MSFT Makes More Money

Microsoft loves subscriptions.

Moving a corporate customer from "transactional" purchases of Office -- the once-traditional practice of purchasing one-time, perpetual licenses that let workers use the suite as long as their firms want -- to Office 365 rent-not-buy subscriptions results in almost a doubling of revenue for Microsoft.

"Over the lifetime, the increased reach, the increased frequency in this example, as well as some yield, adding some incremental services, results in a 1.8 times lifetime value of that user in the transition," said CFO Amy Hood in a meeting with Wall Street last week.

Transactional customers buy Office once every five to seven years, said Hood. But by convincing businesses to subscribe to Office 365, specifically the E3 plan, Microsoft can realize an 80% increase in revenue over the years-long relationship. Office 365 E3 includes the core Office application suite, as well as cloud-based Exchange, SharePoint and Skype for Business, shifting those services from on-premises systems to Microsoft's servers.

In other words, for every $100 Microsoft earned the old way, it reaps $180 under the newer subscription regime over the long haul.