Office 2003 RTMs, Pricing is Set

Today, Microsoft released to manufacturing final, or gold, Office 2003 code. The company also revealed product pricing and Oct. 21 retail availability. The official launch is scheduled for the same day in New York.

RTM means that Office 2003 will be available, starting in September, to Microsoft volume licensing subscribers and to new PC buyers. Look for the former earlier in the month and the other later. Office 2003 pricing will appear on volume licensing price lists, starting Sept. 1. I would encourage volume licensing subscribers to review my previous Weblogs on important licensing changes for Office 2003 and Project 2003.

Pricing is the big news. Office 2003 will launch at a lower price than its last three predecessors, while some individual Office System products will see hefty price increases.

Microsoft had kept Office pricing largely unchanged for versions 97, 2000 and XP. For example, at launch, Office 97 Standard cost $499 and $209 as an upgrade; the Professional version cost $599 or $349 as an upgrade. Office XP launch pricing changed little: Standard for $479 or $239 as an upgrade and Pro for $579 or $329 as an upgrade. Rather than keep previous new version pricing, Microsoft has made permanent Office XP price reductions announced in May. The maintained lower pricing is the most significant change in the cost of Office in about eight years.

Office Standard 2003 full version will sell for $399 and the Pro version for $499. Respectively, upgrades will cost $239 and $329. Office Student and Teacher Edition 2003 will go for $149, same as the XP version. But Microsoft has revised licensing terms so that the software can be activated on three computers and legally be used by anyone in a household with a student or teacher. The liberal licensing supports my long-held contention that Microsoft is using the Student and Teacher Edition as a way of discounting the productivity suite for the consumer market without jeopardizing corporate pricing.

New version, Office Small Business Edition 2003, is priced at $449 or $229 as an upgrade. The difference between Standard and SMB is the addition of Publisher 2003 and Outlook 2003 with Business Contact Manager. As I blogged previously, Business Contact Manager will require hefty hardware requirements, so small businesses should read the fine print carefully before considering the Outlook add-on.

Information about what’s included in each Office version can be found here and finer pricer details, here. Businesses considering Office 2003 suites or individual products should carefully review pricing and features. Fine print deserves a close review. For example, only two Office 2003 offer full Extensible Markup Language (XML) or document rights management support. Users also should closely watch how Microsoft has integrated and overlapped some server and Office 2003 features.

New programs InfoPath and OneNote each will sell for $199--the latter with a $100 mail-in rebate.

OneNote is a remarkable product, particularly when used on Tablet PC. The program is flexible in ways not seen in other Office programs. For example, users can jot notes anywhere on the page using either a stylus or keyboard; the motif is similar to writing on a notepad. But I believe that the price is too high, even with the rebate, something Microsoft has gotten an earful about from this analyst. Microsoft would have done better to price the first version at a lower price--no rebates--and make adjustments later on. After all, this product isn’t truly a member of the Office family, as it lacks fundamental Office 2003 capabilities. Case in point: XML support. I wouldn’t see a problem raising the price later on when product features reach parity with other Office applications.

There is precedent for this. After buying the FrontPage Website authoring and management suite from Vermeer in early 1996, Microsoft slashed the price from $695 to a promotional price of $149. In pricing literature since, Microsoft has referred to the $149 as promotional. FrontPage 2003 will sell for $199, or $50 more than its full-version predecessors.

Publisher 2003 will sell for $169, although there is a $70 mail-in rebate for upgraders. Publisher 2003 with Digital Image Pro will go for $209, with a similar $70 mail-in rebate for upgraders. At Microsoft’s online store, Publisher 2002 sells for $129 or $149 with photo-editing capabilities. So that works out to a $40 or $60 price increase, depending on the version.

Visio pricing remains unchanged. Version 2003 standard is $199 or around $100 for the upgrade; Pro is $499 or $299 for the upgrade.

Office SharePoint Portal Server 2003 is a hefty $5,619 with five client-access licenses (CALs). Office Live Communications Server 2003 will sell for $929 and about $35 a CAL. Please see my earlier Weblog post on Office Live branding confusion; also, this Project 2003 Weblog on Microsoft's "integrated innovation" strategy and what that means for companies trying to evaluate the value of Office, the increasing number of server products and prospective increased number of CALs.

Posted by Joe Wilcox at August 19, 2003 01:14 PM