Why Choose Office 365 Instead of Buying Office 2013?

Back in August, I received a call from a new customer asking for a quote for Office 2013 licenses.

While I was looking for pricing, I came across an interesting article, Microsoft really doesn't want you to buy Office 2013. The gist of this seemed to be that MS has structured things to make buying Office 2013 unattractive.

How outrageous! But can it be true? And if it was ever the case, does this still hold water today?

I was really curious about the ROI of the subscription pricing vs. pricing conventional software. I decided to do a little napkin math. So, let's do some cost comparison and explore the return on investment from renting Office 2013 instead of buying it.

Comparing Traditional Office 2013 with Office 365


Firstly, we need to decide what we're comparing to what.

For my example, I'll stick to pricing for small business. This is where most of the interest in Office 2013 prices seems to come from - at least based on the calls I get here in the office. Microsoft refers to their small business discounted pricing as "MS Open for Small Business".

Also, I am going to stick to MS Office Professional Plus. You could save some money buying MS Office Standard, but there are a lot of components missing from the cheaper package. Since Office 365 is Professional Plus edition, we'll compare similar options here.

Office 2013 Professional Plus comes in two flavors, you can buy it with software assurance or without. If you buy without SA, you're basically saying that you want to pay the full price to go ahead and upgrade to 201x whenever that version comes out. If you buy with SA, then you'll pay about 50% more, and you'll have to renew the SA in 2 years, but your cost for the upgrade is covered by keeping the SA agreement current.

Here are our MS Office Professional Plus prices for MS Open Small Business: 

  • without SA is about $475*
  • with SA is about $740* 
    *Prices are from October 2013; if you need current prices, please contact us using one of the the links below.

Let's use an office of 25 staff as an example. This is pretty typical, although I've certainly worked with customers who have as few as 10 - or even 5 - employees.

If you consider that Office P+ with SA is going to cost about $740 per user, then 25 users is an $18,500 up front investment. That’s not tiny. Assuming a shelf life of 3 years, which is typical for MS software, you’d be looking at a monthly “budget” of $513.89. Say I took that budget and broke it up across the 25 users. Your cost will be about $20.56 per user per month.

Suppose you run the same numbers without software assurance, which is probably the better apples-to-apples comparison - since at the end of the product's useful life you'll be spending the full amount all over again. Your total up-front investment would be $11,875 for the fleet, at a monthly budget of $329.86 or $13.19 per user per month – compared to $12.00 if you subscribe to the license via Office 365.

Can that really be right?

I ran these numbers again at the wholesale prices that my distributor gives us. Even at that slightly discounted rate, I was only able to shave a few cents off the monthly cost compared to Office 365.

And these calculations assume that you can actually pay the monthly cost over time, interest free. If you finance the purchase obviously you'd pay even more.

Different Prices for Different People


One important thing to keep in mind here is that Microsoft will require you to buy a different license - and thus pay different prices - depending on who you are and what kind of organization you work for.

There are also different prices for with and without Software Assurance and different editions of Office such as Standard, Professional, and Ultimate. And then there's OEM pricing, which assumes you're buying a new PC to go with your software. This leads to the most confusing matrices of prices and options humanly possible!

Here's some more example pricing for Office '13 (P+ w/o SA) that I found from CDW and other major chains**:

MS Select Plus Academic $58.99 (CDW)
MS Business Academic $86.99 (CDW)
Product Key Card $379.99 (NewEgg)
Retail Box $399.99 (Office Depot)
MS Select Level D $379.99 (CDW)
MS Select Level A $479.99 (CDW)
MS Open for Small Business $495.99 (CDW)
MS Corporate Business $505.99 (CDW)
**Prices as of 11/11/2013 - YMMV

So, as you can see, the ROI of subscription software is going to be different depending on whether you work for or attend a college, are employed by a gigantic mega-corporation, or are part of the government. Everybody else is paying more. I'm assuming this is usually because smaller groups buy less volume, though the evidence doesn't always bear that out.

