Posey's Tips & Tricks

What Microsoft's Office 365 Subscription Numbers Really Mean

From the stigma of subscription services to the growth of free online alternatives, the decline in new customers coming to Office 365 in 2016 has many possible explanations.

Recently I read a story from Computer World that indicated that new Office 365 subscriptions for consumers dropped by 62 percent in 2016. As the article's author dutifully points out, however, this decrease is only in the number of new subscriptions. It does not reflect a decline in the number of people who are using Office 365. In fact, according to the story, Microsoft added 4.3 million new subscriptions over the course of a year.

Even so, the rate with which new subscribers are coming on board has been steadily decreasing for about a year now. So what's going on?

I don't claim to have an official Microsoft approved explanation as to why it is becoming increasingly difficult for the company to attract new subscribers, but I do have a few ideas of my own.

Before I discuss my theories, I want to remind you that the 62 percent decrease in the rate at which new subscribers are signing up for Office 365 applies only to consumer subscriptions. I have not seen the numbers for business subscriptions, so I am not going to factor business use into my theories.

So with that said, one theory that comes immediately to mind is that of market saturation. There are only so many potential customers in the world, and eventually there will come a point at which nearly everyone who is going to subscribe to Office 365 has already done so.

On the surface, the idea of market saturation might not initially seem to be credible. After all, there are roughly about 25 million consumer subscriptions to Office 365, and there are over 300 million people in the United States alone. As such, it would seem that there is a vast, untapped market.

Even so, it is important to keep in mind that a single Office 365 subscription can sometimes be applied to multiple people. The Office 365 Home plan, for example, allows for up to five users.

There are also plenty of people who would probably never subscribe to Office 365. Take my grandparents, for example. They don't even own a computer, and would therefore have absolutely no reason to subscribe to Office 365.

Of course some people prefer to outright purchase a Microsoft Office license, as opposed to signing up for a subscription. The number of new people who have subscribed to Office 365 presumably does not include those who have purchased perpetual Microsoft Office licenses as opposed to leasing Microsoft Office on a subscription basis.

Another possible reason for the decline in new Office 365 subscribers may be that the economics are simply not appealing to consumers. I personally subscribe to an Office 365 enterprise plan, but my main reason for doing so has to do with the fact that I write about Office 365 and would not be able to do my job if I did not have a subscription. If I were an average consumer, however, I can tell you with 100 percent certainty that I would opt to purchase Microsoft Office licenses outright rather than signing up for a subscription to Office 365. The last thing the world that I want is another monthly (or annual) bill. I would much rather make a one-time purchase, and be done with it, rather than having to have one more expense each month.

As for the economics of subscribing, it isn't exactly a secret, that many people look for free alternatives to Microsoft Office. I have no doubt that open source Microsoft Office alternatives have chipped away at Microsoft's market share.

Never mind the fact that there is a certain stigma attached to subscription services. I think that many people have the perception that subscribing to a service like Office 365 is going to result in additional spam in their inbox, and relentless up selling. In all fairness, I personally haven't noticed an increase in the volume of spam that I receive since adopting Office 365, and I can't seem to recall Microsoft attempting to upsell me on anything. Even so, I do think that at least among some people these types of perceptions are a deterrent to subscribing.

One more reason that might be attributed to Microsoft's decline in new consumer subscriptions to Office 365 is the increase in virtual desktop usage in business environments. If a user has remote access to a virtual desktop that is supplied by their company, and can access Microsoft Office through that virtual desktop, then they would probably prefer to use the virtual desktop environment rather than paying for a separate subscription to Office 365.

Whatever the reason for Microsoft's drop in new subscriptions, Microsoft Office usage is still growing, albeit more slowly than it was a year ago. It will be interesting to see what Microsoft's marketing department does once the new subscriber rate eventually plateaus.

About the Author

Brien Posey is a seven time Microsoft MVP with over two decades of IT experience. As a freelance writer, Posey has written many thousands of articles and written or contributed to several dozen books on a wide variety of IT topics. Prior to going freelance, Posey was a CIO for a national chain of hospitals and healthcare facilities. He has also served as a network administrator for some of the country's largest insurance companies and for the Department of Defense at Fort Knox. When He isn't busy writing, Brien Posey enjoys exotic travel, scuba diving, and racing his Cigarette boat. You can visit his personal Web site at: www.brienposey.com.

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