The dynamic shift to cloud based platforms and growing popularity of services like Azure has resulted in a boom in Microsoft’s revenues. Microsoft posted a healthy revenue of 46 billion USD, up by 21 per cent and a net income of 16.5 billion USD, showing a 47 per cent rise in the June quarter of FY 2021. The growing demand for cloud based services is a key factor in the skyrocketing revenues of the company.
Amid all this, Microsoft announces price revision of some of its products, effective from 1st March 2022. Let us see how and why this price hike is justified and how it will impact the users.
Breaking the Habit of No Price Hikes for a Decade
In 2011 Microsoft launched Office 365. Since then, this is the first time they have declared a revision of prices. Though the company had kept mum on its pricing policy for this long, it has not stopped innovating, and growing its reach. Since its launch in 2011, Office 365 has grown to 300 million-plus commercial paid seats.
Four years ago, they launched Microsoft 365 to bring the best of Office, Windows and EMS together. In the last four years, they have added umpteen new apps to the suites and introduced several new features and capabilities in three major areas:
- Communications and collaborations
- Security and compliance
- AI and automation
How Microsoft Justifies the Price Hike
The revised pricing of Microsoft services is going to impact the commercial users. The company kept the prices constant for a decade, so the question is, why now when the businesses are in a nascent stage of recovery from the economic fallout of the pandemic?
Corporate Vice President of Microsoft Jared Spataro has mentioned increased value delivered to the users and continuous decade-long innovations as reasons behind the hike. Let’s deep dive into the reasons why this price revision is justified by the company:
- 24 apps were added to the suites in the last few years after the release of Microsoft 365 in 2017. The apps thus mentioned include Microsoft Teams, Power Apps, Power BI, OneDrive, Visio, Planner, Power Automate, Stream, Yammer, Whiteboard, etc.
- 1400 new features and capabilities were introduced since the launch of Office 365 in 2011. Though the success rate of all the mentioned updates is not cent per cent, yet several of these were really helpful.
- Innovations in data security and protection against ransomware across Office 365. New attack surface capabilities have been introduced since the arrival of Microsoft 365. They have also added DLP (data loss protection) capabilities for emails and documents, data encryption and sensitivity labels to keep information protected.
- AI powered innovations across Microsoft 365 enabling users to become better creators, writers, presenters and designers.
How does the New Pricing Look?
There’s no denying that the increased prices will affect business owners to a certain extent. To determine to what extent it will impact the commercial users, we need to take a comprehensive look at the new pricing. Here’s a list of products/ services with revised prices:
- Microsoft 365 Business Basic: From $5 to $6 per user
- Microsoft 365 Business Premium: From $20 to $22
- Office 365 E1: From $8 to $10
- Office 365 E3: From $20 to $23
- Office 365 E5: From $35 to $38
- Microsoft 365 E3: From $32 to $36
These price increases will apply globally, with some exceptions based on local market adjustments in some regions. However, the company clarifies that no changes to pricing for education and consumer products are in the offing.
The revised prices will greatly impact the company’s revenue. Microsoft will get an estimated $5 billion rise in its revenues post-price revision as per reports. The company has a solid ground in continuous innovations, keeping up with competitors and generating revenues for justifying price revisions. Though the overall capabilities of an Office 365 license may cost 15% more after 1st March 2022, it’s still worth the price.
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