up paying anymore to stay on the latest version the buying boxed copies.

Of course the problem is that at the end you don't have anything once you stop paying. It would be nice that after sometime you on the sub model to be able to switch over to a permanent copy.
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Leasing is always much more expensive due to overhead coming from the lease company. Anyone 'power using' office tools is doing their jobs wrong. An office power user is a huge liability to his/her company because their home brewn software is understood and maintained only by the persons themselves and if the person gets fired or switches jobs, the old home brewn office monstrosity becomes an instant problem for the old company - as nobody really knows how to use it and how to fix it when it inevitably breaks.
 
BulletDust said:
The client machine still requires an underlying OS though and MS have hungary shareholders to look after.
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The OPEX model of the cloud makes the stock holders much more happy. Client OSes isn't that much money anymore since servers essentially are removed due to cloud and on the OPEX model. So the future holds 2 options for the consumer Windows. Either a subscription model or it simply goes free. And I tend to believe its the last part after Windows 10.
 
Shintai said:
The OPEX model of the cloud makes the stock holders much more happy. Client OSes isn't that much money anymore since servers essentially are removed due to cloud and on the OPEX model. So the future holds 2 options for the consumer Windows. Either a subscription model or it simply goes free. And I tend to believe its the last part after Windows 10.
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Revenue is revenue where shareholders are concerned. The notion of giving the OS away for free from this point onwards and not pushing users to upgrade or charging a subscription based model is unlikely.
 
BulletDust said:
Revenue is revenue where shareholders are concerned. The notion of giving the OS away for free from this point onwards and not pushing users to upgrade or charging a subscription based model is unlikely.
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The point is to sell consumers something else. Onedrive, O365, Windows Store etc without losing the share. Its a problem revenue wise when consumers sit on outdated OSes without the infrastructure for the new subscription services.
 
Shintai said:
The point is to sell consumers something else. Onedrive, O365, Windows Store etc without losing the share. Its a problem revenue wise when consumers sit on outdated OSes without the infrastructure for the new subscription services.
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And planned obsolescence will do just that. Drop support for older processors, lock the licence to one machine, force users to upgrade, make a sale on a Windows licence. It's illogical and naive to believe that MS will just give their OS away for free indefinitely: However if that's what you want to believe don't let me stop you.

Microsoft are in the business of making copious amounts of money, not friends.
 
BulletDust said:
And planned obsolescence will do just that. Drop support for older processors, lock the licence to one machine, force users to upgrade, make a sale on a Windows licence. It's illogical and naive to believe that MS will just give their OS away for free indefinitely: However if that's what you want to believe don't let me stop you.

Microsoft are in the business of making copious amounts of money, not friends.
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They already gave Windows 10 away for free. Simply to promote Windows Store.

And if anything, Windows will be a subscription like in the enterprise and cloud. The idea of fixed licenses is dead long ago.
 
Shintai said:
They already gave Windows 10 away for free. Simply to promote Windows Store.

And if anything, Windows will be a subscription like in the enterprise and cloud. The idea of fixed licenses is dead long ago.
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I totally agree.

As I stated earlier, either scenario is a very likely possibility with very little evidence of the fixed license model lasting forever.
 
I've worked for some larger companies in my time. All of them already have enterprise agreements with MS. We already had a "subscription" agreement so this is hardly a new thing. Office 365 must be going for the smaller businesses - no brainer for them. Get your people used to using OneDrive so their documents are in the cloud.
For home users, does Microsoft publish any numbers? Most people I know might be a laptop every 3-5 years (totally made up statistic). They won't buy another one until it stops working. Heck, I've seen a huge decline in my sphere of influence of people using computers at home. I used to have to answer tech questions and the like, but rarely see much of this anymore. Maybe they are all using tablets now (parody of the tablet thread active this morning).
 
B00nie said:
Leasing is always much more expensive due to overhead coming from the lease company. Anyone 'power using' office tools is doing their jobs wrong. An office power user is a huge liability to his/her company because their home brewn software is understood and maintained only by the persons themselves and if the person gets fired or switches jobs, the old home brewn office monstrosity becomes an instant problem for the old company - as nobody really knows how to use it and how to fix it when it inevitably breaks.
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This entire statement is false. The company that I work for is Dell's largest customer (at least in the PC side, I don't know about server side) it is is definitely much cheaper to lease computers than buy them. You can use ANY custom software and it not be a liability for knowledge loss when someone leaves as long as you properly document how it works and how to use it. Companies often want to use COTS software as it is generally cheaper to buy than build in-house developed software and support is also usually better and cheaper for COTS software. Also how does being a "power user" have anything to do with using custom software? There are a lot of COTS add-ons to Office products out there.
 
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