So much for ‘predictable expenses’: Is Office 365 busting your budget?

Cloud vendors tout their service offerings as a way customers can save money. Microsoft positions Office 365 the same, but does it always work out that way? I’ve asked technical decision-makers from many companies both large and small about this matter, and the responses I’ve garnered have been all over the map. What’s most surprising, however, is how several of the companies I talked with have found Office 365 to be more (not less) expensive than amortizing the total cost of ownership (TCO) of on-client deployed Microsoft Office software.

One large enterprise I’ve had some dealings with recently estimates that they spend tens of thousands of dollars per year on their Office 365 subscription. This huge figure represents a combination of three cost centers in their IT operations. First, there is the cost of licensing the Office 365 subscription itself which varies depending on the type of subscription the customer chooses to implement. This cost can be difficult to quantify since it may vary over time as Microsoft decides to introduce new plans, merge plans together, or drop existing plans. While one of the benefits that all cloud services providers tout to their customers is having “predictable expenses” for using their services, the reality, of course, is that nothing seems to stay the same very long in our rapidly changing and evolving cloud-based world.

Don’t forget about bandwidth

The second cost area beside licensing is of course bandwidth. Any cloud service you use is only as good as the bandwidth pipe that connects you to your provider’s services, and we all know that Internet connectivity costs also tend to fluctuate over time as Internet service providers merge, acquire, or become acquired by other providers. From the point of view of companies selling cloud services, Internet bandwidth is cheap and ubiquitous. This is a fantasy of course, as anyone who has tried to negotiate provider contracts for a large enterprise.

A third cost which is often not factored into the total cost package for a cloud service like Office 365 is the overhead administrative cost of planning, implementing, managing, monitoring, and troubleshooting the cloud service from the customer end of things. Why is this important? And why can’t this cost simply be rolled into the overall overhead of administrative IT for the company? Part of the problem is that, as I said previously, cloud services tend to quickly change and evolve over time, and as a result of this, they sometimes break when a new feature or capability is introduced, or when an old function is retired. So while cloud providers also flaunt their services as being not only cost-predictable, they also peddle them as being robust and reliable. But for anyone who has used a cloud service for more than a year can testify, this just isn’t true. A classic example of this kind of thing happening occurred in the summer of 2017 when a number of Office 365 customers suddenly found themselves unable to use this service because of Microsoft having quietly redesigned the Office 365 login portal without thoroughly testing it first and providing their customers with adequate instruction or forewarning. While this kind of thing doesn’t happen very often, it can make or break the bottom line for a business living on the edge.

Unrelated issues that affect Office 365

10-things-you-need-to-understand-before-buying-office365Then there are all kinds of unrelated issues involving your network and your Internet service provider’s network that can affect the usability of Office 365 and other cloud services from the point of view of your employees as they try to get their work done. Things like when you find out your company is going to be acquired by another company and to integrate your on-premises systems into their datacenter you’ll need to change the IP addressing of your servers. While doing this sort of thing can be a royal pain, it can also result in interruptions with your cloud services because of such changes. Or take the time when your ISP decides to migrate their DNS servers to a cloud-based DNS service provider. One would think that changing the client DNS settings on all your desktops and laptops would be sufficient, but then you find out that you need to re-create a whole set of DNS records online so your employees can continue to access the cloud services your users use to do their work. Or how about the time when your users started telling you that their attachments weren’t getting through in their email messages. Or the time when you upgraded your client systems to the newer version of Windows 10 and discovered that Office 365 performance gradually degraded over time when users sent or received their email using the Microsoft Edge web browser. Or how about the time…

I think you get the picture. IT administration is a cost center for an organization, not a revenue generator, and anything that needs to be installed, monitored, or maintained needs time, energy, and money devoted to it. And trying to fix problems with cloud apps and services can actually be more frustrating and more time consuming than troubleshooting on-premises servers and applications because it’s no longer just one party (your IT person or group) that has to deal with the problem but two parties who have to work together — you and the support desk of the cloud provider you are leasing services from. And we all know how the quality of tech support in general from most vendors of all types has been steadily declining in recent years.

Hell’s bells and whistles

Many companies who buy into subscriptions for cloud services like Office 365 often find over time that they don’t even make much use of the extra bells and whistles built into the online version of Office compared to the versions they previously deployed as on-premises software. This actually exacerbates the problem of cost for these cloud services since you’re ending up paying for stuff you don’t actually use. The only solution in my mind to optimizing the value of what you’re getting with a service like Office 365 is to be ruthlessly honest with not just some but all of the cost elements involved in migrating to, administering, and using the cloud platform. In the movie world ruthless people tend to be deceitful and dishonest; in business, however, it’s often the only way for a company to survive.

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11 thoughts on “So much for ‘predictable expenses’: Is Office 365 busting your budget?”

  1. Wowza Mitch. We’re in the midst of a technology revolution and businesses that aren’t seeing the value likely have a lack of leadership in their IT department/consultant holding them back from modernizing and automating their business processes. That’s really where the value is at and IT people are going to have to wake up to knowing how to do those things and keep up with todays rate of change because it isn’t going to get any easier for them.

    1. I do not call this a technology revolution. I call this the vendors taking over and us becoming the refuse. There is no cloud, it’s just someone else’s computer. And once the vendors lock us in, that’s it.

