Microsoft 365

Microsoft 365 is a package of programs and online services for which a recurring fee is paid. It includes the word processor Word, the spreadsheet program Excel, the presentation program PowerPoint and the email program Outlook. In addition, there is storage space on the internet so files don’t just sit on one’s own device. The package used to be called Office 365, and before that Microsoft sold the programs individually as purchased versions. The name change in 2020 was meant to make clear that it had long since become about more than classic office software. Today several hundred million people worldwide use these services, both privately and professionally.

Why a subscription instead of a purchased version

The shift from a one-time purchase to a subscription has changed Microsoft’s business significantly. With a purchased version, a customer paid once every few years, and then there was radio silence for a long time. With a subscription, money flows in every month, predictably and in a steady amount. On the stock market, such recurring revenues are considered especially valuable because they can be forecast well.

For companies, Microsoft 365 is more than a collection of programs. It also manages user accounts, passwords and access rights for the entire workforce. Any company that switches to it shifts a central part of its technology to a single provider. Moving away from Microsoft then becomes expensive and complicated. Experts call this effect lock-in: you’re tied to the provider, even if you’re dissatisfied.

That’s why Microsoft 365 regularly comes up in political debates. Authorities and schools discuss whether they are allowed to store data belonging to citizens and students with a US corporation. Data protection advocates in Germany have repeatedly raised concerns about this.

What lies behind the familiar program windows

Technically, Microsoft 365 consists of two halves. One half is programs that are installed on one’s own computer and that run computations there. The other half runs in Microsoft’s data centers, that is, in large halls full of servers. Files end up in the online storage OneDrive, emails on Microsoft servers, and video conferences run via the Teams service. This outsourcing to the network is referred to as the cloud.

The subscription itself is not a single product but a tiered pricing structure. A cheaper plan includes only web versions of the programs, while a more expensive one additionally includes security tools and administrative functions. Companies pay per employee per month, often ranging from a few euros to over thirty euros.

Since 2023, Microsoft has been building artificial intelligence directly into these programs, under the name Copilot. A language model, that is, a program that has learned from vast amounts of text, then drafts text in Word or summarizes meetings in Teams. Copilot is not included in the standard subscription and costs extra. This surcharge in particular is an important lever for Microsoft to increase revenue per user.

From the school computer to the quarterly balance sheet

In everyday life, people usually encounter Microsoft 365 without noticing the name. Many schools give their students a free account that lets them open Word in the browser. Anyone doing an internship at a company will almost certainly get an Outlook address and Teams access. Even the login for a work computer often runs through this system.

In business news, the term mainly appears in connection with Microsoft’s quarterly figures. Analysts then look at how many users are booking more expensive plans and how strongly Copilot is being adopted. A common misconception is confusing Microsoft 365 with the cloud division Azure. Azure rents out computing power to other companies, while Microsoft 365 sells finished applications to end users. Together, both now account for the majority of the corporation’s revenue.