Microsoft Office: Buy or "Rent"?

Microsoft has released many versions of Office going back to at least the 1990’s. With each new version came different purchase and licensing options.

This article discusses a small bit of all that: How licensing works for Office 2016 for home or small business use.

Microsoft really wants to shift its customers over to the subscription model. To that end, they offer substantial benefits to subscribers -- benefits not offered under the purchase model.

Here are some of the benefits available to subscribers.

  • Upgrade to the latest version of Office as released at no extra cost

  • Installation on multiple computers

  • Installation on multiple mobile devices such as tablets and phones

  • Access to Office Online, a slimmed-down hosted version of Office that works on any computer without having to locally install the software

  • Significant OneDrive cloud storage (OneDrive is like Dropbox)


Subscribing to Office

Under a subscription license, you'll pay Microsoft a monthly or yearly license fee for the right to use Office. The license fee varies depending on a number of factors, all discussed below.

To clarify: When you get Office 2016 via subscription, you are actually subscribing to a product called "Office 365" -- that includes Office 2016. Office 365 also includes the benefits listed above. So, here are the costs (as of Mar 2020):

Office 365 Home, Non-Commercial Use
Costs: $9.99 per month (or $99.99 per year)
Includes

  • Locally installable version of Office 2016 including Word, Excel, PowerPoint, OneNote, Outlook, Publisher, and Access

  • Up to five users including yourself can share in the same subscription

  • Entitled to install Office on up to five PCs/Macs + five tablets + five phones, for a total of 15 installs (but no more than five per device type)

  • 1 TB of OneDrive cloud storage per user


Office 365 Personal, Non-Commercial Use
Costs: $6.99 per month (or $69.99 per year)
Includes

  • Locally installable version of Office 2016 including Word, Excel, PowerPoint, OneNote, Outlook, Publisher, and Access

  • You may install Office one one PC/Mac, one tablet, and one phone.

  • You may not share your allowable installs. e.g. You cannot give away your phone install even if you don't plan to use it.

  • 1 TB of OneDrive cloud storage


Office 365 Business
Costs: $10.00 per month (or $8.25 per month with annual commitment)
Includes​

  • Locally installable version of Office 2016 including Word, Excel, PowerPoint, OneNote, Outlook, and Publisher

  • You may install on up to five PCs/Macs + five tablets + five phones, for a total of 15 installs (but no more than five per device type)

  • You may not share your allowable installs with other people -- only the home edition may share installs

  • 1 TB file storage on OneDrive


Office 365 Business Premium
Costs: $15.00 per month (or $12.50 per month with annual commitment)
Includes​

  • Locally installable version of Office 2016 including Word, Excel, PowerPoint, OneNote, Outlook, Publisher, and Exchange Email

  • You may install on up to five PCs/Macs + five tablets + five phones, for a total of 15 installs (but no more than five per device type)

  • You may not share your allowable installs with other people. (Only the home versions may share installs)

  • 1 TB file storage on OneDrive

  • 50 GB Email

  • Business Skype


To be clear, under the foregoing subscription options, you are getting full, locally installed editions of Office 2016 on your computer. You do not have to be online to use Word, Excel, or other Office products.

If you use Office 2016 offline then your files, of course, must be on your computer and not located exclusively on OneDrive cloud storage.

Purchasing Office, Perpetual License

For those that want to purchase a perpetual license to Office (no monthly subscription costs) the following options are available. These purchase options do not include free upgrades to the latest version. e.g. When you buy Office 2016 as a perpetual license, that is the version you get and no more. Also does not include OneDrive storage or any other Office 365 feature.

Office Home and Student 2019, Non-Commercial Use
Costs: $149.99, one-time purchase
Includes

  • Locally installable version of Word, Excel, and PowerPoint

  • One PC/Mac, no tablet, no phone

  • No Office 365 features


Office Home and Business 2019
Costs: $249.99, one-time purchase
Includes

  • Locally installable version of Word, Excel, PowerPoint, and Outlook

  • One PC/Mac, no tablet, no phone

  • No Office 365 features


Office Professional 2019
Costs: $439.99, one-time purchase
Includes

  • Locally installable version of Word, Excel, PowerPoint, Outlook, Publisher, Access

  • One PC/Mac, no tablet, no phone

  • No Office 365 features


Visuals

If the foregoing verbiage wasn't as clear as I'd hoped then perhaps the following illustrations will help.

