Microsoft announced a few weeks ago that it was going to provide transparency around its Office 365 business. — and also said it would be shaking up the price plans. It did just that at the Worldwide Partner Conference (WPC) and the good news is that prices are going down August 1.

Before popping the champagne corks though. read on. The cheaper edition will be available to new midsize business customers next month. But existing customers will have to wait to the beginning of October 2015 before the full impact of the changes kick-in. So much for rewarding customer loyalty.

Office 365 vs. Google Drive

One of the principal criticisms of Office 365 is its elevated price in comparison to Google. This new pricing goes some way to tackling that issue in the small-and-medium (SMB) business space.

The significance of cutting the price tag for the SMB plans cannot be overestimated. Google has been building out its Drive suite to cover many of the bases that were once Microsoft’s unique stomping ground and with cheaper pricing it has been an attractive alternative.

The most recent assault on the Microsoft space was at Google’s I/O conference in June, when Google offered its users the ability to edit Microsoft Office documents in Google Docs. That really brought pricing and value for money into focus.

The first thing to note is that the new pricing will apply to all its customers as of October 1st, 2015. From there on in the existing SMB plans will be replaced by the following plans:

  • Office 365 Business: This offers the full Office goodness withOutlook, Word, Excel, PowerPoint, OneNote and Publisher, with 1TB of OneDrive for Business cloud storage. Its closest current equivalent is Office 365 ProPlus, whichcosts $12 per month. This new plan will only cost $8.25 /user/month ($99 per year), per user.
  • Office 365 Business Essentials: This gives access toall the main cloud services needed for business like email, meetings, calendars, storage, and video conferencing, but doesn’t come with the desktop apps. It also comes with Yammer and support for on-premises Active Directory synchronization. This costs $5/user/month.
  • Office 365 Business Premium: Offers everything from both the Office 365 Business and Business Essentials plans. The cost of this will fall from $15/user/month to $12.5/user/month.

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Under current pricing, the small business plans are capped at 25 seats, which means that once the business moved beyond that they were hammered with a massive price hike as the moved into the midsize business plans.

Under this shake-up, the cap will be set for all SMBs at 300 seats, which means that a small business can grow at its own rate and know that the price will remain the same up to 300 employees.

However, if the full impact of the new plans won’t come into effect until October 2015, some of the advantages will kick in as of October coming.

Learning Opportunities

Microsoft points out that as it has a policy of providing 12 months’ notice for any changes to a customer’s core subscription, current customers don’t have to do anything until October 2015.

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What current Office 365 users should do

However, starting on October 1, 2014, Microsoft is making changes for existing customers to bring them some of the benefits new plan before they officially move onto them in October 2015.

Small Business and Small Business Premium customers will, for example, benefit from the rise in the seat cap while Midsize Business customers will have their prices reduced from $15/user/month to $12.5/user/month. Existing customers will be offered these reductions the next time they renew their subscription.

If October 2015 seems a long way away, remember that Microsoft will be introducing some of the changes over the coming year. Business users will be sent an update on this in September, which should clarify any unanswered questions. How this impacts the Google - - Microsoft rivalry in this space will not be clear until the plans come into operation, but it should up the ante in the productivity stakes yet again.