FAQ: Microsoft rents out Office 365

Pay once for Office, or pay-as-you-go with a subscription to the suite?

Microsoft this week launched the first two of its new pay-as-you-go subscription plans for Office.

The company's rarely-shy CEO Steve Ballmer called the sales approach "an entirely new way to think about the productivity experience," and predicted that the majority of the world's billion-and-counting Office users will eventually adopt software rental.

"People will love instant access to all their documents and settings across their devices," said Ballmer in a Tuesday blog. "They'll love staying connected to the people and information they care about. And they'll love having the latest version of Office at all times, because it simply updates without the hassle of purchasing and upgrading to a new version."

That's a whole lotta love.

Or is it? Is Ballmer right? Is this the way we'll get software from now on? Or is it an experiment -- a gamble -- that could easily go awry?

That's for customers like you to decide. So what's in it for you, this Forever (Paying for) Office?

We have answers to that question, and a bunch more. Gotta love it.

What's Office 365? It's a new way for Microsoft to sell Office, the money-making and market-leading productivity suite best known for its Excel spreadsheet, PowerPoint presentation maker and Word word processor.

Rather than sell what's called a "perpetual license" to the suite -- a fancy way to describe a copy you pay for once, then use as long as you'd like -- Microsoft wants you to subscribe to Office, paying an annual fee for the right to run the software.

It's like the difference between buying and leasing an automobile, or buying and renting a house. Pay a lot now, and own it; or pay a lot less to just borrow it.

Subscribe to software? Why would I do that? Microsoft's sweetened the deal with more rights -- you can install Office on up to five Windows PCs or Macs in the household -- and some extra benefits, including additional online storage and free international calling minutes on its Skype Internet phone service.

Because all of Microsoft's retail perpetual licenses allow you to install the suite on just one machine, the one-versus-five difference is the most important.

What can I buy today? Either of two pay-as-you-go software subscription plans, Office 365 Home Premium and Office 365 University.

Subscription plans for businesses, including a $150-per-year Office 365 Small Business Premium, which Microsoft has already announced and discussed in detail, won't be available until Feb. 27.

Is this the first time Microsoft's tried to talk consumers into software-by-subscription? No. In 2008 it trotted out Equipt, a $70-per-year deal that included Office 2007 and some other software. The experiment failed, and Microsoft pulled the offer after just nine months. Not exactly an auspicious omen, but then, the world's different today than five years ago.

How much does a subscription cost? Home Premium runs $99.99 annually, or $9.99 when billed monthly. University is lots cheaper, just $79.99 for a four-year subscription, but you must be a full- or part-time student, or a faculty or staff member, at an accredited college or university.

What do I get?Office 365 Home Premium lets you install Office 2013 (for Windows) or Office for Mac 2011 (OS X) on up to as many as five PCs or Macs. Also included: 20GB of SkyDrive storage -- above and beyond the 7GB everyone gets for free -- and 60 Skype international calling minutes per month.

Office 365 University offers the same software and services, but allows customers to install the suites on a maximum of just two Windows PCs or Macs.

As long as you keep paying, you can keep using Office 2013 and/or Office for Mac 2011.

What applications do I get? Office 2013 includes the latest versions of Access, Excel, OneNote, Outlook, PowerPoint, Publisher and Word. Office for Mac 2011 has a more limited line-up: Excel, Outlook, PowerPoint and Word.

What do I need to run Office 365? On a PC, you must be running either Windows 7 or Windows 8; XP and Vista need not apply. A Mac must be powered by OS X Snow Leopard, Lion or Mountain Lion.

What happens to Office if I cancel the subscription or let it expire? Office drops into what Microsoft calls "read-only mode," which means that while the applications still run, they only let you read and print documents. The software cannot be used to create new documents, or make any changes to existing ones.

In other words, practically speaking the applications are worthless. Think of it as Microsoft repossessing the software, just like when the repo man drives off with your car if you don't keep up the payments.

Can I use Office 365 Home Premium or University for work? Absolutely not, says Microsoft.

The end-user licensing agreement (EULA) for Home Premium makes that pretty clear: "The service/software may not be used for commercial, non-profit, or revenue-generating activities."

Employees who want to run Office at home for work purposes must either purchase a perpetual license for one of the editions that do have commercial rights, such as Office Home & Business 2013 or Office Professional 2013 on Windows, or Office for Mac Home & Business 2011, or acquire a copy through their company's Home Use program.