  2. I totally agree. Also business will need to keep up with regular changes in the platform as it can have impact on their daily activities. Regular training, communications will be a must (will need to budget). Also Microsoft is exposing technologies that most business don’t have a strong expertise internally. This can be catastrophic if they “try” by themselves. SharePoint is an example… Easy to create sites and libraries but easy to create chaos with too much sites, documents everywhere, wrong usage of permissions/sharing, unable to find documents because of no metadata, no search configuration…. This really can bust your budget to fix all this!!

    1. Agreed Martin. Vendors and service providers/enablers say to businesses “just trust us, we’ll take care of everything” while they quietly put their hand in your pocket. Then when something breaks or goes wrong they want what’s in your other pocket as well. Such is our desperately fast-paced business world these days 🙁

      The bottom line is that trust is scarce and everyone is out for a fast buck, so when you find a vendor or provider who is an exception to this rule and has your own business interests at heart and not just their own interests, be sure to hold on to them for dear life!

  3. “Bells and whistles” (a favorite description I also use with Office 365).
    In the past, IT had to worry about user files stored on the local drive not being backed up or generally accessible. Now you have to add the files in that 1TB of OneDrive space to the conundrum.

    MS sells the “new features” constantly being added as a selling point of 365 keep-paying-forever “subscriptions”. From the user/corporate point of view it is a sisyphean task trying to keep up with them. MS writes puff pieces introducing the feature, but don’t follow up with easy to find FULL documentation and user training on these new features. That means the users have to waste time trying to figure them out, “on-the-job”. Or each IT department has to invest time learning the features and creating corporate specific training. Yah, like that is going to happen, another unexpected cost center.

    I like your point about internet connections and bandwidth. MS / Office 365 (and Windows 10) assume that you have an unlimited bandwidth and download caps. I’ve heard of people (more than one) who have had MS pushed updates to Office and Windows fail, repeatedly. But instead of saving the update locally, it goes in to a download, update, fail, infinite loop. I’ve heard of consumers being forced to pay $100 in a month for going over their download cap due to failed updates. Imagine what could happen in a corporate situation if they have not provided a local copy of update files. While larger companies may have the local knowledge to do that, many small and mid size companies do not.

    It is the SMBs who STILL don’t know how to manage 365. I constantly see questions about simple stuff. And they surely don’t nave any idea of the real costs of 365.

    1. Thanks Ron. Factoring OneDrive into things can definitely complicate the story as far as administering user folders is concerned. I like your analogy to Sisyphus — sometimes I feel like I’m rolling a bolder up and down repeatedly trying to keep our network working. Agree also about SMBs having the hardest time implementing/maintaining Office 365 –and they are the primary target customer for the platform!! Cheers.

  4. UGH, Where was this article 2 months ago. We are a small company, 10 full-time employees, we were paying an outside IT firm $1600 a month and had an in house server. The server housed our company folder that no one could access from home unless we had had a PC working in a closet and used GOTOMY PC. Microsoft came in and I thought shared with us a “better” solution going to the cloud.
    We just started the migration on Dec. 1st, we upgraded and got 4 new towers, installed in SSD hard drives in 4 other one in preparation of Windows 10 upgrade. The rep came in on a Friday and it took all day and 4 machines didn’t get done, I did one over the weekend, upgrading to Windows 10, then installing Microsoft office 365 so there was no interruption in service to the employees. The company folder we have not “figured out” how to move over to Sharepoint, as planned.
    I finally got a Microsoft training scheduled to come out on Monday to train the staff. They sold me on unlimited in house support and training. It took me 3 weeks to get him scheduled and we all have some operator errors, like you discussed in the article. The cloud is a better solution for us as a small business and it will save us money but the jury is still out on whether I will still be sane at the end of this process. I really feel like Microsoft doesn’t ever tell me the whole story and our IT Company who is paid thru the end of the year, is holding back key info, which waiting for a crash of some sort so we call them back in at $1600.
    At least, after reading your article I finally know the good, the bad, and the UGLY!

    1. Like you said Juli vendors often sell you their story but the fail to tell you the full story. I feel your pain!


  5. Opioids and Microsoft, what’s a guy to do?
    How about we start naming the good and bad providers? Good articles like this are a start.

  6. It never ceases to amaze me that people continue to miss what Microsoft (and Google, Amazon; etc.) are doing. These companies are not in business to help you; they are in business to take your money. That’s what business is.

    Microsoft, in particular, had a problem. End users were spacing out their purchases of the cash cow – Microsoft Office – because each new version was little more than a UI change. Why buy Office 2016 when Office 2010 works just fine?

    This is certainly not unique to Microsoft (you will see it in any of the old line software markets, like legal software). Companies need to turn a steady profit or risk investor revolt.

    Enter the subscription model. It works great for insurance, so why not software? Add in the reduced tech support and easier rollout, and it’s great for the vendors. And with lots of startups getting into the old markets, pricing was depressed.

    Now the market is maturing, and there is going to be consolidation and outright closures (think about using THAT cloud provider). In all of this remember: You, the consumer, are simply a source of revenue, and the larger your provider, the less they need care about making you happy. That’s not their job.

    So don’t be shocked that your promised stable pricing didn’t come to pass. You ain’t seen nothin’ until Microsoft stops selling the boxed version of Office and everyone has to go the O365 route. THEN the pricing will start a slow, steady climb, probably one that closely tracks their annual revenue increases.

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