Microsoft is the only public cloud provider that owns most of the desktop PCs. As it did with its Microsoft Explorer browser, Microsoft can leverage its desktop dominance to sell other items. In the cloud, that means Office 365 -- and the new Windows 10 pushes the use of Office 365 hard.
It has every incentive to do so because Office 365 customers pay up to 80 percent more than customers using the perpetually licensed (traditional) versions of Exchange, SharePoint, Word, Excel, and PowerPoint. My own Office 365 tab is about $80 a year, which is much more than the box of software I used to purchase every three years or so.
Of course, I could always move to Google Apps or even open source clones like OpenOffice and LibreOffice. But like other traditional Office users, I’ve chosen the path of least resistance.
Technically, Office 365 is not a set of cloud applications. You have to download each application to each of your computers and mobile devices covered by your license, then run the software locally. But there are limited-functionality Web applications you can also use when needed, such as when working from someone else's computer, and Office 365 favors Microsoft's OneDrive cloud storage so that all your documents are available from all your client devices. It's a hybrid cloud model, unlike Google Apps but like Apple's iWork.
The new version of Office Mobile, designed to work in Windows 10's tablet mode, strongly favors the use of cloud storage. The Office 365 versions for iOS and for Android have done so from the very beginning. The forthcoming desktop version of Office 2016 for Windows 10 will do the same, similar to what Microsoft did in the recently released Office 2016 for Mac.
There’s nothing wrong with this strategy; in fact, it’s good business. And Microsoft isn't forcing you to use the more expensive Office 365 subscription-based apps, at least not on on Windows or Macs. Plus, many third-party apps are Office-compatible if you don't want to travel Microsoft's road map.
Of course, most IT shops won't use those third-party apps for fear of compatibility issues now or later. As they grow more comfortable with mobile and at-home workers, the Office 365 model of "one subscription for multiple devices, user-downloadable but IT-managed" will increasingly make sense for IT and likely justify Office 365's higher licensing cost.
The risk to Microsoft is that, over time, the higher price won't feel justified. Microsoft will need to ensure that the benefits, real and perceived, keep pace with the price increases. Otherwise, Microsoft could create an opportunity for other competitors. When that gap gets too big, even traditional IT shops will shift -- just ask BlackBerry.