How Microsoft’s ‘enterprisation’ of consumers will play out

In late March, Microsoft announced name changes to some of its Office 365 Business subscription plans, substituting "Microsoft 365" instead.

However, the Redmond, Washington, developer did not touch subscription plans aimed at enterprise, education and government. 

The rebranding, effective from 21 April (US time), will see Microsoft change its Office 365 suite of business products to Microsoft 365, adding Windows 10 upgrades to the mix for enterprises and offering Microsoft Teams for consumers. 

The changes represent a kind of “enterprisation of consumers” that effectively marks a step by the vendor toward potentially monetising its vast consumer base of Windows 10 users in the broader Asia Pacific region and, indeed, around the world.

This is according to analysis by data and analytics firm Global Data, which notes that Office 365 had until now been Microsoft’s subscription-based offering for both enterprises and consumers, offered as a monthly and yearly subscription.

When the vendor first announced the changes, Microsoft 365 corporate vice president Jared Spataro claimed in a post that the rebrading “represent[ed] our ambition to continue to drive innovation in Microsoft 365 that goes well beyond what customers traditionally think of as Office. 

“The Office you know and love will still be there, but we’re excited about the new apps and services we’ve added to our subscriptions over the last few years and about the new innovations we’ll be adding in the coming months,” Spataro said. 

Yet Global Data head of technology and telecoms data Nishant Singh suggests that, with consumers using products and services bundled under the Microsoft 365 moniker, the company will have new opportunities to tap into sources of revenue.

“Windows is unlikely to generate significant revenues for Microsoft going forward,” Singh said, “especially given that the path ahead for Windows is that of regular improvements and updates instead of big releases.

“However, with Microsoft 365, it appears that the company will now bet on subscriptions with Office apps and services at its core, with Windows being relegated to a secondary role,” he added. 

This new source of potential revenue is particularly important, according to Global Data, given that the vendor decided earlier this year to shutter its Ad Monetisation platform for Universal Windows Platform (UWP) apps, essentially giving up monetisation efforts via its Microsoft Store -- the apps store in Windows 10.

Office 365, however, has a substantial number of consumer subscribers that pay for the Office apps and services. From Global Data’s perspective, as Microsoft winds down its efforts to monetise Windows 10 via its apps store, it is working to capture the users running Office 365 on their PCs -- a number set to soar as more people work from home. 

Indeed, with Office 365 reaching beyond 37.2 million subscribers globally -- and continuing to grow as employees adopt new solutions to work from home amid the ongoing coronavirus pandemic -- Microsoft has a burgeoning market to tap into. 

In this way, Microsoft is effectively finding another way to make use of the massive user base of at least 1 billion devices running on Windows 10, of which nearly 33 per cent are estimated to be from the Asia Pacific region.

Historically, Office has historically been important for Microsoft, with the products division within Microsoft, Productivity and Business processes, driving around 30 per cent of the company’s revenues, according to Global Data.  

The analyst firm reckons that, with the inclusion of additional apps and services and no extra cost in the rebranded Microsoft 365 subscriptions, Microsoft seems to be betting on continuing that momentum.

“The rebranding of Office 365 to Microsoft 365 reaffirms that the company is all in on this new approach,” Singh said. “For enterprises and consumers alike, Microsoft is confident of the subscription model, which will center around its Office tools like Word and Excel, and includes quite a few additional apps and services to drive-up the value-for-money quotient.

“In terms of inclusion of features, Microsoft 365 Business Premium does offer more than Zoom or Slack: it includes the Office apps, 1 TB of cloud storage, Outlook with a 50 GB mailbox per user, device and data protection tools, upgrade rights to Windows 10 from previous versions, and of course Teams – which competes with Zoom and Slack. 

“The pricing, in addition to the bundling of Windows 10 upgrade, is likely to resonate strongly with the price-conscious Asian market in the shrinking economy,” he added.

According to Global Data, Microsoft 365 Business Premium, the most expensive offering for large enterprises, is priced at US$20, almost the same price as Zoom’s US$19.99 per month per host offering aimed at large enterprises.

For Singh, Microsoft’s move to bring consumers into the Microsoft 365-branded product stack -- originally fashioned as a purely enterprise-angled offering -- sees Microsoft flip the ongoing trend of consumerisation of enterprise products on its head. 

“Consumerisation of IT was a prevalent trend in the past decade, in which technologies emerging in the consumer market saw adoption amongst enterprises and businesses,” Singh said. “With the Covid-19 outbreak, Microsoft has a unique opportunity to turn the tables and do an ‘Enterprisation’ of consumers.”