Why buy the subscription version?

A shorter version of this article originally appeared in Woody's OFFICE Watch #6.29 -- reprinted here with permission.

Now that Office XP has been released we can finally look through the important details of the subscription option for buying Office XP.

The subscription option was to be available across the world, but Microsoft pulled that back to a limited group of countries including the usual guinea pig – Australia.

With a subscription purchase you pay less but get the right to use Office for 1 year only.  At the end of a year you have to pay another fee to renew your right to use Office XP.  If you don’t renew the software will drop to a reduced functionality mode where you can only view and print documents.

Microsoft has been promising / threatening to have subscriptions for years, it gives them greater control over software licenses and also evens out their cash-flow.  For customers the benefits are less apparent and once you see some of the conditions on subscription purchases it seems an even worse option.

Since Australia is one of the test areas for Office XP subscriptions we’ve sent out our Aussie experts to see how it’s going in real life:

You can buy only Office XP Professional in a subscription pack – no other XP bundle is available.  The box looks much the same as the regular Office XP bundles with the word ‘Subscription’ in the name and a sticker ’12 month subscription’.  It’s a far cry from the much clearer ‘Subscription Version’ splashed across the front of the box – that’s what Microsoft promised when they announced the subscription option last year.

We won’t be surprised if some consumers buy this version, lured by the lower price but not realizing the implications of the license.  From talking to the salesmen in large Australian retailers there’s considerable ignorance of the subscription option – some admit they aren’t sure what the rules are, others just make it up.

A close reading of the software license for subscriptions reveals some hidden nasties that Microsoft hasn’t talked about.  Most WOW readers we’ve talked to believe that the rules for using the subscription and non-subscription versions are the same except for the 12 month use limitation.  But that’s definitely not the case.

A subscription license is only for ONE computer – no more.

A subscription license is only for ONE computer – no more.  The usual license allows installation on one desktop and a portable computer provided they are used by the same person.

You have to buy two subscriptions to replace your existing dual-use license!

In addition, a subscription license is NOT transferable.  Unlike the usual MS Office license you can’t sell or transfer it to someone else.

If you want to know more about the Office XP license check out our explanation  Remember that the new software activation systems in Office XP mean that Microsoft can control how many computers you install your subscription version of MS Office on.

The limitation to a single computer makes a lot of difference when you’re working out whether the subscription version is better value.  But first we’ll take the Australian recommended retail prices for Office XP Professional to see which version is better value.

If you assume that Office XP has a 2 year life cycle before it is superceded then you can estimate your cost.  $299 + $359 = $658 – not much less than the perpetual license upgrade price of $749.  And that’s assuming the price of the second year is the same as that advertised now.

There’s no guarantee of the price in future years, it could rise or fall in the future, you are effectively taking a bet that it’ll remain the same or go down.  You’d be a brave punter to believe that Microsoft will lower the price of software where they have an overwhelming market share and a largely captive audience. 

Microsoft Australia’s web site talks about a ‘predicable annual fee’, but there’s no information or warranty given about future subscription prices so we can’t see how it is ‘predicable’.

Subscriptions will get you future upgrades at no additional cost – but there’s no guarantee of the annual charges that Microsoft will impose.  The traditional license at least fixes your cost with no unknowns in future years until you choose to upgrade.  That’s important since many people don’t upgrade each version of Office, it’s becoming more and more common for people to ‘skip’ a version.

Microsoft will argue that the comparison is fairer with the full purchase product since the upgrade is only available to existing users.  In the real world most purchasers are existing users and buy the upgrade version, but let’s do the comparison.  The full purchase price is the equivalent of about 3.5 – 4  years at the current subscription price (assuming it remains the same, which it won’t, but we’re being generous).  In that 3.5 years you’ll get the right to use any upgrade of Office (ie Office 2004 or whatever it’s called) for no additional cost above your subscription.

That simplistic calculation doesn’t take into account the single computer limitation of the subscription license.  Many small and medium businesses have workers with Office on a desktop computer and a portable machine.  Using MS Office on two computers (one must be portable according to the license) is allowed if you pay up-front, but to get the same rights you’d have to buy TWO subscriptions.

That changes the calculations a lot.  Two annual subscriptions (one for each computer) costs $718 for a years use.  For less than two years of dual subscription you get a perpetual Office XP Professional license that you can use on two computers for as long as you wish.  ($658 x 2 years = $1,316 vs $1,288)

Subscriptions give you the use of the money you would have paid upfront but that’s balanced against the unknown price in future years.

On those numbers it looks like a no-brainer to us – the usual purchase bundles (either Full purchase and especially version upgrade) are generally better value with a known cost base.  That especially applies if you want to install Office XP, quite legally, on two computers that you use.  Certainly it’s hard to see how the subscription option is ‘a more affordable way to buy Office’ as Microsoft Australia alleges.

The only people we think would benefit from the subscription option are:

• People or businesses operating a short-term project that requires extra versions of Office XP for less than 12 months.

• Cash tight people or businesses who want a lower start-up cost and are willing to take the risk of price rises in future years.

• People with a great concern for Microsoft’s financial position and have an overwhelming desire to contribute extra money to the corporate coffers.