Under Home Use, a copy of Office Professional 2013 or Office for Mac Home & Business 2011 costs $9.95. Contact your firm's IT department to see if it participates in Home Use.

Is Office 365 "in the cloud"? No, not really. Although the term "cloud" has been linked to Office 365 Home Premium and University, it's a misnomer: The software is installed locally, on the hard drive of your PC or Mac to be specific. The applications are not running on Microsoft's servers, and you don't need an Internet connection to use them.

The only "cloud" aspects of Office 365 Home Premium and Office 365 University are the SkyDrive online storage -- by default, that's where the Office applications store all the documents you create -- and some of the software delivery techniques, including "Click-to-Run" and "Office On Demand."

The former accelerates start time with Office 2013 (though not the Mac edition) by downloading and installing the basics right off the bat, often in just minutes. While you work, the rest downloads and installs in the background.

Office on Demand lets you install temporary, virtualized versions of some Office apps -- Access, Excel, PowerPoint, Publisher and Word -- on a Windows PC you don't own, lets you work on that machine with your personal Office settings, then when you're done it scrubs the system of all evidence you were there.

Is Office 365 a good deal? That's easily the toughest question.

Computerworld's analysis last year showed that the subscription was a better deal only if you used four or more of the five Office installs; for one to three copies, it was less expensive over the long run (specifically over the five-year stretch between most Office upgrades) to buy perpetual licenses.

That analysis, however, did not take into account the extras, including the additional SkyDrive storage space; features such as Office on Demand; or even the application selection differences between what's provided by Office 365 and what's bundled with Office Home & Student 2013, the lowest-priced perpetual license.

For example, Publisher is not included with Office Home & Student 2013, nor is Outlook. But both come with Office 365. If you require -- or simply want -- those applications, they may be enough to tip you toward a subscription -- even if you utilize just two or three of the five allowed installs.

What's in it for Microsoft with this "rental" concept? Money.

Microsoft already makes most of its money from Office using similar deals with businesses, which typically buy not only massive numbers of Office licenses, but also the right to run any upgrades issued in the next few years.

Microsoft wants to move as many customers as possible, including consumers, to that same business model, because subscriptions not only provide regular -- and more easily forecast -- revenue, but also because it's betting that once it makes the initial sale, it will lock in users to a continuing series of payments.

It's no different than a magazine, which would prefer to sell subscriptions rather than single copies from a newsstand (if the latter even exist these days).

Or think about it this way: Each time Microsoft rolls out a new Office, it has to once again convince customers to plunk down their money. Not so with subscribers, who simply download a new version when it's released.

I'm not biting. But I may want the new Office. What are my options? You can buy one of the three retail perpetual-licensed versions of Office 2013 for Windows:

Office Home and Student 2013 includes Excel, OneNote, PowerPoint and Word; It can be installed on one PC and costs $139.99.

Office Home and Business 2013 includes the above applications, plus Outlook; It can be installed on one PC and runs $219.99.

Finally, Office Professional 2013 includes the applications in Home & Student, as well as Access, Outlook and Publisher; It can be installed on one PC and costs $399.99. (Office Professional is the same suite as is installed when you subscribe to Office 365 Home Premium or Office 365 University.)

I'd like to try out Office 365. Can I do that without paying? Yes. Microsoft offers a 30-day free trial to Office 365 Home Premium (but not University). You must provide a credit card, however, which will be automatically billed at the end of the trial unless you cancel the deal before the 30 days are up.

Anything else I should know about Office 365? Microsoft has made some noise about how it will update Office for subscribers more frequently than it has perpetual licenses in the past, but it's not provided any details of the timing, much less what those upgrades may include.

Take that with a grain of salt: Windows customers with semi-long memories may remember Vista Ultimate, a top-of-the-line edition that Microsoft promised would receive regular updates with exclusive new features. Instead, Microsoft stiffed Ultimate owners -- who complained that they received little they'd been promised -- and then quietly discarded the concept.

I've been running the free preview of Office 365 Home Premium. What do I do if I want to convert to a subscription? Microsoft says you must uninstall the Office 2013 apps from your Windows machine. Yes, we know that's a pain, but it's what Microsoft says.

It's unclear whether your customization settings will be retained after you've reinstalled Office 2013 from the paying subscription. We're guessing not.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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