Licensing Changes on Office 2019 Favor Cloud

Microsoft licensing changes coming next quarter will tilt the playing field further toward cloud subscriptions versus on-premises licensing, especially for Office 2019.

Microsoft announced several licensing changes this week that will go into effect on Oct. 1.

The clearest change is a 10 percent hike in Office 2019 commercial prices, to include the Office client, Enterprise CAL, Core CAL and server products. Office 2019 is expected to ship later this year. Microsoft also released preview versions of several Office 2019 servers earlier this week.

The pricing change is one of several ways that Microsoft has been constraining the on-premises version of Office as it tries to steer customers to the subscription- and cloud-based Office 365. Earlier this year, Microsoft announced a shorter support lifecycle for Office 2019, which will have five years of mainstream support and two years of extended support. The regular Microsoft support cycle calls for five years of extended support, so 10 years of total support rather than the seven being offered for Office 2019.

Additionally, Microsoft has said Office 2019 will only be supported on Windows 10, not Windows 7. That limitation occurs even though the Windows 7 lifecycle doesn't end until January 2020, a full year after the Office 2019 release.

There is also a price increase in Windows 10. Microsoft announced it is renaming the Windows 10 Enterprise E3 offers and raising the price of the per-device version to match the per-user version. The E3 name will now refer only to the per-user offer. That means Windows 10 Enterprise E3 per User becomes Windows 10 Enterprise E3, and Windows 10 Enterprise E3 per Device becomes Windows 10 Enterprise.

Microsoft unveiled several other broad changes to its volume licensing programs:

• Establishing a single, consistent starting price across all programs aligned to web direct for online services (OLS)
• Removing the programmatic volume discounts (Level A and Open Level C) in Enterprise Agreement (EA)/EA Subscription, MPSA, Select/ Select Plus, and Open programs (Open, Open Value, Open Value Subscription)
• Aligning government pricing for on-premises and online services to the lowest commercial price in EA/EAS, MPSA, Select Plus, and Open Programs
• Delivering a newly designed Customer Price Sheet that better outlines how a customer's price was derived (direct EA/EAS only)

With its announcement post, Microsoft positioned the changes as part of a "Modern Commerce" strategy. "These changes will highlight the benefits of our pricing for a cloud-first world, help us move from program-centric to a customer-centric pricing structure, and create more consistency and transparency across our purchasing channels," read the post, which was attributed to the MPN (Microsoft Partner Network) team.

In a series of Tweets, Directions on Microsoft analyst Wes Miller called the Office licensing adjustment an important change to note.

"If you add all of these motions up, and look at other lightly announced price increases, it clearly points toward encouraging customers that have avoided licensing Office 365 (or now Microsoft 365) to look again," Miller wrote under his Twitter handle @getwired.

Additionally, Miller, who follows licensing closely at Directions, called the newly released Office price changes, along with the shorter support lifecycle, the first two shoes to drop, with two other changes likely later.

"Possible shoe 3: Highly likely that Office 2019 Professional Plus won't feature roaming rights, and that it will drop them over the next 3 years, as Windows 10 did (a process that completes in early 2019). Meaning if you have server-based desktops of any kind, it's ProPlus time," Miller wrote. "Possible shoe 4: Will there even _be_ an Office 2019 Standard? Less and less differentiating value between it and Professional Plus - we've long thought it might be dropped."

Posted by Scott Bekker on July 27, 2018