Office suite space is dominated by few players
Previously in the series, we discussed enhancements to Microsoft Office 365. Apart from Azure, Office 365 also played an important role in enabling Microsoft (MSFT) to achieve its highest-ever growth in the cloud space last year.
From a cloud perspective, office suites such as Microsoft’s Office 365 and Google (GOOG) (GOOGL) apps are a set of tools that are designed to enable businesses not only to operate efficiently but also to operate with much lower investments in information technology infrastructure. Apart from Microsoft and Google, Salesforce.com (CRM) and Box (BOX) are the dominant players in this space.
In 2015, Microsoft wanted to acquire Salesforce to boost its Microsoft Dynamics segment. However, the acquisition didn’t materialize.
The chart above gives a glimpse into how these cloud office suites helped employees to collaborate and access files and tools required to do their jobs without the worry of major security concerns.
Considering Office 365’s continued double-digit growth, Microsoft’s strategy regarding its office suite seems to be working well. It also indicates that the company is well on its way with its mobile-first, cloud-first strategy.
Pricing and customer service makes MSFT’s Office different from its peers
Google has two primary offers for its apps: $5 per user per month for small companies and $10 per user per month for big organizations. Microsoft, on the other hand, offers three options for its Office 365:
- $5 per user per month – doesn’t include Office suite
- $8.25 per user per month –Skype business account isn’t included
- $12.5 per user per month – Skype HD video conferencing available
Microsoft has astutely bundled its applications and has positioned its $8.25 per user per month offer as the most profitable. Apart from pricing, satisfactory customer service has also played a significant role in Office 365’s rising popularity.
Nick Espinosa, the chief information officer at information technology consultancy BSSSi2, shared his opinion on Google’s service, stating, “The cut-off is if you’re if under 1,500 users they won’t talk to you.” Espinosa also said, “Google should have a paid support line. We can get Microsoft 24 hours a day; in an emergency, they will get back to us in an hour. In an emergency, they’re there with us from midnight to 3 a.m., if we need them.”
Investors who wish to gain exposure to Microsoft could consider investing in the Technology Select Sector SPDR ETF (XLK). While XLK invests ~10.6% of its holdings in Microsoft, it also has an exposure of ~38% to application software.
Next, let’s discuss how Microsoft is rapidly overtaking its peers in the office suite space.