Office 365 price drops

Enterprises pay less for Office 365 though the reason is silly.

Microsoft has announced a price drop of ‘up to 20%’ on Office 365 for their enterprise ‘E’ plans as well as an extension of the Education offer, effective 14 March 2012.

The announcement of these price drops is strange and appears to defy normal business practice. According to Microsoft the ‘economies of scale’ have reduced their costs of running Office 365 and they have chosen to pass those savings onto customers. Economies of scale happen in all businesses, not just the cloud, but any good business will take those savings as increased profit if the product can continue to be sold.

A business will reduce prices when there’s resistance to buying and they need a more attractive price regime to maintain and get new customers. That’s what’s happened here. Microsoft found that Office 365 hasn’t been as popular with enterprise customers and they are adjusting the rates in the hope of changing that.

This is all Business 101 stuff yet the ‘passing the savings onto you’ line is trotted out by Microsoft and mostly accepted unquestioningly.

Microsoft running costs for Office 365 were truly a fifth less than they expected and they wanted to pass along savings then surely all customers should benefit from a 20% discount?

If you qualify for the price reduction it should happen automatically for all ‘direct’ customers, meaning that if you’re bought through a middle-man it’s worth checking what you’re paying.

Australian customers are reportedly getting similar price cuts effective 1 May 2012.  Meaning that Aussies not only pay high prices but get a 6 week delay in the price drop.


The A2 plan for educational institutions has been extended to include free access for faculty and staff as well as students.


Despite the nonsensical reasons and the lack of price drops across the board, Office 365 is still worth a look for anyone, personal, family or small business looking for a better email/calendar/contacts solution.