Microsoft’s decision to increase the pricing of Microsoft 365 suite by 20 per cent is likely to hit Indian businesses hard. Many small businesses had opted to use the software platform to keep operations running as they shifted to remote working environments during the pandemic. Industry experts believe that this untimely increase in pricing could in fact help rivals Google and Zoho to gain market share.
In a blog post on Thursday, Jared Spataro, Corporate Vice-President for Microsoft 365, announced that the company is increasing the pricing of bundles of software like Teams, Office and Outlook, by 20 per cent to be effective over the next six months.
“These increases will apply globally with local market adjustments for certain regions. There are no changes to pricing for education and consumer products at this time,” Spataro said. This is going to be Microsoft’s first price increase in a decade.
Faisal Kawoosa, Founder and Chief Analyst, Techarc told BusinessLine, “This is not an appropriate thing to do at the moment. The price increase will surely impact the India market. Due to Covid, the smallest of the offices across the country had to go for software suites like Microsoft 365 to work remotely. A price increase right now will only add a burden to their budgets.”
Value-based increase
Sanchit Vir Gogia, Chief Analyst and CEO, Greyhound Research believes that the increase is ultimately going to be value based as Office365 is an essential business tool which organisations can’t live without. Also, there were several new features added which weren’t monetised by Microsoft during the pandemic; hence, the price hike may well be justified.
“That’s not a blanket increase of pricing, and 20 per cent hike is only on the base price of $5. At higher tiers, the hike is lesser in terms of percentage. These are published prices but whenever there are large deals, there is discounting happening at ground level, country and regional levels,” he told BusinessLine.
Gogia, however, added that there should have been heads-up of another six to nine months for price-sensitive customers. “There has to be more education around this for the customers. The extra money is fine but the main question existing clients will have now is on how this will impact their discounting. So, Microsoft definitely needs to offer more details at the account level to ensure comfort of clients and partners,” he said.
Google gains
According to Kawoosa, Google is well-positioned to gain in this scenario, while other platforms like Zoho too would be a preferred choice for many. “Microsoft is any day at least 10-15 per cent higher in pricing as compared to Google, and Zoho is even cheaper than Google,” he said.
Gogia concurred, “Smaller businesses may look at other options like Google or Zoho and they are definitely going to get additional enquiries because of this price increase. Both have always been aggressive over pricing. What Microsoft needs to pay attention to is the complexity of pricing and licensing of its products. In most client situations, confusions regarding licensing and inclusions are often witnessed. Microsoft should use this opportunity to simplify pricing and licensing and make it easier for organisations to work.”