Microsoft partners hail Office 365 price slash

Software goliath passes on cost savings from economies of scale

Partners have cheered Microsoft's decision to lower enterprise pricing for Office 365 as the vendor looks to pass on the cost savings from growing economies of scale to its customers.

Microsoft announced in a blog yesterday that it is lowering the prices of most of its Office 365 for enterprise plans by up to 20 per cent.

In the UK, the price of the basic Office 365 E1 package – which comprises Exchange Online, Lync Online, and SharePoint Online – has been cut from £6.50 to £5.25 per user per month effective immediately for new and renewing direct customers.

Pricing for E2 and E3 packages has fallen from £10.50 to £9 and £15.75 to £13.25 respectively.

Similar-sized cuts have been enacted across a range of other enterprise plans, including E4, Exchange Plan 1 and 2, Sharepoint Plan 1 and 2, Lync Plan 2 and Web App Plan 1 and 2.

Microsoft launched Office 365 last summer and claims the cost of running its cloud services is falling as it adds more customers. Big-name wins include JetBlue, Patagonia, Campbell Soup Company, Groupe Marie Claire and Tata Steel Europe.

In a blog post, Kirk Koenigsbauer, corporate vice president of the Microsoft Office Division product management group, said: "As we rapidly add customers, the cost to run Office 365 becomes more efficient. This is the beauty of the cloud where we can deliver economies of scale through our worldwide datacentres and economies of skill with our engineers, administrators and support teams operating the service."

Microsoft has also made some pricing changes to Office 365 for education. This includes making its A2 service plan free to not only students, but also faculty and staff.

Angelo Di Ventura, group sales and marketing director at Microsoft large account reseller (LAR) Trustmarque, welcomed the move.

"Microsoft has bet the ranch on the cloud and needs to start getting some penetration in that market," he said. "What better way to do it?"

John Garidis, cloud services business development manager at Microsoft LAR Bytes, agreed: "We see this as very positive. People move to the cloud to save money and the lower the price, the more they save."

Although the price slash has been seen by some as an attempt by Microsoft to fend off Google, Garidis did not view it as a defensive move.

"We do not compete with Google in many opportunities in the large enterprise space so I don't think Microsoft feels threatened," he said.