So which way should you go? The magic number appears to be $432. Taken over a 3 year lifetime, this translates to $12 a month. So if you have a pile of cash sitting around, and you can get Office for less than this price, you may want to just go ahead and buy it. Everyone else most likely does better paying for it monthly.

Some More Reasons to Choose the Office 365 Subscription Model

Assets, liabilities, and business property taxes


This is the distinction between assets, capital expenses, and operating expenses. Office 365 is considered an expense and will generally treated that way by accountants. I don’t know if you pay business property taxes, but here in Maryland we pay a tax on any software “asset”, whereas with Office 365 we write 100% of it off, no depreciation, and no taxes. Also, there's no need to worry about depreciation with expenses. (Note that some localities will let you depreciate 100% of the cost of software, so it depends on where your business is located).

Up-front Costs, Budget Approvals, and CAPX vs. OPEX
In the above example $18k is a sizable investment. If you have more than 10 workstations to license, your finance people may prefer it if you subscribe rather than buy. Otherwise, it may be a while before you could get the funding approved. It might even be CAPX, and nobody likes that.

Buying it All at Once vs. Pay as You Go
In the above example, if you truly need all 25 copies right now, your cost would average out to $320 or $520 per month over the 3 years you use the software. (There are a lot of reasons that you wouldn't want to keep running back to buy more licenses every few months in this way.) With Office 365, you can start with only 10 or 15 copies and easily add new licenses as you need them. This way, your cost would only be $120 (for 10x) or $180 (for 15x) month to start. On that budget, it's about the same as buying just one “boxed” copy of Office every 3 to 4 months.

Additional Cost to Renew SA
SA (Software Assurance) is a 2 year deal, not three. You’d incur an extra fee to renew the SA agreement at the end of the second year. And - many companies either forget to do it, which means paying full price for Office anyway the next time you upgrade it. Others forgo the SA pricing, and end up buying the software all over again later. Some folks pay for SA and then later decide they can’t afford to renew. These folks then end up using older copies of office for 4 or 5 years which ultimately affects productivity, drives up IT support costs, and that adds up to greater expenses down the road.

Same Price with Added Value
Finally, there are other bundled cloud services that make Office 365 even more worthwhile. MS charges $12 a month for Office Pro 365 which is a pretty advantageous cost, but the whole suite including Exchange Online e-mail and a SharePoint intranet (and public facing web site) is just $20 a month. Just moving e-mail service alone can save many thousands per year in server maintenance and licensing costs.

Where to from Here?


Whether or not you're sure that what I've described here is the right option for your small business, you can reach out to me and I'll help you figure out your individual ROI on Office 365.

When you're ready to go, we can help you choose the right combination of Microsoft Online Services tailored especially for you. I’d also be pleased to set up an appointment to walk you through creating your O365 account and setting it up.

If your needs are straightforward and you already know the number of seats you need, here are some links where you can start a free trial or purchase a subscription. These links include delegated administration from LMS, so we can help you get the most out of your account.

Office 365 ProPlus

30 day trial 25 users

Buy 5 users

Buy 10 users

Buy 25 users

Mid-sized Buisness Plan

30 day trial for 25 users

Buy 5 users

Buy 10 users

Buy 25 users

Enterprise E3 Plan

30 day trial for 25 users

Buy 5 users

Buy 10 users

Buy 25 users


if you're outside the US, want to integrate your Office 365 accounts with your current Active Directory, or have more complex needs that don't quite fit into the table above, please contact me with your specific requirements so we can create a custom solution that's right for your business.

Also, please note that there are significant technical differences between the Mid-size Business and Enterprise plans - and you can't readily migrate from one to the other - so ask us if you have questions about which one is right for you.

Well, that’s about all I have to have about buying Office – rent it; don’t buy it. It’s a no brainer.