In this first example, this nice family of four below shares a single subscription to Office 365 Home. They are all sharing from the same pool of allowable installations. Dad has the subscription in his name and has added mom, son, and daughter to his subscription. This family has used five PC/Mac installs, three tablet installs, and zero phone installs. All for $9.99 per month (or $99.99 per year), a real bargain for eight devices.

The next example illustrates subscribing to Office 365 in a business setting.

In this example, there are four employees, each having their own individual Office 365 Business subscription. Because this is a business edition of Office, these employees cannot share the unused portions of their allowable installations. Each employee (that uses Office) must have their own, dedicated subscription. Each subscription may install Office on five PCs/Macs, five tablets, and five phones.

You might ask who has five PCs, five tablets, and five phones. Lots of people have more than one computer although virtually no one has multiple tablets and phones.  And depending on individual company policy, employees may be allowed to draw on their unused installation allocation for their personally-owned computers and devices as well, saving the employee money.

Each Office 365 Business user shown above has their own subscription.

Abusing your Subscription

What's to stop you from using a Home edition (non-commercial use only) for business purposes?

There are no technological barriers (that I'm aware of!) preventing one from using Office 365 Home edition for commercial purposes or to prevent a Office 365 Business edition user from sharing some of his/her installs with other users. It is against the licensing terms, but is otherwise not prevented or monitored (again, that I am aware of). e.g. For sure, Microsoft is not snooping in your documents trying to figure out if they're business-related. It’s pretty much on the honor system as far as that goes.

There are some practical considerations to be aware of. e.g. If a Office 365 Business edition user shares some of their installs, it's possible the other person(s) could access your OneDrive account. That may be rather inconvenient if you store sensitive files on your OneDrive account.

 

Decider

The real value under the subscription model comes when installing on multiple devices, with or without multiple users. That’s because you pay the same amount per month whether you install on just one PC/Mac or on all five PCs/Macs allowed under the plan -- and all allowable mobile devices, too. (Except for the personal plan, which allows one PC/Mac, one tablet, and one phone.)

If you already own a fairly recent version of Office (2016 or later), need Office on only one PC/Mac, use only Word and Excel (and maybe PowerPoint) and have no interest in OneDrive, then a perpetual license (one-time purchase) might be the way to go.

Otherwise, a subscription model generally makes more sense. This becomes ever more true as you install Office on multiple devices -- PCs/Macs, tablets, and phones. As I said up top, Microsoft really wants people to subscribe to Office, rather than buy a perpetual license, and they are including significant benefits to encourage that.

Think about it: Just for the PCs/Macs alone, you are getting Microsoft Office for as little as $100 a year for up to five computers. That’s potentially $20 per computer per year for Office -- a real bargain. Plus you get the additional benefits that come with Office 365.

Sorry if this sounds like a commercial for Office 365, it's really not. I'm certainly no shill for Microsoft. I am simply and fairly comparing the two models (subscription vs. perpetual license) and giving my opinion based on how you might use Office and what you get under each model. Your mileage may vary.

Mini-Rant

Microsoft Licensing is an incredibly complex subject, incomprehensible to most anyone, including me, who isn't an MS licensing pro or VAR (Value Added Reseller). It's comically easy to violate Microsoft licensing terms even without intention. Microsoft audits of end-users for license compliancy is possible although thankfully pretty uncommon.

Microsoft actually has classes and certification exams for their licensing -- it's that complicated! Back in my corporate days, we had a small dept of two or three employees whose sole purpose was to keep track of licensing for Microsoft and other products.

What is particularly galling is how some of my clients have had to repurchase certain products (Office, usually) because of sloppy record keeping. That repurchase may be due to an audit enforcement action or, much more likely, because a product reinstall becomes necessary due to computer replacement. Without the license keys, activation email addresses and passwords, reinstalling Office could become impossible. That repurchase is free money(!) for Microsoft.

It's true that people and companies should keep these records. But many regular people don't understand the importance of good license info record keeping or the consequences for failing to do so.

And that blame I place squarely on Microsoft. It should not be that easy to find oneself in such a jam.