Juha Saarinen: Microsoft 365′s confusing price differential between retail and direct sales

How much is it for a Microsoft 365 Family subscription? Photo / AP

Opinion

While frantically trying to set the anti-Rickrolling security defences in Microsoft 365, formerly known as Office 365, an Auckland man discovered the subscription renewal price for the software suite had gone up.

Microsoft 365 Family now costs $179 including GST, up from $165 in 2022. That’s a meaty 8.5 per cent increase, more than inflation and over and above pay rises for most people.

The Microsoft 365 subscriber took to social media to vent spleen over the increase.

That move, moving the conversation into the virtual social media sphere, paid off for the subscriber, as other users pointed out that if one were to buy Microsoft 365 from a retail tech store, the cost would be far less.

How much less? A quick search on retailer sites suggests you can obtain a one-year subscription to Microsoft 365 Family for $130-$140. That’s below the 2022 price, and perhaps indicates Microsoft’s margins are healthy enough to not hike the cost for direct subscribers.

That said, even at $179, Microsoft 365 Family offers an awesome feature set for a maximum of six users, each of whom gets a capacious terabyte’s worth of OneDrive cloud storage.

Nevertheless, why pay more if you can get the productivity suite for much less and give local businesses a slice of the action instead of filling Microsoft Ireland’s already brimming coffers?

Microsoft was contacted for comment on the a version of its software, but did not respond in time for publication.

In theory, subscriptions could work in favour of users, if certain conditions are met.

You’d want competition among providers, data portability and the ability to switch fast and easily when there are better deals (or features you’re happy to pay for) on the horizon.

In reality, those conditions are rarely ever met in any sector that uses subscriptions, with user inertia shoring up business profits everywhere. Take Xero, our home-grown online accounting provider, for example.

Imagine the savings if small to medium-sized businesses could pay a small charge for maintenance and storage, and then on top of that, for when you actually have to dirty your hands with accounting tasks? Many smaller enterprises only need to do that a few times a month. For the rest of time, Xero just sits there, which doesn’t quite fit the pay-as-you-go cloud computing model.

However, Anything as a Service will remain with us, and there’s a new acronym, XaaS, to go with it.

Never forget that software is the industry that makes applications that you’re only licensed to use, and do not own as such. That’s often very complex licensing, so much so that there are people and companies whose only job is to advise organisations on what the least expensive way to acquire the digital tools needed to go about their business is.

Subscriptions are a tweak of that model, creating regular monthly and annual revenue streams for providers. The internet’s made that business model very easy to deploy as well, as the products and services are shipped to users over someone else’s infrastructure for free (sorry to remind you of this again, telcos and internet providers).

Now, IT service providers of all kinds are urged to move towards reselling subscriptions, or face extinction under the threat of cloud service providers selling directly to businesses.

Leaving aside the choice of pestilence and cholera, as in dealing with complex licensing or managing countless subscriptions, or even diving into free and open source software in desperation, this situation seems to have flown under the radar of authorities and competition watchdogs.

Take the current hot topic, inflation: Stats NZ assembles the Consumer Price Index (CPI) and really does a pretty impressive job of it.

A spokesperson said the agency collects the cost of about 100,000 items and services from a very large number of sources to measure inflation.

Digital subscriptions, which are becoming increasingly common, are not yet part of the CPI, however. With big hikes like 8.5 per cent affecting lots of people and organisations, maybe they should be?

There are signs that commerce authorities are starting to look at how gigantic companies can undermine competition and create monopolies through XaaS.

One recent example is the humongous $110 billion Activision Blizzard gaming deal that Microsoft’s trying to get across the line currently.

Britain’s Competition and Markets Authority said no to the deal, as it risks making Microsoft dominant in cloud gaming. That is, instead of using a console or a PC, you subscribe to games that run in data centres.

The general consensus is that the cloud gaming market will be worth more than $60b annually in a few years’ time. That’s rivers of subscription revenue gold right there. It’d be nice if some of it was diverted to New Zealand developers now that the nation’s punting on video gaming as a digital earner for the future.

Meanwhile, please send all your venture capital for my next billion-dollar business idea: a cloud-based application that offers a centralised platform to manage all your digital subscriptions, with AI to optimise them for great savings. All for an affordable $4.99 a month!