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New Microsoft Office price list: Winners and losers

Microsoft looks to better compete with IBM Notes, Google Apps

By Eric Lai
January 26, 2010 07:19 AM ET

Computerworld - When Microsoft Corp. announced earlier this month that it would eliminate upgrade versions of Office 2010, the early reaction was: Uh-oh, the application suite just got a lot more expensive.

The picture is more complex, especially in light of the increasing heat put on Microsoft's super-profitable suite by its competition --, IBM Lotus Symphony, Zoho Office and Google Docs. So the matter of who wins and who loses with Microsoft's Office 2010 pricing scheme isn't necessarily clear.

Here's a compilation of potential winners and losers:

Loser: Cash-strapped enterprises. Amy Konary, IDC's software pricing whiz, says that two words explain Microsoft's decision to eliminate upgrade pricing -- Software Assurance, or SA. Some companies were saving coin by avoiding Microsoft's pricey software maintenance contract and buying lower-level Open or Select licenses for Microsoft Office. Neither Open nor Select licenses require companies to buy SA, which grants upgrade rights but nearly doubles the cost for volume licensing customers. Eliminating upgrades makes SA a near-requirement for companies that don't want to fall behind on Office releases.

Loser: Consumers loyal to Microsoft Office. Many consumers are getting by just using a decade-old version of Office, or using a free alternative such as Google Docs. Microsoft is offering two options to win back those users. The first, Office Starter 2010, replaces Microsoft Works, which had long been a nonstarter mostly because of lingering document format issues. The new hosted Office Web Apps offering, meanwhile, is aimed straight at Google Docs.

But both Office Starter and Office Web Apps could prove a tad feature-lite for users accustomed to Office's buffet menu.

And home/small business users who still upgrade Office on a (semi-)regular basis are getting no favors from Microsoft. The full Home and Student edition, which includes Word, Excel, PowerPoint and OneNote, still costs $149 (three installs), though users can opt for the new Product Key Card that can be purchased for $119 at electronics retailers like Best Buy. Like the upgrade, it offers rights for one installation.

Winner: Small businesses. Many small businesses have been defecting from Office. Microsoft "can't let that continue," said Paul DeGroot, an analyst at Directions on Microsoft. "If the small-business trend catches on with larger businesses, it would have very serious consequences."

Thus, Microsoft is cutting the price of the full Home and Business edition -- which includes Word, Excel, PowerPoint, OneNote and Outlook -- to $279, matching the upgrade price of Office 2007's Small Business edition (which, in addition to those five apps above, includes Microsoft Publisher) and nearly hitting the $239 upgrade price for Office Standard 2007. A one-license key card will be $199, or 30% off the upgrade price (upgrades affect only one PC, too).

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