What This Year's Office 365 Changes Mean to SMBs

Last week, Microsoft announced some major changes to its Office 365 versions for small and medium-sized businesses, triggering an avalanche of questions. And with the fog of war starting to finally fade, I feel like I have a better handle on what this will mean to those SMBs who are already on Office 365 but are unsure how these changes will impact them.

The good news? The changes are all positive. For customers with small business versions of Office 365—that is, Office 365 Small Business and Office 365 Small Business Premium—your subscriptions will be upgraded somewhat (albeit in ways that will impact few customers) and the cost of those subscriptions will remain the same. For midsized businesses, however—those with Office 365 Midsized Business subscriptions—the news is even better: You're about to realize a significant price reduction.

Is there bad news? Just a bit. The big one is that some of this stuff is still confusing. As you'll see in a moment, one of the new offerings is an awful lot like—but is in fact not identical to—Office 365 Pro Plus, a product that will apparently still continue. And that's the second problem, really: When it comes to Office 365, there's almost too much of it. That is, there are too many subscription versions, which can make choosing one difficult.

OK, let's dive in.

Today, SMBs—that is, small- and medium-sized businesses—have three basic choices when it comes to Office 365: Office 365 Small Business, Small Business Premium and Mid-sized Business. And they form a natural progression of sorts: The Small Business version provides access to Office 365's hosted servers—Exchange Online, SharePoint Online, and Lync Online—plus 1 TB of OneDrive for Business storage. Step up to Small Business Premium, and you get 5 installs of Office of PCs and Macs, plus 5 installs of Office for tablets (currently just iPad, but Android and Windows are coming soon). And if you step up to Midsized Business, you get support for more users (300 vs. 25), Active Directory integration (for the folks with on-premises infrastructure) and Yammer Enterprise.

As you might imagine, the prices goes up commensurately from version to version: Office 365 Small Business is $5 per user per month (or $60 per year), Small Business Premium is $12.50 per user month ($150/year), and Midsized Business costs $15 per user per month ($180/year). This rundown ignores a few of the tertiary subscriptions you can get, like Office 365 Pro Plus, which figures prominently in the next discussion. But that's the basic story.

Starting October 1, these subscriptions are going away. They're being replaced with three new subscriptions called Office 365 Business Essentials, Business, and Business Premium. But these are not exactly 1:1 replacements for today's SMB Office 365 subscriptions, which leads to the first bit of confusion. So let's step through each.

Office 365 Business Essentials does indeed replace Office 365 Small Business, and it has the same basic feature set and the same price. That is, it provides the same access to the Office 365 hosted services—again, Exchange Online, SharePoint Online, and Lync Online—and 1 TB of OneDrive for Business storage, but it doesn't include any rights to the Office software for PCs/Macs or tablets. That one is simple enough, but one improvement is that it is applicable now for businesses with up to 300 users (up from 25).

Office 365 Business is new, sort of. New in that it doesn't directly replace any existing Office 365 SMB version at least. It provides subscription-based access to the Office 2013 software only, and not to the Office 365 hosted services, but you do get 1 TB of OneDrive for Business storage. But it's not the full Office 2013 Professional Plus suite that most other Office 365 subscriptions provide. Instead, you get just Outlook, Word, Excel, PowerPoint, OneNote and Publisher. It costs $8.25 per user per month ($99/year) and like Office 365 Business Essentials, it can be licensed by companies with up to 300 users.

If you're familiar with Office 365, you may be thinking that this new offering is a replacement for something called Office 365 Pro Plus. I certainly did. But it's not: Both Office 356 Pro Plus and Business will coexist. So what's Pro Plus? Available now, it's just like Office 365 Business except that you get the full Office 2013 Professional Plus suite—that is, the same Outlook, Word, Excel, PowerPoint, OneNote and Publisher provided by Business, plus Access and Lync. Pro Plus costs $12 per user per month ($144/year).

If you don't need Access or Lync, then, you could save $45 per user per year by choosing Office 365 Business instead. But it's unclear to me why they need both of these versions, with such different pricing. (Part of the reason is that Office 365 Pro Plus is licensable to enterprises and other businesses with more than 300 users, I get that. But that's an artificial excuse for this complexity, and Microsoft's Office 365 enterprises SKUs are already too numerous and confusing.)

And then there's Office 365 Business Premium. Somewhat confusingly—though it makes sense when you think about it—this version replaces both Office 365 Small Business Premium and Office 365 Midsized Business. It provides everything in both Office 365 Business Express and Business—that is, the hosted services and the liberal Office software install rights plus 1 TB of OneDrive for Business storage—plus Active Directory support and Yammer Enterprise. It is priced at $12.50 per user per month ($150/year) and can be licensed by companies with up to 300 users.

What this means is that Office 365 Small Business Premium customers will see cost changes, but will gain a few benefits that, frankly, won't benefit most: Support for up to 300 users (up from 25), and support for Active Directory and Yammer Enterprise. For Midsized Business customers, the change is more dramatic: The basic features don't change, but the cost goes down dramatically by $30 per user per year.

If you're curious about how or when you might be switching over to these new versions, please check out my article Microsoft Announces Major Changes to Office 365 for Small and Midsized Businesses. The short version is that the timing will depend on a few factors—including when your subscription(s) renew—but that you'll receive credit if the new subscription is less expensive than the old. So you won't be penalized if your upgrades are awkwardly timed. As important, Microsoft gives Office 365 (business) subscribers one year before they have to commit to any major changes like this. So you can put the migration off if you want to, though to be honest I don't see much of a reason to do that.

And that's the best news of all. If you can get past the overlap and confusion around the SKUs, Office 365 continues to make tremendous sense, not just for SMBs but for individuals and businesses of all sizes. And these new version only make things better, albeit in often-subtle ways for the smallest businesses.