Microsoft announced on Thursday, December 4, that it will increase the subscription prices for its Office software series targeted at business and government customers starting from July 1st of the following year. This marks the first significant adjustment in commercial subscription pricing by the company since 2022, with some products seeing a price hike of up to 33%.
Nicole Herskowitz, Corporate Vice President of Microsoft 365 and Copilot, explained the decision in a blog post, stating, “We are continuously investing and innovating our platform for the future. Over the past year, we have released over 1,100 new features on Microsoft 365, Security, Copilot, and SharePoint. These new features have added value to the software suite.”
Microsoft’s Office applications, including Word, Excel, PowerPoint, and Outlook, have been facing increasingly fierce competition from Google in recent years. Industry analysts believe that this pricing adjustment by Microsoft reflects both the continued enhancement of Microsoft product features and the company’s pricing strategy adjustments in the cloud services market.
It is worth noting that adjustments to subscription prices for business users of Office are not frequent. In 2022, Microsoft raised the prices of the suite for the first time since the initial launch of Office 365 in 2011.
Previously, Microsoft rebranded Office 365 as Microsoft 365 in 2020. In January of this year, Microsoft had already announced a price increase for consumer Office suites.
The price adjustments this time cover multiple subscription levels with specific changes as follows:
– For small and medium-sized businesses, the monthly fee for Microsoft 365 Business Basic will increase from $6 per person to $7, Microsoft 365 Business Standard will rise from $12.50 to $14, while Microsoft 365 Business Premium will remain unchanged at $22.
– For enterprise customers, the entry-level Office 365 E1 product will continue at $10, Office 365 E3 will increase from $23 to $26, Microsoft 365 E3 with Windows operating system updates will rise from $36 to $39, and the feature-rich Microsoft 365 E5 will increase from $57 to $60.
The most significant price hikes are seen in subscription products targeting frontline employees. The subscription price for Microsoft 365 F1 aimed at frontline workers such as cashiers will increase from $2.25 to $3, a 33% hike; while the price for Microsoft 365 F3 will rise from $8 to $10, a 25% increase.
The U.S. Department of Defense and other government clients will also face similar percentage price increases.
It should be noted that these subscription prices do not include access rights to the $30 value Microsoft 365 Copilot additional component, which utilizes generative AI models. According to a CNBC report last week, some companies have begun using Copilot extensively, while others are still observing its effectiveness.
Although many organizations typically receive discounts below the list price, Microsoft has reduced direct bulk transaction discounts for certain types of customers.
According to Microsoft financial data, approximately 43% of the company’s total revenue of $77 billion in the first fiscal quarter comes from its Productivity and Business Processes division, which includes the Office product line.
In October, the company announced that revenue from Microsoft 365 commercial cloud services had increased by 17%, with a 6% rise in user numbers, mainly driven by products for small and medium-sized businesses and frontline workers.
This price adjustment is expected to further enhance Microsoft’s revenue performance in the productivity software market while also testing the extent to which enterprise customers are willing to accept software price increases.