Software: Rent or Buy?

Microsoft has just announced the general release of Office 2019, the latest version of its “on-premise” productivity suite. Since the debut of Microsoft’s subscription version of this suite, Office 365, the year-numbered designations have been used to delineate the two product lines, and up to version 2016, the two versions have been functionally identical. According to Microsoft, as of 2019, the “on-premise” version will no longer maintain feature parity with Office 365 going forward. Of course, details are still fuzzy on exactly what that means, but based on take-aways from the Microsoft Ignite Conference held in Florida earlier this week, the main differentiator appears to be cloud AI-based features, like enhanced search and internet-connected data.

The classic real estate question comes to software: Rent or Buy?

For most business users who are approaching the cloud at a more measured pace, this question is probably still easily answered by doing a quick financial calculation: how many usable years will I get out of the numbered version of Office compared to the subscription cost of an ongoing 365 license? For some of my clients who are still (desperately) clinging to version 2010, their ROI has clearly exceeded everyone’s expectations, but as many are finding, it does come at a cost – missing features, reduced security and a growing incompatibility gap will at some point force an upgrade, often when the timing is most inconvenient. Up until now, the primary benefit of the subscription based model for Office has been the lower up-front cost of acquiring the software and the ease of reinstalling the software as needed. Microsoft has also sweetened the pot for some subscription plans by allowing multiple installs of the product on as many as 5 computers per license, which definitely improves the ROI over the long-haul. As more functionality and data moves to “the cloud”, the calculus of licensing software may tilt towards renting, especially since the software makers seem intent on focusing all their future efforts (and money-making) towards this model.

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